Progress 01/01/04 to 12/31/04
Outputs
Research under this project has focused on three areas including 1) agricultural finance and risk management, 2) entrepreneurship and 3) Agroterrorism. Under the heading of finance and risk management several projects have been completed and are in peer review. We have conducted research into the use of commodity-linked credit for agriculture and agribusiness. We argue that because of the relationship between business and financial risk in agriculture, new products can be developed that link the repayment structure of a loan to the performance of an underlying commodity. We are investigating models that link commodities in the form of a forward contract or an option. If the objective is to minimize variance then forward contracts may be useful, but our real focus is on mitigating losses from downside risk. We are also investigating models to protect supplier credit from default due to adverse commodity price movements. The project is also focused on innovation and
entrepreneurship. Working with Cesar Escalante at the University of Georgia, we have examined, using a case study approach, barriers facing entrepreneurs. In addition, a graduate student is currently being funded to develop 8-10 case studies of rural entrepreneurs and the impact of business incubators in New Jersey. The NT project members have also organized an historical retrospective on agricultural finance. This is being organized by Paul Ellinger , Bruce Sherrick (University of Illinois) and Calum Turvey (Rutgers). As part of this effort Turvey has partnered with Cesar Escalante (University of Georgia) and William Ngange (North Dakota State University) to prepare a review paper on risk programming. This work will be part of a special pre-conference at the AAEA and published in a special issue of Agricultural Finance Review. We have also been active in examining risks of agroterrorism. A model based on consumer hysteresis has been developed. Trade models using FMD as a case study
have been run, and the benefits to mitigation enumerated. We are also interested in risk perceptions and risk communication. Through the Food Policy Institute at Rutgers University, two nationwide polls were conducted. The first, conducted in early January 2004, followed the outbreak of BSE in December 2003, and the second was Agroterrorim and risk perceptions conducted in October/November 2004.
Impacts
By examining commodity-linked loans we provide an opportunity to develop new financial products for agriculture and commodity related business. The benefits of linked risk products is that is will provide easier access to credit, stable liquidity, and increased investment. By developing case studies of entrepreneurs we gain a depth of understanding into the most pressing issues they face, whether these be operations, marketing, human resource management or finance. By understanding the barriers to success we can make sound proposals that focus on those barriers with the highest opportunity cost. Preliminary evidence shows that access to finance, and access to production facilities are the greatest impedements to growth. Understanding the economics of terrorism provides useful insights into the likelihood of an event occurring. For example our theoretical model indicates that uncertainty is higher for inelastic industries. One can prioritize resources based upon
observeable economic criteria. Understanding consumer perceptions of terrorism risk provides a means to predict the economic consequences of an attack on the food system. But the results from the survey are also useful in identifying the means by which such risks can be communicated to consumers. Using trade models to simulate economic outcomes has provided insights into the magnitude of economic losses in a general equilibrium framework. But it has also provided the base case data for building models to evaluate the benefits of risk mitigation, response and recovery.
Publications
- Escalante, C. and C.G. Turvey (2004) Survival and Early Growth Barriers and Strategies of Agribusiness Entrepreneurs Selected Paper, Annual Meeting of NC 1014 , Chicago Illinois, October 3-5
- Govindasamy R., C.G. Turvey and Venkata S Puduri (2004) The Influence of Agro-terrorism on Consumers Preference for Locally Grown Products, A Case-Study from New Jersey Paper presented at the annual meeting of Food Distribution Research, California, October 15-17
- Hallman, W, C.G. Turvey, B. Schilling (2004) Consumer Risk Perceptions of Agroterrorism with Implications for Food Systems Management Invited Paper Institute For Operation Management and the Management Sciences (INFORMS), Denver Colorado, October 24-27.
- Jin, Y and C.G. Turvey (2004) A General Approach To Valuing Commodity-Linked Bonds Selected Paper AAEA Annual Meeting, Denver Colorado, August 3-7
- Schilling, B., W. Hallman, and C.G. Turvey (2004) Sanity Prevailing in Mad Cow Case. Paper Presented at the Annual Meeting of the Northeastern Agricultural Economics Association, Halifax, N.S. Canada, June 23
- Turvey, C.G. (2004) Assessing Terrorisms Threat to the Food System. Presentation at the International Food Symposium, Calgary Alberta, March 9, 2004
- Turvey, C.G. , J. Cranfield and K. Meilke (2004) Agroterrorosim, Trade, and the Value of Risk Mitigation Invited Paper Institute For Operation Management and the Management Sciences (INFORMS), Denver Colorado, October 24-27.
- Turvey, C.G. and Y. Jin (2004) Managing Business and Financial Risks in Agriculture with Commodity-Linked Credit Instruments. Selected Paper, Annual Meeting of NC 1014 , Chicago Illinois, October 3-5
- Schilling, B., C.G. Turvey and W. Hallman (2004) Consumers and Mad Cows, Wheres the Beef? U.S. Food Safety 1(1):149-150.
- Turvey, C.G. (2004) Will the Bioterrorism Act be Disruptive to the Food Industry? U.S. Food Safety 1(1):66-68
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