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Agricultural and Rural Finance Markets in Transition (nc1014, Nc221, Nct-194)

Wang, Holly
Purdue University
Start date
End date
1. Evaluate the managment strategies, capital needs, and policy impacting the financial performance and long-term sustainability of firms in the food and agricusiness sector 3. Identify financial institutions and services that benefit agricultural proceders and rural communities and expand agricultural markets, especially those producers that are beginning, young, from socially disadvantaged groups, and/or involved in producing specialty crops
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The project will have two components. First, the new federal farm programs, especially ACRE will be studied in the context with other existing risk management tools, such as crop yield and revenue insurance, futures market and other instruments. The added risk protection value and welfare transfer value of ACRE will be evaluated. This policy impact on farms' financial performance will be investgated. Second, the international financial market and policy including recent financial crisis and excahgne rate policies of each major players in the world market will be examined. Using China, a huge agricultural commodity consumer, as a case, the exchange rate policy impact on market demand for commodities grown in the Midwest including grain crops, livestock and specialty crops, will be explored. Product quality and food safety are an important part of the competitiveness of US agriculture. Their roles in expanding US agricultural market, especially under the pressure of international financial crisis will be explored.

The primary method used to achieve the goals is empirical analysis. With the increase of fluctuations of agricultural commodity prices and land prices, farmers' risk portfolio is critial to loan decisions made at the the financial instituions to facilitate the capital availability. This is the emphasis in the NC1177 proposed method for objective 2. Time series data of crop yields and market prices will be collected, and statistic models for time series data will be employed. Risk theory and simulation will also be applied to analyze farmers' risk management behavior and the residual risk exposure under the optimal management strategies. Corn and soybean farms in Indiana will be the primary subjects in this analysis. An investigation of the impact of the exchange rate policy changes on cotton price linkages between US (the world largest exporter) and China (the largest user and textile exporter to US) markets will be conducted. Cointegration and other econometric methods will be used in this analysis. This will fit NC1177's 3rd objective and is in line with the proposed study of international finance issues. Futhermore, the impact of current international financial crisis on domestic and export markets of a specialty crop, ducks produced in Indiana primarily, and on the firms' financial perfomances will be explored. The investigator will work closely with the duck industry to obtain and utilize busienss data and macroeconomic data.

PROGRESS: 2011/10 TO 2012/09

The outputs of the agricultural financial market in transition project developed in the past year include six peer reviewed journal articles, all in SCI and SSCI journals, eight conference presentations, and six invited talks as reported in the publication category. Field surveys were conducted, and a lot of mentoring to graduate students, junior scholars and visiting scholars occurred. Research was also incorporated in classroom teaching. PARTICIPANTS: Dr. Wang is the sole PI of this project. She has several collaborators from Purdue as well as other universities. Dr. Laping Wu from China Agricultural University, Dr. Yuehua Zhang from Zhejiang University (China), Dr. Junfei Bai from China Academy of Science, and Dr. Nicole Olynk from the same department are all collaborators. She has trained one PHD student at Purdue University, David Ortage, who has successfully defended his dissertation, received tenure tracked assistant professor offers from two major land grant university and will start his career in Jan. of 2013 at Michigan State University. With this project, she has trained two another PHD students as Purdue visiting students from Renmin University of China and China Agriculture University, Qing Guo and Yanping Zhang. The former is finishing up his dissertation from the project and the latter has successfully completed her PHD degree using this project and now employed by China Ministry of Agriculture. TARGET AUDIENCES: The target audience of this projects are professionals in agricultural risks and finance internationally, farmers, financial industry, policy makers and governments of developing countries. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

PROGRESS: 2010/10/01 TO 2011/09/30

Outputs include 1) preparing journal publication for the article about US Midwestern farmers' risk management behavior under the ACRE program; 2) writing several publications on Chinese food demand with food safety implications to US livestock products and producers; 3) advising graduate students on a research project regarding to US poultry industry. The paper addressing Midwestern farmers financial management has been presented at conferences and submitted to a peer reviewed journal. 4) Several journal articles are either published or accepted for publication (only the published ones are listed for this period.) Some of peer viewed journal articles are for a market relevant to US commodity (the cotton paper) or relevant to financial risk management modeling (contracting, financial markets, etc.) 5) More data are collected on demand for aquaculture products, through consumer survey and interview agribusiness. 6) One Master student defended his thesis. The primary means of dissemination of the research work is through peer reviewed journal publication and professional conference presentation. PARTICIPANTS: The only person paid by this project is the PI, Dr. H. Holly Wang herself. Graduate students, David Ortega, Paul Gardener, Yanping Zhang were paid by different collabortors, and they are also trainees. Partner organizations include Maple Leaf Farms, China Agricultural University, China Academy of Science, and Illinois-Indiana Sea Grant Research. Collaborators include co-authers: Nicole Olynk, Laping Wu, Junfei Bai, Milton Boyd, Tim Baker, Rong Nie, and Poomthan Rangkakulnuwat. TARGET AUDIENCES: Main audience is the professional society. Efforts include giving lectures in classroom of various courses at Purdue University, professional conferences. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

PROGRESS: 2009/10/01 TO 2010/09/30

Activies include 1) conducting statistical analysis for corn and wheat yield and market price risks at the levels of state, national and interntional (Indiana, US, and China); 2) conducting field surveys on Chinese market demand for US meat products; 3) collecting and analyzing data from macroeconomic environment, market and food safety risks for the poultry industry; 4) finalizing research on cotton futures market analysis; 5) finishing up a risk management computer tool for apple growers; and 6) mentoring four graduate students on related projects. The studies on corn and wheat are focused on the new method in yield modeling and the financial risk mitigation programs in the US Farm Bill. Papers have been completed and presented at professional conferences, and submitted to a journal. One student finished his Master thesis on this topic, and another student is finishing her PhD dissertation on this topic. The study on Chinese meat demand takes on the food safety risk issues and investigates the potential for US livestock export to that market. The poultry study is focused on duck producers in the US. Factors affecting the profitability of duck farms include food safety risks, prices, and population demograph. The study on the commodity futures market for cotton investigated the efficiency of global financial market. The apple project is for apple growers to evaluate his/her own farm risks, when he/she choose organic versus conventional apple productions. A computer tool was sent to many apple growers and is posted online for free public access. Research from these projects has been presented at many conferences. The PI also organized a conference and several sessions at other conferences. Other than research publications, the comupter tool is accessible at and PARTICIPANTS: Qiujie Zheng, former PHD student; Yunguang Chen, former MS student at Purdue University, now PHD student at Oregon State University; David Ortega, Yuanlong Ge, PHD students at Purdue University; George Patrick, Nicole Olynk, faculty members at Prudue University; Ahn Sung, collaborator at Washington State University; Larry Makus, collaborator at University of Idaho; Shunfeng Song, collaboraor at University of Nevada; Laping Wu, Junfei Bai, Qinghua Shi, collaborators in China. TARGET AUDIENCES: The primary audience of the project includes professionals and policy makers. The PI has participated in many professional conferences and made presentations to dissenminate the results to professionals, hoping the methods developed will be accepted and applied widely. Publications are written to reach more people including policy makers. The audience of the apple risk managment tool is farmers. The tool has been mailed to many identified apple growers and is posted online for free access. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Funding Source
Nat'l. Inst. of Food and Agriculture
Project source
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Risk Assessment, Management, and Communication
Policy and Planning
Natural Toxins
Viruses and Prions
Bacterial Pathogens
Chemical Contaminants
Meat, Poultry, Game