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APR: Spring 2017 Articles

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U.S. Export Beef Competitiveness: Do Cattle Inventories Matter?

Chen-Ti Chen, John M. Crespi, and Lee L. Schulz
The US beef industry operates in a highly competitive world market. As a global leader in the production of beef cattle, its competitive advantage in beef production stems from a well-developed infrastructure as well as a reputation for quality. Nevertheless, US beef has a disadvantage in the relative cost of production. For instance, the majority of US beef is grain-fed, while a pound of grass-fed beef can be produced at a lower cost. Lack of animal traceability and mandatory national identification systems can also put US beef in a vulnerable position competing with other major export countries. There is no doubt that the US beef industry today faces a highly competitive global market place. However, are US beef exports facing significantly greater economic competition today than they did in the past, or have those export markets always been highly competitive? The beef industry has become more concentrated over the past 30 years, suggesting that examinations of export competitiveness should consider the possibility of market power. We also question whether global competition is affected by the inherent dynamics of cattle production and marketing in beef exporting nations. Livestock production is impacted by a biological cycle that affects the production of final meat products, and as cattle are capital and consumption goods, current breeding and consumption decisions impact future stocks.

Ag Trade and Trade Agreements

Lee Schulz and Chad Hart
International trade and trade agreements have been a major part of the political discussion during the Presidential election and in the first few months of the Trump administration. From the withdrawal of the United States from the Trans-Pacific Partnership (TPP) to the ongoing debate about the North American Free Trade Agreement (NAFTA), trade policy is transforming and trade relationships are in a state of flux. Currently, the United States has free trade agreements with 20 countries, via 14 trade agreements (two multilateral agreements, NAFTA and the Dominican Republic-Central America-United States Free Trade Agreements [CAFTA-DR]; 12 bilateral agreements). Worldwide, there are currently 274 trade agreements in force, thus the United States is not involved in the vast majority of trade agreements. Countries in the European Union are involved in 40 trade agreements, and several other countries are involved in more trade agreements than the United States.

Cover Crop Adoption Decisions in Iowa: Insights from an In-Person Survey

M. Jimena Gonzalez-Ramirez, Catherine L. Kling, J. Gordon Arbuckle Jr., Lois Wright Morton, Jean McGuire, Chad Ingels, and Jamie Benning
Current nitrogen and phosphorus applications in the Midwest have been connected to increasing water quality problems. In an effort to improve water quality, the Iowa Nutrient Reduction Strategy (INRS), a science and technology-based framework to assess and decrease nutrients to Iowa water and the Gulf of Mexico, was developed in 2013 (INRS 2013). This framework advocates significant voluntary adoption of cover crops, which are planted between harvest and the planting of cash crops. While cover crops were utilized in the past to decrease soil erosion and build up soil organic matter, this technology has been revived recently due to its multi-functionality. Cover crops are very promising as they can reduce both nitrogen and phosphorus losses by around 30 percent (INRS 2013). The INRS proposes several scenarios to meet the N and P reduction goals including two in which row crop land cover crop adoption rates are proposed. Some Eastern states have recognized the importance of this practice such as Indiana, where 7.1 percent of farmland planted cover crops (Rundquist and Carlson 2017).

Redistribution or Public Good: Which Direction for the New Farm Bill?

Bruce Babcock
Farm Bill programs run the gamut from crop insurance to conservation, from invasive species control to nutrition subsidies, from agricultural research to commodity subsidies. These programs fall into two broad categories. Some, such as the nutrition programs, commodity programs, and the crop insurance program have an objective of redistributing income from taxpayers to specific groups of people. Others, such as agricultural research, conservation, and food inspection programs have an objective of improving economic efficiency by providing goods and services that the private sector under-provides, or by mitigating undesirable market outcomes. The key decision that the Senate and House Agricultural Committees will need to make in the 2018 Farm Bill is how to split up a fixed amount of funds between redistributive programs and those that improve efficiency.

Four Reasons Why We Aren’t Likely to See a Replay of the 1980’s Farm Crisis

Wendong Zhang
There are plenty of alarming signs indicating a possible farm crisis: current corn prices are half the 2013 peak level of US $7/bushel; farm income has declined for major commodities (corn, wheat, cattle), falling from the previous year to levels well below recent years; weak farm income and worsening credit conditions continue to trim farmland values, which are expected to trend lower in the months ahead, thus weakening the equity position of producers and the collateral value for lenders. Given the heightening farm financial crisis, many agricultural lenders, academics, and other stakeholders in the US farm sector worry another farm crisis is looming. However, there are four economic and legal reasons why this farm downturn is unlikely to slide into a sudden collapse of agricultural markets.