High Input Prices Research Articles

Benchmarking the performance of Chinese airlines: An investigation of productivity, yield and cost competitiveness

In the past decade, the Chinese airline industry experienced extraordinary growth in size and profitability. However, no quantitative study has investigated the performance of Chinese airlines in terms of productivity and cost competitiveness. This study investigates the leading Chinese airlines' productivity, yield, cost competitiveness and input prices, and benchmarks them against major airlines around the world. It finds that Chinese airlines' productivity has improved significantly in the past decade but still lags behind that of industry leaders. Chinese carriers enjoyed high yields and low input prices in the domestic market, which led to high profitability in recent years. However, their cost advantage has been diminishing. To sustain long-term growth, Chinese airlines need to adopt the industry's best practices in a timely manner. Both the aviation markets and input markets in China should be further liberalized.

FEATURES OF RURAL POVERTY AND CURRENT CHALLENGES FACING THE EGYPTIAN AGRICULTURE SECTOR IN LIGHT OF THE 1000 VILLAGE GOVERNMENTAL INITIATIVE

Poverty is great obstacle towards achieving sustainable development and economic growth, and threatens political and social stability and security. Poverty doesn’t mean only lack of necessities to fulfill individuals’ welfare, but deprivation from opportunities and choices. Though, previous governments-prior to 25th of January revolution embarked a program aiming poor people through an integrated bunch of developmental projects to improve poor people’s quality of life. This program consists of two main parts: first the main development program targeting 1000 poorest villages (according to the economic development ministry, 2008) and second part the integrated development program which targets 151 villages. In order to enhance the governmental initiative and improve the agriculture sector in Egypt, the current study aims at identifying the conditions of these poor communities via targeting two main and important categories which are agricultural laborers and farmers either tenants or renters of the agricultural lands from gender perspectives, besides identify- ing their problems and suggestions to overcome these problems and their relationship with the relevant agricultural institutions and private sector, and finally their suggested policies to enhance and attract investments to the agriculture sector in Egypt, which will eventually lead to application of more convenient measurements and policies to improve poor people’s livelihoods. The study’s results revealed the rooted poverty especially among agricultural laborers either male or female, but mostly among females, as most of them lack skills, and not gathered in one entity, besides low wages and seasonality of the agriculture work. Therefore most of them are willing to shift to other work opportunities. As for farmers, they suffer from many problems such as high agricultural input prices, soil deterioration, irrigation problems, and deteriorated drainage networks and finally lack of agriculture extension services. In light of the previous results, if no serious measurements and actions taken by the government and relevant stakeholders to improve the agriculture system as a whole, and improve laborers capabilities, solving irrigation and drainage problems, and accessing markets, then we will lose our capabilities to face the accelerating challenges and imbalance in our food security and moreover trapped in the vicious poverty cycle.

Market structure in the Chinese steel industry

Trade in intermediate goods has become a significant feature of the international economy. Nevertheless, questions regarding price negotiation and the determinants of importing firms’ profitability remain unanswered. Using firm-level data, we attempt to address these issues in the context of the Chinese steel industry. Despite being the largest producer of steel in the world, the Chinese steel industry has maintained a very low level of profitability. This paper suggests that the low profitability of Chinese steel producers results from the abnormally high degree of market segmentation in China. Using a recently developed econometric method in panel data spatial analysis, we explain the level of geographic fragmentation in the Chinese steel industry. Our results reveal that local steel production depends only on local demand rather than on cross-regional demand. Production is responsive, as a 10% increase in local GDP induces more than 8% increase in local steel production, while the cross-province spill-over demand is insignificant under several reasonable model specifications. Less efficient firms survive because of the segmented market. As a result, Chinese steel producers realize lower profit in the face of high input prices.

Farmers’ response to soaring food prices in the Arab region

Sharp increases in food commodity prices in 2007–2008 led to impacts on food security and poverty worldwide. This paper discusses the impacts on smallholder farmers in six Arab countries that all suffer, to varying degrees, from water scarcity, poverty and food insecurity. The analysis is based on a survey covering more than 1000 rural households in Egypt, Jordan, Morocco, Sudan, Syria and Yemen. It examines government responses to the price spike, price transmission from international to local markets, and farmers’ production decisions in response to these price changes. It also discusses how smallholder farmers, given the right policy support, could benefit from new opportunities offered by higher commodity prices. Higher international prices were transmitted to domestic markets in all six countries. The price transmission was high and immediate in countries with the least intervention in food markets. In countries with more interventions on imports and/or domestic food prices, the connection between international and domestic prices was generally low. The ability of smallholder farmers to benefit from higher domestic prices was limited by various factors: drought, higher input prices (especially fertilizer), and the timing of the price increases in relation to the crop cycle. The study makes several recommendations to enable smallholder farmers to better respond to market signals. These include better timing of announcement of policy decisions regarding price supports, better access to credit, safety nets to protect the poorest households, improved management of water resources, and simple financial instruments to protect against price volatility.

Ensuring a Sustainable, Enduring Agriculture

During the farm crisis of the 1980s we began to better understand the inherent faults of an industrialized food system. Despite large gains in productivity, efficiency, and economies of size, thousands of farms were in foreclosure. Many farmers were overly extended in debt. Others were in trouble because of a combination of factors such as drought, low crop prices, high input prices, and the lack of competition in the marketplace. The end result was the loss of thousands of farmers and a subsequent decline in many rural communities.At the same time, a new vision of an enduring agriculture emerged. It was called sustainable agriculture. This new paradigm became attractive because it focused on solutions to the problems of the day. Sustainable agriculture offered hope to farmers that were willing to differentiate their product and add value to it, deal with ecological costs by using sustainable best management practices, and work to create equity in food system employment. Forming new links with consumers is enabling farmers to set their prices, and consumers are willing to pay to know more about their food.

Drivers leading to higher food prices: biofuels are not the main factor

Since 2007, the overall rise in food prices in the USA was twice that of the overall inflation rate, led by inflation for poultry and dairy products in particular. Prominent studies have indicated that the main drivers associated with the rise in food prices in the past 3 yr are the increased energy costs (and the trickle-down impact on farm input costs) and the devaluation of the US dollar. However, currently, the impact of crude oil as one of the primary drivers in food prices has waned significantly, as crude oil prices have fallen dramatically since late 2008. The data reviewed here debunk the popular myth that food producers, particularly farmers growing corn or soybean for biofuel feedstocks, are making huge profits with high commodity prices. Producers continue to face extraordinary risks in their farming operations, and profit margins have narrowed considerably because of the high input prices driven by high energy costs. One of the primary solutions to the food price inflation is to increase the supply of commodity crops in a responsible way that is both respectful and sustainable regarding economic, social, and environmental aspects. At the center of this solution is implementing and developing new technologies to increase crop yields and nutritional values without increasing the amount of fossil-based inputs used in agriculture. Conventional breeding, molecular breeding, genomics, and biotechnology are pivotal technologies for increasing crop yields to meet these supply needs, combined with the impacts of other new technologies and best management practices in agricultural production.

Agricultural Policy: High Commodity and Input Prices

Because of high commodity prices, beginning in 2006, subsidies to farmers in the United States, the European Union, and Canada have been reduced significantly. However, significant losses have been experienced by the red meat sector, along with escalating food prices. Because of rising input costs, the “farm boom” may not be as great as first thought. Ethanol made from corn and country-of-origin labeling cloud the U.S. policy scene. Higher commodity prices have caused some countries to lower tariff and non-tariff barriers, resulting in freer commodity trade worldwide. Policymakers should attempt to make these trade-barrier cuts permanent and should rethink current policy legislation to deal with the possibility of a collapse of world commodity markets. Agricultural commodity prices have dropped significantly since early 2008.

Openness and Industrial Response in a Wal‐Mart World: A Case Study of Mexican Soaps, Detergents and Surfactant Producers

This paper uses a case study approach to explore the effects of NAFTA and GATT membership on innovation and trade in the Mexican soaps, detergents and surfactants (SDS) industry. Several basic findings emerge. First, the most fundamental effect of NAFTA and the GATT on the SDS industry was to help induce Wal‐Mart to enter Mexico. Once there, Walmex fundamentally changed the retail sector, forcing SDS firms to cut their profit margins and/or innovate. Those unable to respond to this new environment tended to lose market share and, in some cases, disappear altogether. Second, partly in response to Walmex, many Mexican producers logged impressive efficiency gains during the previous decade. These gains came both from labour‐shedding and from innovation, which in turn was fuelled by innovative input suppliers and by multinationals bringing new products and processes from their headquarters to Mexico. Finally, although Mexican detergent exports captured an increasing share of the US detergent market over the past decade, Mexican sales in the US were inhibited by a combination of excessive shipping delays at the border and artificially high input prices (due to Mexican protection of domestic caustic soda suppliers). They were also held back by the major re‐tooling costs that Mexican producers would have had to incur in order to establish brand recognition among non‐Latin consumers, and in order to comply with zero phosphate laws in many regions of the US.

The Distribution of U.S. Agricultural Subsidies

This paper examines the equity effects of one of the largest per-recipient income transfer programs in the Unites States: the U.S. agricultural subsidy program. The paper demonstrates the complexity of the program's effect on equity and the unintended rent-seeking behavior induced by policies aimed at increasing the program's equity. Although agricultural subsidies accrue disproportionately to large farms, when measured as a proportion of total assets, small farms receive relatively higher subsidies. The paper demonstrates that the vast majority of agricultural subsidies stays with the recipient farmer and is not dissipated to input suppliers or landlords through higher input prices. Yet, the impact on farm household income is mixed; both the median income and the poverty rate are higher among subsidized farmers than the general population. The paper documents substantial rent seeking among farmers who might become constrained by legal limits on total subsidy receipts, indicating that efforts to increase program equity have been ineffective.

Functional analysis of fertiliser use on chickpea (Cicer arietinum) farms: A case study from Turkey

Fertiliser use in chickpea (Cicer arietinum) grown under dry conditions was analysed from an economic point of view. In addition, a simple relationship between output (amount of chickpea) and inputs (fertiliser cost, pesticides cost, chickpea production area, labour, and amount of seed) was determined. The Tokat province of Turkey was chosen as the research area because it was the main chickpea production area. To study the effects of fertiliser use on chickpea production, 74 farmers were randomly selected and surveyed. Research findings were as follows: (1) gross and net profit was negative for the fertiliser user group and non‐fertiliser user group; (2) lack of technical knowledge and high input prices were the main reasons for unbalanced fertiliser use by farmers; (3) chickpea production area and fertiliser cost were the most important factors affecting chickpea production; (4) chickpea production was little effected by labour; (5) amount of seed and total pesticide cost were not significant in the model; (6) farmers should increase average chickpea production area to use resources efficiently.

Factors affecting profitability of sugarcane production as monoculture and as intercrop in selected areas of Bangladesh

The study was undertaken to know the profitability of sugarcane production as monoculture and as intercrop. Data were collected from 70 sugarcane growers of Daulatpur Upazilla under Kushtia District. Data were collected during the period from February to July 2003. The study reveals that the sugarcane plus potato combination produced the highest net return followed by sugarcane plus maize, sugarcane plus lentil and sole sugarcane production. Family labour cost, cost of urea, number of fertilizing, sowning/planting time of intercrop, cost of sett were the important factors which influence the profitability of sugarcane production both as intercrop and as nonoculture. High prices of inputs, lack of scientific knowledge, and dishonesty of officials are the major problems in sugarcane production. In order to promote intercropping in a large scale with sugarcane, government and other related organizations must encourage farmers to produce sugarcane as intercrop in order to earn higher net return. DOI: http://dx.doi.org/10.3329/bjar.v32i3.545Bangladesh J. Agril. Res. 32(3) : 433-444, September 2007

Information and Communication Technologies in Turkish Agriculture

In recent years, the Turkish agricultural sector has had serious problems, such as lower yields, higher input prices, higher production costs and loss of competitiveness in foreign markets, all leading to reductions in both crop and animal production. At the same time, measures such as curtailment of state financial support to farmers and farming businesses, coupled with the increasing costs of production inputs including seeds, fertilizers, sprays, machinery and decreasing crop prices have negatively affected the sector and primarily the farmers. But, besides taking measures affecting structural change, it is also necessary to establish ways of ensuring accurate information exchange between farmers, agri-food industries and institutions for research and development if productivity and improvements in the competitive power of Turkish farmers within foreign and domestic markets are to be assured. The paper outlines the current situation concerning information and communication technologies (ICT) and agriculture in Turkey and the challenges facing the rural sector in striving towards a knowledge society.

Backward Integration by a Dominant Firm

This paper studies the welfare consequences of a vertical merger that raises rivals' costs when downstream competition is a la Cournot between firms with constant asymmetric marginal costs. The main result is that such a vertical merger can nevertheless improve welfare if it involves a downstream firm whose cost is low enough. This is because by raising the input price paid by the nonmerging firms the merger shifts production away from those relatively inefficient producers in favor of the more efficient firm. Yet, there is a trade‐off between the gain in productive efficiency and the loss in consumers' surplus caused by the higher downstream price that follows a higher input price. It is also shown, through an example, that this result extends to price competition with differentiated products.

Backward Integration by a Dominant Firm

This paper studies the welfare consequences of a vertical merger that raises rivals' costs when downstream competition is a la Cournot between firms with constant asymmetric marginal costs. The main result is that such a vertical merger can nevertheless improve welfare if it involves a downstream firm whose cost is low enough. This is because by raising the input price paid by the nonmerging firms the merger shifts production away from those relatively inefficient producers in favor of the more efficient firm. Yet, there is a trade‐off between the gain in productive efficiency and the loss in consumers' surplus caused by the higher downstream price that follows a higher input price. It is also shown, through an example, that this result extends to price competition with differentiated products. (This abstract was borrowed from another version of this item.)

When Backward Integration by a Dominant Firm Improves Welfare

This paper studies the welfare consequences of a vertical merger that raises rivals' costs when downstream competition is a la Cournot between firms with constant asymmetric marginal costs. The main result is that such a vertical merger can nevertheless improve welfare if it involves a downstream firm whose cost is low enough. This is because by raising the input price paid by the non-merging firms the merger thereby shifts production away from those relatively inefficient producers in favor of the more efficient firm. However there is a tradeoff between the gain in productive efficiency and the loss in consumers' surplus caused by a higher downstream price which follows a higher input price. It is also shown, through an example, that this result extends to price competition with differentiated products.

Challenges Facing Small and Medium-Sized Enterprises in the Kyrgyz Republic, 1996-7

Based on high quality household survey data from 1996 and 1997, this paper analyzes the challenges facing non-farm household businesses in the Kyrgyz Republic. The non-farm businesses are small, concentrated in service activities, and rely on family labour. They are new enterprises established after the transition from central planning began, rather than state enterprises formed during the planning era and subsequently privatized. High taxes, low product demand, and high input prices are the three most cited challenges, while the problems facing small businesses do not include credit availability, capacity concerns, input availability, or labour costs. Frequent mention of licence difficulties and extortion, in addition to high taxes, indicates that the grabbing hand of the government is a major obstacle to private businesses. The government is also failing to maintain law and order; in 1996 a quarter of the businesses report violence among their three main challenges.

Price and inventory dynamics in petroleum product markets

Unlike many studies of commodity inventory behavior, this paper estimates a model with endogenous spot and forward prices, inventories, production, and net imports. Our application involves markets for refined petroleum products in the United States. Our model is built around the supply and demand for storage. We estimate the model using Generalized Method of Moments and perform dynamic, simultaneous simulations to estimate the impacts of supply and demand shocks. Supply curves for the industry are inelastic and upward sloping. High inventory levels depress prices. Inventories fall in response to higher sales, consistent with production smoothing. Under higher input prices, refiners reduce their stocks of crude oil but increase their product inventories, consistent with cost smoothing. In some cases, imports of products are more variable than production or inventories.

The Welfare Effects of Forbidding Discriminatory Discounts: A Secondary Line Analysis of Robinson-Patman

We examine the welfare effects of forbidding price discrimination in intermediate goods markets when firms can bargain over terms of their nonlinear supply contracts. In particular, our focus is on secondary line injury to competition under three interpretations of what it means to forbid price discrimination. We find that in each case, forbidding discriminatory discounts renders retailer bargaining power useless in mitigating manufacturer market power. As a result, all retailers end up paying higher input prices, and all retail prices rise. We show by example that the welfare loss can be substantial. Copyright 1994 by Oxford University Press.

A micro-economic analysis of dairy farming in the Netherlands

A unified framework for analyzing the short-term production relationships between outputs and inputs on Dutch dairy farms before and after the introduction of the milk quota system is presented. It is derived from duality theory and estimated using an incomplete panel of Dutch dairy farms. The theoretical framework fits the data well. The supply of unrestricted outputs and the demand for variable inputs are much more responsive to milk quota changes than to price changes. The average estimated shadow price of milk quota in 1984/85-1988/89 was 0.36 guilder per kilogram in 1980/81 prices. The scarcity of milk quota and resources is further investigated for different types of dairy farms. It appears that high shadow prices of quasi-fixed inputs go together with low shadow prices of milk quota. Copyright 1993 by Oxford University Press.

Endogenous environmental degradation and land conservation: agricultural land use in a large region

This paper studies endogenous land conservation and maintenance in agriculture in a large region with fixed population and endogenous wage. Farmers allocate labor between cultivation on the one hand and conservation and maintenance on the other to maximize output while compensating for depressing effects of cultivation practices. We compare large-region results with those for a small region with fixed wage and endogenous population. Higher product prices and larger populations exacerbate environmental degradation throughout a region and contribute to deforestation. An exogenous increase in the wage in a small region reduces cultivated area, but may increase or decrease equilibrium land degradation. In a large region, greater technical interaction in production between agricultural inputs reduces the impact of population and price increases on deforestation. Higher input prices take degradation pressure off land, whether the total population is fixed or variable. Improvements in transfortation unambiguously exacerbate environmental deterioration if they occur in a small region, but if they occur throughout a large region, their impact is ambiguous and could relieve environmental pressure on existing cultivated area. Extension of transfortation infrastructure at the edge of cultivation has somewhat different effects. More environmentally degrading production techniques encourage farmers to cultivate less intensively, while improvement of environmental conditions encourages the opposite. Less effective techniques of mitigating environmental damages are used less than more effective ones.