Identifying Priorities for Iowa's Future November 2003

Economics, Markets, and Policy $7,834,000 in FY02 expenditures The Questions Experiment Station researchers work in areas that are both practical and fundamental, short-term and far-reaching. What key questions are researchers addressing for Iowans? Commodity, Trade and Research Policy--$1,664,000 What are the impacts of government policy on commodity prices, production and exports, and on farmers, processors and consumers? $481,000 How does U.S. and foreign trade policy affect world prices and international trade? $954,000 How does research policy affect the agricultural sector and economic growth? $229,000 Finance and Risk Management--$264,000 How do changes in financial markets affect performance of the agricultural sector? $264,000 Environmental Economics--$2,112,000 What are the effects of agriculture on the environment? $1,758,000 What are the economic costs and benefits of increasing environmental quality? $354,000 Rural Development--$1,076,000 What factors lead to rural economic growth or decline? $904,000 What is the role of value-added agriculture in rural development? $172,000 Evolution of Markets--$2,718,000 How is U.S. food and fiber demand changing over time? $353,000 What are alternative ways to enhance food safety? $126,000 What are the costs and benefits of new or alternative processes or products? $996,000 What are costs and benefits of alternative firm and market structures in agriculture? $668,000 How do changes in foreign agricultural production and consumption affect the demand for U.S. exports? $575,000 Selected Impacts Research results often improve understanding, help solve practical problems and build to greater discoveries. How has Experiment Station research impacted Iowans? Commodity, Trade and Research Policy Researchers analyzed alternative ways to export fresh meat to Asia. The analysis showed large potential increases to China given a relaxation of Chinese import restrictions. This information provided key evidence to the Senate Finance Committee prior to its vote to approve normal trade relationships with China. A model to analyze the impact of genetically modified soybean and soybean products in world trade will enhance negotiators’ knowledge of alternative trade liberalization agreements. During the debate on the 2002 Farm Bill, researchers analyzed the economic impacts of alternative proposals. This information allowed congressional staff, legislators, commodity organizations and other agricultural groups to better understand the tradeoffs involved. Researchers investigated the impact on prices, production and net farm income from changes in U.S. farm and trade policies potentially required under new World Trade Organization agreements. Finance and Risk Management Researchers developed new risk-management insurance products for use by independent Iowa hog producers. The products, which became available in August 2002, have resulted in $60 million of coverage ($3.3 million of premiums) covering 830,000 hogs. New methods to rate revenue insurance products resulted in a decision to completely overhaul crop insurance rates for coverage on over $3.5 billion of products. Environmental Economics Researchers studied how Iowans value wetlands, rivers and lakes and the recreational opportunities created by these areas. In Clear Lake, extensive analyses showed the costs and benefits of improving water quality. Results showed the community’s willingness to pay for large improvements if the result was significant water quality improvements. Researchers increased the effectiveness of plant-growth models to estimate the impact of alternative agricultural practices on production and water quality. The models allow the development of more “what if” scenarios to determine optimal combinations of soil, crops, chemicals, terrain and climate. Rural Development An efficient method was developed to deliver large quantities of economic and demographic data to communities, counties, state officials and Midwestern researchers. The centralized system increases the availability of data for decision-making at a significantly reduced cost. A comprehensive survey showed that community-based banks tended to accept deposits from a relatively large geographic area, but made most loans within 90 miles of their hometowns. The finding emphasizes the importance of local banks for local investments. Evolution of Markets Researchers investigated the costs of implementing the federal Hazard Analysis and Critical Control Point (HACCP) systems for pork to improve food safety and protect food quality. Annual nvestments were between 3 and 20 cents per hog, with operating costs of 14 cents per hog. The information is useful to packers and food processors in choosing among alternative methods to meet food safety targets. By analyzing soybean protein and oil from around the United States, researchers identified handling procedures that minimized damage to grain and allowed for more efficient segregation. The result: a suggested management protocol for use by private industry. The intent is to develop an efficient way to segregate cereals and oilseeds, allowing for payment of quality premiums. One large cooperative is implementing the system and estimates an increase of $2 in profits per $1 of investment. Researchers estimated the costs of producing ethanol from corn using alternative processes. They also analyzed the market response of producers to higher ethanol demand. This knowledge will enhance the ability of producers and investors to make better-informed decisions about the construction of new ethanol plants. By studying farmer-owned brands in the United States and other countries, researchers demonstrated that tight control over quantity and quality were essential in obtaining sustainable profits. The information has been useful for producer groups trying to design products for niche markets, farmer brands and cooperative marketing ventures. Selected Extension/Outreach Science-based information is a hallmark of the Experiment Station and Iowa State’s land-grant mission. What key extension or outreach activities are making the information available to Iowans and others? Because the 2002 Farm Bill significantly changed government support programs for Iowa farmers and landowners, Extension personnel held meetings and developed software to help farmers analyze their personal situations. Extension farm management specialists consulted individually with more than 1,100 producers, analyzing their options with the Commodity Programs Payment Analyzer. Participants realized an average benefit of $5,322 per farm per year. ISU Extension developed a series of online courses called Agricultural Management E-School (AMES). The Advanced Grain Marketing Course has been offered five times to 260 students. Eighty-seven percent of participants said they had completed a marketing plan as a result of taking the course. John Beghin and Bruce Babcock testified several times to congressional committees on the impact of federal farm legislation, including alternative agricultural and trade policies. The quarterly Iowa Ag Review newsletter takes economic research findings and presents them in easy-to-understand articles. The Midwest Agribusiness Trade Research and Information Center regularly publishes research/outreach papers that examine food consumption trends in foreign markets. Local and regional decision-makers are using information from the work of Cathy Kling, Joe Herriges, Jinhua Zhao and John Downing that analyzed costs, benefits and willingness-to-pay for water quality improvements at Clear Lake. Methods for estimating probability distributions for prices, yields and option values were developed by Bruce Babcock and Dermot Hayes and adapted by Bob Wisner for use in educational extension programs and online courses. Bob Jolly, William Edwards, Neil Harl and others hold annual schools to train bankers in current issues in agricultural finance. Dan Otto is working with Iowa hospitals on projected demand for services and cost-efficient ways to provide health care. The Iowa Farm Outlook newsletter, Pro Ag meetings and regular appearances on WOI radio, coordinated by Bob Wisner and John Lawrence, keep producers apprised of the grain and livestock market outlook. William Edwards conducts annual surveys of cash rent and custom machinery rates, which help facilitate negotiations between farmers and landowners. The annual land value survey, analysis and conference, led by Michael Duffy, documents changes in Iowa land value and ownership. The annual agricultural tax schools, led by Neil Harl, train tax practitioners across the nation to better serve farmers and ranchers. Farm financial associates provide one-on-one analysis and advice to farmers considering significant changes in their operations. The loan deficiency payment (LDP) analysis Web site developed by the Center for Agricultural and Rural Development provides a user-friendly, yet sophisticated analysis of marketing choices and is used by producers across the country. Dermot Hayes regularly provides information on agricultural trade and trade policy to the National Pork Producers Council. Giancarlo Moschini and Harvey Lapan have worked with legislators on proposals to modify the structure of Iowa’s income tax.

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