FOOD AND AGRICULTURAL POLICY INSTITUTE, MO

• Sponsoring Institution: National Institute of Food and Agriculture
• Project Status: TERMINATED
• Funding Source: SPECIAL GRANT
• Reporting Frequency: Annual
• Accession No.: 0221512
• Grant No.: 2010-34149-20711
• Project No.: MO-SSSG0135
• Proposal No.: 2010-01462
• Program Code: AT
• Project Start Date: Aug 1, 2010
• Project End Date: Jul 31, 2012
• Grant Year: 2010

Project Director
Westhoff, P.

Recipient Organization
UNIVERSITY OF MISSOURI
(N/A)
COLUMBIA,MO 65211

Performing Department
Social Sciences

Non Technical Summary
Each year, the United States spends billions of dollars on agricultural programs designed to affect the income and wealth of farmers and the cost of food to consumers. The underlying policies are complex and the policy debate is often confused by arguments over what the implications of a particular policy may be. Advocates make arguments based on anecdotes and conjecture, and opposing sides often find little common ground for discussion. FAPRI-MU contributes to the policy process by providing objective, quantitative analysis of major issues. FAPRI-MU does not advocate or oppose particular policies but provides information that can be used by all. One of the key roles FAPRI-MU analysis plays is to help identify a wide spectrum of consequences that may result from a policy proposal. The analysis serves to highlight trade-offs in a way that sharpens policy debates. Quantifying the likely consequences of policies does not end the need for political debate, but it can make it possible to focus on a manageable set of questions concerning priorities and objectives. Other analysts and institutions can and do provide information to support the policy process, but FAPRI-MU fills a critical niche. First, the breadth of FAPRI-MU's modeling system allows it to examine a broad range of questions and provide answers that consider how a myriad of factors interact. FAPRI-MU can provide information not just on the likely effects of a proposal on the federal budget or on agricultural markets, but also the effects on consumer food costs, natural resource use, farmland values, and producer income. The institute has been examining farm bill proposals, international trade agreements, and EPA regulations for more than 20 years. This experience working with public decision makers has helped FAPRI-MU analysts understand how the policy process works and how best to provide useful information.

Animal Health Component

100%

Research Effort Categories

Basic

(N/A)

Applied

100%

Developmental

(N/A)

Classification

Knowledge Area (KA)	Subject of Investigation (SOI)	Field of Science (FOS)	Percent
601	2410	3010	20%
601	3910	3010	20%
601	5010	3010	10%
610	2410	3010	20%
610	3910	3010	20%
610	5010	3010	10%

Knowledge Area
610 - Domestic Policy Analysis; 601 - Economics of Agricultural Production and Farm Management;

Subject Of Investigation
3910 - Cross-commodity research--multiple animal species; 5010 - Food; 2410 - Cross-commodity research--multiple crops;

Field Of Science
3010 - Economics;

Keywords

agricultural policy analysis

econometric modeling

ten year baseline

policy scenarios

Goals / Objectives
The Food and Agricultural Policy Research Institute at the University of Missouri (FAPRI-MU) provides objective economic analysis of agricultural policy issues. The project funded by the special grant has two major objectives. 1. Provide information to help public decision makers evaluate farm policy options. a. Assess the implications of retaining current policies for agricultural markets and for food producers, consumers, and taxpayers. b. Analyze the consequences of alternative policies in response to requests from Congress and other decision makers. c. Report results in an understandable manner and a timely fashion. 2. Develop capacity to conduct quantitative analysis of agricultural policy issues. a. Maintain and expand domestic and international data banks. b. Develop and improve models that can be used to project agricultural market outcomes and food sector indicators under a variety of policy scenarios. c. Use formal and informal networks of experts to aid in design and implementation of analysis and review preliminary results.

Project Methods
FAPRI-MU's policy analysis system relies on large-scale quantitative models of agricultural markets, the expertise of FAPRI-MU analysts to develop modeling systems, and outside reviewers. FAPRI-MU's models include thousands of equations intended to represent the behavior of food producers, consumers, and traders around the world. Many of these equations are estimated econometrically using time series data. Others are generated using the principals of economic theory and physical relations known to exist, such as the relationship between animal numbers and feed utilization or the length of time needed for animal herds to change size. FAPRI-MU models are dynamic in that they attempt to reflect how variables move over time in response to adjustment processes that may result from biological constraints, investment behavior, etc. The models are multiple-market, partial equilibrium models. They do not attempt to model the entire economy, but do try to capture key relationships among closely related markets, for example the interrelationships between feed and livestock markets. The models are simultaneous, tying anything that happens in one market to all endogenous variables in the system. A stochastic version of the model allows estimates of the distributions of endogenous variables obtained by solving the models multiple times using random draws of exogenous variables. As comprehensive and complex as FAPRI-MU's modeling system is, it does not and cannot capture all the factors that influence agricultural markets and determine the consequences of agricultural policies. In essence, the quantitative modeling system is a tool used by analysts who also possess a great deal of nonmodel information. As a further check on FAPRI-MU's models and analysts, the analysis is regularly subjected to extensive outside review. Each year, FAPRI develops a preliminary set of baseline projections in November that are then reviewed at a December conference. Participants in the workshop include analysts from USDA, foreign agencies, multilateral organizations, the private sector, and academia. Following presentations on each commodity by FAPRI-MU staff, attendees comment on both the shortcomings and strengths of the preliminary projections. Reviewers provide extensive comments on the preliminary estimates, and these are incorporated into a revised set of baseline projections prepared in January. The revised baseline is released to Congress and the public, and serves as the starting point for the analysis of policy alternatives.

Progress 08/01/10 to 07/31/12

Outputs
OUTPUTS: A primary accomplishment of the project was the preparation of two ten-year baselines for U.S. agricultural and biofuel markets. Preliminary versions of these baselines were prepared in the late fall of each year and reviewed at workshops involving analysts from the U.S. Department of Agriculture (USDA), the Congressional Budget Office (CBO), other U.S. and international government agencies and the private sector. A revised version incorporating reviewer comments and other new information was prepared in January of each year, and a stochastic version was developed. In March of 2011 and 2012, baseline reports were posted on the FAPRI-MU website and presented to Congressional staff, USDA analysts and many other groups with an interest in agriculture and the food sector. In addition to the annual ten-year baselines, a five-year baseline update was prepared in August 2011 to incorporate new information and provide a shorter-term snapshot of possible market outcomes. During the project period, FAPRI-MU analysts also provided analytical support to staff of the House and Senate Committees on Agriculture, CBO, and others involved in policy making and policy analysis. This included analysis of farm policy options that were discussed during 2011 debates on budget issues and 2012 consideration of the farm bill. Extreme weather events resulted in requests for an evaluation of possible impacts on local and national agricultural markets calls. Biofuel policy issues also resulted in calls for FAPRI-MU analysis. To conduct these analyses, new modeling approaches were often required, and major enhancements were made to the crop and biofuel modeling systems, some of which are documented in a 2011 report. Improvements made to the modeling system as part of this project also contributed to analyses of farm policy issues that were conducted in 2012 as part of other USDA-funded projects, and will continue to be useful in future work. PARTICIPANTS: FAPRI-MU analysts who worked on this project include Patrick Westhoff (Director), Abner Womack (Former Director), Julian Binfield (Research Associate), Seth Meyer (Research Associate), Brent Carpenter (Research Associate), Mel Brees (Research Associate), Daniel Madison (Economic Subject Specialist), Scott Gerlt (Economic Subject Specialist), Linda Careaga (Technical Support), and Darlene Kruse (Professional Support). Additionally, a team from the University of Wisconsin performed data analysis. TARGET AUDIENCES: Public decision makers are the main target audience of this project. Working with these key policy makers--including members of Congress--has helped FAPRI-MU analysts understand how the policy process works and how best to provide useful information. In addition to policy makers, others within the agricultural field can use the baseline projections in their daily operations. PROJECT MODIFICATIONS: Not relevant to this project.

Impacts
The FAPRI-MU baseline serves as a point of reference for wide range of decision makers. Congressional staff gains an understanding of the state of the agricultural sector and some of the policy issues that are likely to arise. CBO analysts consider it in establishing their own baseline, and interaction with USDA staff improves baseline projections by both institutions. EPA considers FAPRI-MU biofuel projections in making decisions about the Renewable Fuel Standard, and other government agencies use the baseline for a variety of purposes. Analysts at the Organization for Economic Cooperation and Development, the Food and Agriculture Organization, and public agencies in many countries utilize the FAPRI-MU baseline and provide information to FAPRI-MU analysts to improve market projections. Private sector decision makers also use the baseline in making decisions about which crops to plant and investments to make. The baseline projections are cited in the farm and popular press, helping to increase public understanding of issues related to food and agriculture. FAPRI-MU policy analysis is also used by a broad group of policy makers and the public. Congressional staff routinely asks FAPRI-MU staff for help in understanding the possible implications of policy choices. Budget pressures and high agricultural commodity prices resulted in questions related to biofuel tax credits and use mandates. The 2011 debt limit debate led to a wide range of proposals to reduce the federal deficit, including the elimination or reduction of various farm subsidies. Policy makers asked FAPRI to help them understand what such proposals might mean for all those with a stake in the farm and food sectors. In addition to working directly with Congressional and USDA staff, FAPRI-MU analysts also made a number of presentations to farm groups and the broader public as part of policy education efforts.

Publications

• 1. FAPRI-MU Report #02-11, March 2011, FAPRI U.S. Baseline Briefing Book.
• 2. FAPRI-MU Report #03-11, March 2011, FAPRI U.S. Baseline Briefing Book: Missouri Insert.
• 3. FAPRI-MU Report #04-11, March 2011, The Economic Impact of the Dairy Market Stabilization Program on 2009 Dairy Markets.
• 4. FAPRI-MU Report #06-11, June 2011, The Value of the 2011 Crop Production Loss from the Birds Point-New Madrid Floodway Levee Breach.
• 5. FAPRI-MU Report #07-11, June 2011, US Biofuels Baseline and Impact of Extending the $0.45 Ethanol Blenders Credit.
• 6. FAPRI-MU Report #09-11, July 2011, FAPRI-MU Stochastic U.S. Crop Model Documentation.
• 7. FAPRI-MU Report #10-11, August 2011, FAPRI August Baseline Update for U.S. Agricultural Markets.
• 8. FAPRI-MU Report #01-12, March 2012, FAPRI U.S. Baseline Briefing Book: Projections for Agricultural and Biofuel Markets.

Progress 08/01/10 to 07/31/11

Outputs
OUTPUTS: A primary accomplishment for the 2010/2011 period was preparing a 10 year baseline for US Agriculture and presenting findings to Congressional committees, staff and government agencies. The extreme weather events impacting the midwest resulted in Congressional requests to examine the impact of one year losses in crop production as a result of flooding for southeast and northwest Missouri. The analysis for southeast Missouri was completed in June 2011 while the analysis for northwest Missouri is currently in progress. During March 2011 analysis was completed regarding the economic impact of the dairy market stabilization program. Continuing analytical work has explored the in-depth biofuels and energy markets; the potential impact of eliminating direct payments; and an opportunity for peer review of the FAPRI-MU stochastic crop model documentation. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
In addition to a strong reputation for unbiased analysis and support of the legislative branch of the US government through its work with House and Senate committees and the Congressional Budget Office (CBO), FAPRI-MU has also provided significant input into the agriculture, transportation, energy and environmental models and policy implementation provided by the executive branch through its ongoing research and model development with agencies within the United States Department of Agriculture (USDA) including: Office of the Chief Economist (OCE); Economic Research Service (ERS); Farm Service Agency (FSA)and other government agencies including: Department of Energy (DOE); and Environmental Protection Agency (EPA). Model development and refinement through research with these additional agencies has added depth and analytical insight into FAPRI-MU's modeling system.

Publications

• FAPRI-MU Report #02-11, March 2011, FAPRI U.S. Baseline Briefing Book.
• FAPRI-MU Report #03-11, March 2011, FAPRI U.S. Baseline Briefing Book: Missouri Insert.
• FAPRI-MU Report #04-11, March 2011, The Economic Impact of the Dairy Market Stabilization Program on 2009 Dairy Markets.
• FAPRI-MU Report #06-11, June 2011, The Value of the 2011 Crop Production Loss from the Birds Point-New Madrid Floodway Levee Breach.
• FAPRI-MU Report #07-11, June 2011, US Biofuels Baseline and Impact of Extending the $0.45 Ethanol Blenders Credit.