Source: KANSAS STATE UNIV submitted to NRP
U.S. AGRICULTURAL TRADE AND POLICY IN A DYNAMIC GLOBAL MARKET ENVIRONMENT
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
COMPLETE
Funding Source
HATCH
Reporting Frequency
Annual
Accession No.
1018086
Grant No.
(N/A)
Cumulative Award Amt.
(N/A)
Proposal No.
(N/A)
Multistate No.
S-OLD 1072
Project Start Date
Nov 28, 2018
Project End Date
Sep 30, 2023
Grant Year
(N/A)
Program Code
[(N/A)]- (N/A)
Recipient Organization
KANSAS STATE UNIV
(N/A)
MANHATTAN,KS 66506
Performing Department
Agri Economics
Non Technical Summary
The Multistate Project S1072 explores a comprehensive set of issues related to the competitiveness of US agriculture in a changing global marketplace. In the portion of the project at Kansas State University, we complement the multistate project by tackling five emerging issues that connect U.S. and global food and environmental security with international trade. These issues are:The impact of better access to foreign markets on the returns to U.S. Agriculture: Discontent with globalization and the negative impact of trade in some sectors of the economy has resulted in increased trade barriers. Agriculture in the U.S. relies critically on access to foreign markets and it is important to quantify the potential benefits from trade liberalization and the losses from new barriers. Our planned activities in this area will provide this critical information by using historical data and modern econometric methods to estimate how changes in access to foreign markets--through changes in foreign tariffs--has impacted the returns to landowners and farm operators.Inter- and intra-national trade as part of the economic foundations for assessing the long-run sustainability of U.S. agriculture: The pressure on US farmers to produce more output has led to the unsustainable use of land and water resources in many locations. Yet, analysis of these issues is hindered by lack of enough spatial resolution of key parameters, among them the intra-US regional trade responses governing the spatial redistribution of crop production in response to changes in relative costs. Dr. Nelson Villoria is working in this area by estimating land supply elasticities at the grid cell level. By developing these estimates we will get more accurate and geographically disaggregates insights on the challenges facing U.S. farmers to produce more food in a sustainable way.Government-supported risk management policies in the context of changing world markets: Risk management programs are gaining more importance in the context of U.S. farm policies. This line of research focuses on how the government-supported risk management programs affect farm production and crop supply. For example, the U.S. federal crop insurance has expanded rapidly for the last several decades and one of his recent projects focuses on the impacts of crop insurance on crop supply. These policies have directly bearing on trade as their distortionary effects and compliance with the WTO framework remain underexplored. This research will help to better understand the consequences of domestic policies on the international trade system.Supply instability and international markets: Increasing climate volatility is expected to affect the stability of U.S. crop yields with consequences for farm income as well as for sectors that rely on agricultural products as their main inputs. International trade is a main mechanism for stabilizing prices. For instance, the contraction in US exports following the severe drought of 2012 is a prime example of how international markets act as buffers for domestic supplies. A key aspect determining the extent to which international markets are effective in stabilizing domestic supplies is the extent to which supply shocks are correlated across countries. In this context, we are working to understand how worldwide climate patterns shape bilateral trade patterns. This will allow for counterfactual scenarios of likely future climates in international markets, including the consequences for US corn markets.
Animal Health Component
50%
Research Effort Categories
Basic
50%
Applied
50%
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6016120301025%
6066199301025%
6061599301025%
6060199301025%
Knowledge Area
601 - Economics of Agricultural Production and Farm Management; 606 - International Trade and Development;

Subject Of Investigation
6120 - International economy and sectors thereof; 6199 - Economy, general/other; 1599 - Grain crops, general/other; 0199 - Soil and land, general;

Field Of Science
3010 - Economics;
Goals / Objectives
1. Determine the impacts of U.S. and foreign policies, regulations, market structures, and productivity on U.S. food and agricultural trade, the economy, and the environment. Specifically, to examine the impact of the following a. foreign investment and multinational firms,
b. international and national events and policies (e.g., Farm Bill, immigration and labor issues, food fraud, food labeling laws), and
c. economic growth and changing policies of developing and emerging economies, including safeguards or other mechanisms that target food security. Determine the impacts of international trade agreements and institutions on U.S. food and agricultural trade, the economy, and the environment.ÿ Specifically, to examine the potential implications of the following: a. renegotiating preferential trade agreements (e.g., NAFTA),
b. not engaging in preferential trade agreements (e.g. Trans Pacific Partnership), and
c. future preferential trade agreements.
Project Methods
The members of this project at KSU have complementary skills, which allows for drawing on diverse methods such as simulation, spatial and optimization models, and time series analysis. Market behavior, supply and demand, along with risk and uncertainty will be studied using these methods. The economic impacts will focus on changes in output, value added, employment, the welfare of consumers and producers, and government expenditures. Measures of economic performance will focus on prices, trade, economies at the regional and national level, and the environment. In addition, we will develop new methods as well as extend existing methods to accomplish these objectives.As part of the process to deliver the results of this project, we have several papers under peer review at influential journals. We are also presenting the paper at conferences and workshops that are attended by both academics and policy analysts charged with informing policy debates in the U.S. and abroad. A main way of evaluating this work is through citations in both academic articles and policy documents as well as on social media. We plan on using Google Scholar citations as well as Altmetrics to track the impacts of the project.Beyond the impact of the project through facilitating access to data, our efforts to disseminate this work will seek to inform other researchers, and eventually policy makers, as they discuss the roles of trade policy and stockholding in improving US farm policies geared toward adaptation to a more variable climate.

Progress 10/01/19 to 09/30/20

Outputs
Target Audience:This reporting period we have presented our work in key conferences and other fora targeting agricultural economists: - International Agricultural Trade Research Consortium Annual Meeting, Washington DC, December 8 - 10, 2019 - Agricultural Economics Seminar, Mississippi State University, February 28,2020. - National Bureau of Economic Research Conference on "Agricultural Markets and Trade Policy" Virtual. August 10-11, 2020. - Meetings of the Agricultural & Applied Economics Association, Virtual. August 10-11, 2020. - Agricultural Policy Conference 2020, October 16-17, 2020. - 23rd Annual Conference on Global Economic Analysis. Virtual. June 17-19, 2020. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?The dissemination of results during the reporting period focused mostly on online conferences. What do you plan to do during the next reporting period to accomplish the goals?Our team continues to work on the main themes of the project. I the next year we expect to have under review the following articles, some of them carrying over the previous reporting period: The Incidence of Foreign Market Accessibility on Farmland Rental Rates: In this paper, we estimate how farmland rental rates are affected by the changes in tariffs that U.S. export crops face. Using annual county-level data of cash rents for non-irrigated fields in 2,534 U.S. counties, we first directly estimate the impact of tariff changes on cash rents. Our findings indicate that one percent increase in ad valorem equivalent localized tariff reduces cash rental rates by about 4.2% of the 2017 average. We also provide the predicted changes in cash rental rates caused by the 2018 Chinese retaliatory soybeans tariff using the estimated impact of localized tariff changes. Geographical constraints for using international trade to stabilize domestic markets in the presence of cross-country correlated supply shocks: This study is motivated in the fact that the extent to which international markets are a reliable source for stabilizing agricultural commodity prices depends on the degree to which weather-driven supply shocks are uncorrelated across countries. Most studies on trade and price stability assume that weather-driven supply shocks are independently distributed over time and space. This is at odds with the fact that worldwide climates are correlated, typically over thousands of kilometers, through the so-called climate "teleconnections" such as El Nino/Southern Oscillation (ENSO). In this study we assess the relevance of spatially correlated ENSO-driven supply shocks on domestic producer and consumer maize prices in several countries. We find that international trade, even under extreme unilateral trade liberalization, may not be enough to completely eliminate price spikes when supply shocks are correlated among close trading partners. Other areas of work include: Research on the trade effects of corporate commitments to decrease deforestation in the Amazon; investigating the trade-offs between stockholding and international trade to stabilize domestic markets; and the effects of trade opening on U.S. farm income. Pending requests for funding will help to strengthen our capabilities in this area.

Impacts
What was accomplished under these goals? A main contribution of this reporting period has been to understand the effects of agricultural technological progress on cropland expansion at various geographical resolutions, from the country level to the world as a whole, while formally accounting for the international interdependence of national supply responses. Evidence for these effects has thus far been scant, contributing to polarized perceptions about the potential for improving agricultural technologies as a means to slow down deforestation. We find that, in most countries of the world, growth in total factor productivity (TFP) is either uncorrelated or is positively associated with cropland expansion. Yet worldwide TFP growth have been an important source of global land savings. The divergence between the country-level and the global results is explained by the changes in production. patterns as countries interact in international markets. Our preferred point estimate of the elasticity of global cropland to global TFP growth is -0.34. Moreover, we estimate that satisfying food demand from 1991 to 2010 without observed TFP growth would have necessitated an additional 173 million hectares, or close to 10% of the area covered by tropical rain forests. This has important implications for the need of continued investment in agricultural research and development. Another area of work with significant impacts are our efforts to understand the effects of lower tariffs on destination markets on US farm income. Our work to date has focused on land rents. We estimate that a one percentage point decrease in the aggregated tariff facing the export basket of a typical county in the Eastern US increases rents by 3.6%. This estimate is particularly useful for policy evaluations. For example, we estimate that the 2018 Chinese retaliatory tariffs would have decreased rents by about 3% in the absence of any government support.

Publications

  • Type: Conference Papers and Presentations Status: Other Year Published: 2020 Citation: Yu, J., N.B. Villoria, and N.P. Hendricks, The Incidence of Foreign Market Accessibility on Farmland Rental Rates, Agricultural Economics Seminar, Mississippi State University, February 28,2020
  • Type: Conference Papers and Presentations Status: Other Year Published: 2020 Citation: Yu, J., N.B. Villoria, and N.P. Hendricks, The Incidence of Foreign Market Accessibility on Farmland Rental Rates, National Bureau of Economic Research Conference on Agricultural Markets and Trade Policy (Virtual), April 30  May 1, 2020
  • Type: Conference Papers and Presentations Status: Other Year Published: 2020 Citation: Villoria, N.B., Shourish Chakravarty* and Michael Delgado. Land Supply Elasticity in the U.S. A Spatially Explicit Approach Selected Paper at the 2020 AAEA Annual Meeting. Virtual. August 10-11, 2020.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2020 Citation: Villoria, N.B., Shourish Chakravarty and Michael Delgado. Land Supply Elasticity in the U.S. A Spatially Explicit Approach. 23rd Annual Conference on Global Economic Analysis. Virtual. June 17-19, 2020.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2020 Citation: Yu, Jisang*, Nelson B. Villoria, and Nathan Hendricks. The Incidence of Foreign Market Accessibility on Farmland Rental Rates. NBER Agricultural Markets and Trade Policy Conference, Online due to COVID-19. April 30-May 1, 2020.
  • Type: Journal Articles Status: Published Year Published: 2020 Citation: Perry, E.D., J. Yu, and J. Tack. 2020. Using insurance data to quantify the multidimensional impacts of warming temperatures on yield risk. Nature Communications 11(4542). https://doi.org/10.1038/s41467-020-17707-2
  • Type: Journal Articles Status: Published Year Published: 2020 Citation: M.R. Taylor, L. Sudbeck, C. Wilson, and J. Yu. 2020. Quality Effects on Kansas Land Price Trends, Journal of the American Society of Farm Managers and Rural Appraisers, 167170.
  • Type: Journal Articles Status: Published Year Published: 2020 Citation: Goodrich, B.K., J. Yu, and M. Vandeveer. 2020. Participation Patterns of the Rainfall Index Insurance for Pasture, Rangeland and Forage (RI-PRF) Program, forthcoming, The Geneva Papers on Risk and Insurance - Issues and Practice (Special Issue on Agricultural Insurance), https://doi.org/10.1057/s41288-019-00149-3
  • Type: Journal Articles Status: Published Year Published: 2020 Citation: Yu, J., and N. P. Hendricks. 2020. Input Use Decisions with Greater Information on Crop Conditions: Implications for Insurance Moral Hazard and the Environment, forthcoming, American Journal of Agricultural Economics, https://doi.org/10.1093/ajae/aaz035
  • Type: Journal Articles Status: Published Year Published: 2020 Citation: Kim*, Y., J. Yu, and D. L. Pendell. 2020. Effects of Crop Insurance on Farm Disinvestment and Exit Decisions, European Review of Agricultural Economics, https://doi.org/10.1093/erae/jbz035
  • Type: Journal Articles Status: Published Year Published: 2020 Citation: Chen, Bowen, Nelson B. Villoria and Tian Xia (2020). Trade Impacts of Tariff Quota Administration in Chinas Grain Markets: An Empirical Assessment. Agricultural Economics 51:2, pp. 191-206.
  • Type: Journal Articles Status: Published Year Published: 2020 Citation: Villoria, N.B (2019) Consequences of Agricultural Total Factor Productivity Growth for the Sustainability of Global Farming: Accounting for Direct and Indirect Land Use Effects. Environmental Research Letters, Volume 14, Number 12, November 2019, https://doi.org/10.1088/1748-9326/ab4f57.
  • Type: Conference Papers and Presentations Status: Other Year Published: 2020 Citation: Yu, J., N.B. Villoria, and N.P. Hendricks, The Incidence of Foreign Market Accessibility on Farmland Rental Rates, 2019 International Agricultural Trade Research Consortium Annual Meeting, Washington DC, December 8  10, 2019


Progress 11/28/18 to 09/30/19

Outputs
Target Audience:This reporting period we have presented our work in key conferences and other fora targeting agricultural economists: Meetings of the Agricultural & Applied Economics Association, Atlanta GA, July 21-23, 2019. Th Agricultural Economics Workshop, University of California at Davis, October 18, 2018. Research from this project has also been incorporated in formal classroom instruction in the Fall 2018 and Fall 2019 offerings of AGEC 840, International Trade and Agricultural Markets. This is a MS level course designed for future practitioners in the areas of trade and trade policy. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?The main vehicle of dissemination has been conferences and peer-reviewed publications. key conferences: other fora targeting agricultural economists: Meetings of the Agricultural & Applied Economics Association, Atlanta GA, July 21-23, 2019. Th Agricultural Economics Workshop, University of California at Davis, October 18, 2018. What do you plan to do during the next reporting period to accomplish the goals?Our team continues to work on the main themes of the project. I the next year we expect to have under review the following articles: The Incidence of Foreign Market Accessibility on Farmland Rental Rates: In this paper, we estimate how farmland rental rates are affected by the changes in tariffs that U.S. export crops face. Using annual county-level data of cash rents for non-irrigated fields in 2,534 U.S. counties, we first directly estimate the impact of tariff changes on cash rents. Our findings indicate that one percent increase in ad valorem equivalent localized tariff reduces cash rental rates by about 4.2% of the 2017 average. We also provide the predicted changes in cash rental rates caused by the 2018 Chinese retaliatory soybeans tariff using the estimated impact of localized tariff changes. Geographical constraints for using international trade to stabilize domestic markets in the presence of cross-country correlated supply shocks: This study is motivated in the fact that the extent to which international markets are a reliable source for stabilizing agricultural commodity prices depends on the degree to which weather-driven supply shocks are uncorrelated across countries. Most studies on trade and price stability assume that weather-driven supply shocks are independently distributed over time and space. This is at odds with the fact that worldwide climates are correlated, typically over thousands of kilometers, through the so-called climate "teleconnections" such as El Nino/Southern Oscillation (ENSO). In this study we assess the relevance of spatially correlated ENSO-driven supply shocks on domestic producer and consumer maize prices in several countries. We find that international trade, even under extreme unilateral trade liberalization, may not be enough to completely eliminate price spikes when supply shocks are correlated among close trading partners. Other areas of work include: Research on the trade effects of corporate commitments to decrease deforestation in the Amazon; investigating the trade-offs between stockholding and international trade to stabilize domestic markets; and the effects of trade opening on U.S. farm income. Pending requests for funding will help to strengthen our capabilities in this area.

Impacts
What was accomplished under these goals? The main accomplishments of the work completed during this reporting period are listed below. China has become an increasingly important importer of corn and other agricultural commodities. This motivated us to study the extent to which China's policies directed to protect their domestic markets have a diversification objective. In an article in Agricultural Economics, we find that China's policies, in particular their administration of the tariff-rate-quotas for imported grains committed before the WTO, have helped China to diversify suppliers. This is an interesting finding as China's demand could stimulate more production form South America and Eastern Europe, which in turn could help to diversify exporters. Such diversification has contrasting effects for U.S. producers. On the one hand, China's reorientation of their supply source will contribute to erode market shares. On the other, a more diversified set of suppliers may reduce concerns in importing countries about the exposure to foreign shocks, which over time, could reduce the rationale for obstructing market access to U.S. corn exports. On the area of risk management programs and trade policy, our research has help to understand how the government-supported risk management programs affect farm production and crop supply. For example, the U.S. federal crop insurance has expanded rapidly for the last several decades and one of his recent projects focuses on the impacts of crop insurance on crop supply. These policies have directly bearing on trade as their distortionary effects and compliance with the WTO framework remain underexplored. More work on this area is expected in the current reporting period. On the area of climate instability and agricultural prices, our findings suggest that increased volatility could be offset with increases in the ratio of imports to total consumption or in the stock-to-use ratio at the beginning of the crop marketing year. The fact that both imports and stocks help to stabilize domestic prices suggests that their uses should hinge on a careful cost-benefit analysis, including the risk of facing world production more variable than domestic production and the costs of carrying maize inventories over time.

Publications

  • Type: Journal Articles Status: Published Year Published: 2018 Citation: Song, Jingyu, Michael S. Delgado, Paul V. Preckel, and Nelson B. Villoria. (2018) Downscaling of national crop area statistics using drivers of cropland productivity measured at fine resolutions. PLoS ONE 13(10), October 2018: e0205152.
  • Type: Journal Articles Status: Published Year Published: 2019 Citation: Chen Bowen and Nelson B. Villoria (2019) Climate Shocks, Food Price Stability and International Trade: Evidence from 76 Maize Markets in 27 Net-importing Countries." Environmental Research Letters, Volume 14, Number 1, January 2019, https://doi.org/10.1088/1748-9326/aaf07f.
  • Type: Journal Articles Status: Published Year Published: 2019 Citation: Garrett, Rachael., Samuel Levy, Kimberly Carlson, Toby Gardner, Javier Godar, Jennifer Clapp, Peter Dauvergne, Robert Heilmayr, Yann le Polain de Waroux, Ben Ayre, Barbro Dovre, Holly Gibbs, Simon Hall, Sarah Lake, Jeffrey Milder, Lisa Rausch, Rodrigo Rivero Castro, Ximena Rueda, Ryan Sarsfield, Britaldo Soares-Filho, Nelson Villoria (2019) Criteria for effective zero-deforestation commitments. Global Environmental Change Vol 54. January 2019, Pages 135-147.
  • Type: Journal Articles Status: Published Year Published: 2019 Citation: Villoria, N.B. (2019) Technology Spillovers and Land Use Change: Empirical Evidence from Global Agriculture. American Journal of Agricultural Economics. Volume 101, Issue 3, April 2019, Pages 870893,
  • Type: Journal Articles Status: Published Year Published: 2019 Citation: Hertel, Thomas W., Thales A. P. West, Jan B�rner, and Nelson B. Villoria (2019). Global to Local to Global Analysis of Land Use Change and Leakage. Environmental Research Letters, Volume 14, Number 5, May 2019. https://doi.org/10.1088/1748-9326/ab0d33
  • Type: Other Status: Published Year Published: 2019 Citation: Nu�o, Jose and Nelson B. Villoria (2019) Estimating International Trade Margins Shares by Mode of Transport for the GTAP Database. Journal of Global Economic Analysis. Volume 4 (2019), No. 1, pp. 28-49.
  • Type: Journal Articles Status: Published Year Published: 2019 Citation: Ubilava, David, Nelson B. Villoria, and Jesse B. Tack. (2019) "Smooth Transitions Across Latitudes and Longitudes: An Application of a Nonlinear Panel Regression to the Climate-Economics Nexus." Economic Letters. Volume 182, September 2019, Pages 114-117.