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F
rom the Chairperson
Recently, I represented MSU at an international convening of experts and practitioners organized by the United Nations International Fund for Agricultural Development (IFAD) in Rome, Italy. The discussions at the workshop focused on identifying thematic trends and knowledge gaps in the rural development challenges facing smallholder producers in developing countries. The participants emphasized the need to increase the volume and quality of research-based evidence needed to spur policy reforms and institutional innovations for sustainable rural development. As I listened to several of the debates and conversations, I was reminded of the quality research and outreach engagements of AFRE faculty members and students in international development and other areas of expertise. Most of the topical research areas discussed at IFAD highlight the cutting-edge work already being done by AFRE scholars.
As this year draws to a close and we look forward to the beginning of a new calendar year, it is a good time to reflect on our recent accomplishments. Overall, 2015 has been a very good year for the Department of Agricultural, Food and Resource Economics (AFRE). Below are a few highlights:
- People: AFRE welcomed several new faculty members (including a new department chairperson) and staff members, and we obtained approval to search for two more tenure-stream faculty members next year. New and more diverse additions are a good thing because they add fresh perspectives and new energy that can further enhance our already excellent group and help shape AFRE's future direction.
- Professional leadership: AFRE faculty members were appointed/elected to serve in leadership roles in various national and international professional associations -- e.g., journal editors, section and committee chairs, advisory boards, review panels.
- Scholarship: We had significant growth in scholarly output in high-quality and impactful journals. Strong clusters of research teams and multidisciplinary collaborations are growing within and outside AFRE.
- Grants: We have had great success in attracting millions of dollars in new competitive external grants (USAID, NSF, AFRI, Gates Foundation, EPA, etc.) to support innovative agricultural and food policy research and capacity building in Michigan, nationally and globally. We are also seeing increasing success by our junior faculty members in this area.
- Teaching: The demand for our academic program offerings (majors and course enrollments) has seen major spikes, which demonstrate the relevance of our majors in preparing students for desirable careers.
- Student job placements: We had excellent job placements for our recent undergraduate and graduate students, including desirable academic positions for new Ph.D. graduates.
- Extension and outreach impact: AFRE faculty members and extension specialists provided excellent outreach programs and organized very well-attended and impactful annual outreach events such as FIRM Team, Making It in Michigan and Ag Credit Conference.
- Awards and recognitions: AFRE faculty members, students and alumni won major MSU, national and international professional awards recognizing the contributions and impacts of their work -- e.g., Foundation Professorship, Beal Outstanding Faculty Award, FIRM extension team -- 2015 MSU Institute Team Award; students won the 2015 IFAMA Global Student Case Competition.
Subsequent articles in this newsletter provide tangible examples of the strength and wide reach of AFRE faculty and professional staff members and students in developing research-based evidence and practical solutions necessary for addressing the challenging issues facing today's agricultural and food systems. Although we have come a long way, there is more work to be done, and we have the right skilled people with the needed ingenuity to do it.
Here's to an exciting and professionally impactful 2016.
Titus Awokuse
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Figuring out risk insurance under the 2014 Farm Bill
The 2014 Farm Bill presented AFRE farm management economists with a major challenge and a tight deadline.
Farm bills are not new to U.S. agricultural economists. Every five years or so, Congress passes a bundle of legislation that defines agricultural, nutrition, conservation and forestry policy for years ahead. The resulting farm bill covers programs that can help farmers maintain profitability while also helping provide low-income consumers access to food.
The 2014 Farm Bill (officially the Agricultural Act of 2014) broke new ground. It dramatically changed the types of risk management programs available to farmers. It gave crop farmers the choice between two commodity programs: the Price Loss Coverage (PLC) and the Agricultural Risk Coverage (ARC) programs. These are much more focused on revenue risk than previous Farm Bill programs.
The Farm Bill also included two other risk management programs. The Dairy Margin Protection program focuses on margin risk and has insurancelike features. The Noninsured Crop Disaster Assistance Program (NAP), which provides protection against low yields associated with weather events, was restructured to allow farmers to buy coverage on yields of crops for which federally subsidized crop insurance is not available. Deductibles from 35 percent to 50 percent at the full USDA/FSA market price can now be purchased as "buy-up" coverage.
The PLC program compensates farmers when prices on their crops fall beneath a certain level; the ARC provides payments when crop revenue falls below a benchmark level. These programs were free to enroll in. Dairy Margin protection, on the other hand, pays farmers when the margin falls below a level chosen by the farmer. There is a charge for higher levels of protection. Likewise, there is a premium associated with NAP buy-up.
How should a farmer pick the best options for his or her risk profile? That was the question facing a team of four AFRE department professors and five MSU extension educators as farmers faced important choices on program participation in the winter of 2014-15.
Farmers had to decide between ARC and PLC for the entire five-year Farm Bill period -- through 2018. The decision was irrevocable, and the deadline was April 7, 2015. With commodity prices dropping in early 2015, farmers had to make smart decisions to protect their farms. The Dairy Margin Protection Program and Noninsured Crop Disaster Assistance programs allow choice for coverage annually over the course of the Farm Bill, so their deadlines were less urgent.
The FIRM team responded by building comprehensive software and helpful documentation to guide farmers' decisions. The team created
a website through MSU Extension with access to the tools and information.
"Translating those rules into a useful decision-making tool was probably the biggest challenge," said
David Schweikhardt, AFRE professor.
To assist with the choice between the Agricultural Risk Coverage and the Price Loss Coverage programs, the FIRM team, under the leadership of MSUE educator
Roger Betz, offered an Excel spreadsheet that predicts alternative outcomes. A farmer enters into the spreadsheet historic information about the farm along with expected yields and crop prices. The spreadsheet ties that information into Farm Bill rules to predict costs and potential outcomes from alternative decisions.
For the Noninsured Crop Disaster Assistance Program and Dairy Margin Protection Program, professors
J. Roy Black and
Chris Wolf helped to create web-based decision aids.
To familiarize Michigan farmers with the 2014 Farm Bill decision tools, the FIRM team hosted 110 presentations throughout the state. Many of the workshops were conducted jointly with the USDA Farm Services Agency. The corn, soybean and wheat grower organizations, Michigan Farm Bureau and Greenstone Farm Credit provided additional support. For Schweikhardt and the FIRM team, the presentations were the most engaging part of the program because they gave the team an opportunity to hear the concerns of farmers directly.
"The team was really engaged, and they clearly did a good job," Black said. "The group really did pull it off."
The FIRM team's timely effort was recognized by the
2015 Institute Team Award from MSU Extension, which is presented to teams of MSU Extension staff members who "possess the highest standards of integrity and character to positively reflect and enhance the reputation of MSU Extension."
The FIRM team will continue providing educational programming for the Dairy Margin Protection and Noninsured Crop Disaster Assistance programs throughout the life of the Farm Bill.
by
Marie Orttenburger
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Joseph Herriges brings high-caliber environmental economics experience to AFRE
"You don't buy and sell the environment," says
Joseph Herriges, professor of environmental economics. Yet understanding the value of the environment is essential for designing policy to protect it. Herriges' research centers on using econometric tools to infer values of environmental resources.
He does environmental valuation well, at least according to the Association of Environmental and Resource Economists (AERE), which named him
Fellow. The honor was bestowed in the summer of 2014, just after he moved to MSU to take a position that is divided between the departments of Economics and Agricultural, Food, and Resource Economics (AFRE). He brings with him dynamic experience in the field, an eye for detail and a profound investment in his work and the work of his colleagues.
One prominent example of Herriges' research into economic valuation of environmental resources is his work on the Iowa Lakes Valuation Project. Over the course of four years while he was at Iowa State University, Herriges and his colleagues collected data from 6,000 households about where they went to recreate, to see how far people would travel for lakes with good water quality.
"We were able to show that water quality mattered," said Herriges. "People did travel great distances within the state to go to places that were nice versus places that weren't so nice."
Based on the team's initial reports, the Iowa legislature passed a substantial increase in the budget for cleaning up the water in lakes.
"When policy makers are trying to come up with a policy, they know what the costs are of a policy, but they don't necessarily know what the benefits are," said Herriges. His work gives them a number with a sound empirical basis in people's behavior.
Herriges considers himself an applied econometrician whose application is environmental economics. Though he did not start in environmental economics, his status as AERE Fellow testifies to his contributions. After years as managing editor of the
Journal of Environmental Economics and Management
while it was managed by AERE, he continued as a co-editor of AERE's new journal, the
Journal of the Association of Environmental and Resource Economists (
JAERE
).
He has also served as associate editor of
Environmental and Resource Economics
.
As a professor, Joe Herriges' impact extends beyond the classroom.
"Several of his graduate students have gone on to be very prominent members of our profession and hold full professorships at other institutions," says Frank Lupi, professor of environmental and natural resource economics.
Herriges mentored Dan Phaneuf, professor of agricultural and applied economics at the University of Wisconsin-Madison and editor of
J
AERE
. Phaneuf remembers grappling with a problem in his dissertation for months until focusing on it one day with Herriges.
"I remember that as the day the whole future opened up," Phaneuf said. That moment was essential to the dissertation's success, he said, which ultimately led him to where he is today.
"What I really appreciate about working with Joe is how diligent he is," Phaneuf said. "He never considers moving forward unless he understands every single moving part."
Herriges began his career outside of academia, consulting for the electric power industry. For ten years, he designed and evaluated rate structures and conservation programs that encouraged individuals to reduce their power usage.
With that background in industrial applications of economic incentives, Herriges returned to academics, where he began focusing on econometrics and applied economics. As he grew professionally, he added environmental economics to his repertoire. He worked for 26 years at Iowa State University, and for much of that time has focused on nonmarket valuation.
Since coming to MSU, Herriges has been teaching econometrics and advanced environmental economics. He also started an environmental economics "Journal Article Club" for faculty and students in AFRE and Economics. The club, essentially a book club with journal articles, meets twice a month. Herriges saw a number of students build their dissertations around articles discussed at the journal club he had started at Iowa State University and hopes the same happens here at MSU. He said it has also proven to be a good way for faculty in both departments to stay alert to research outside of their focus.
"It's a good way to maintain a broad exposure to what's going on in the field without having to necessarily do it all by yourself," said Lupi, who participates in the club.
Not to mention, Herriges provides a free lunch at each meeting.
"Joe is a good economist, and he understands incentives," joked Lupi, adding, "we're really lucky to have him here at MSU."
Herriges has three grown sons and one granddaughter. He enjoys photography, woodworking, outdoor activities, and traveling with his wife of thirty-three years.
by Marie Orttenburger
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Robison's Research Adds Clarity to Investment Ranking
Lindon Robison's research is shifting the focus of an age-old discussion in economics.
"It's absolutely simple," said Robison, a professor in AFRE.
For years, people choosing between two investments could use two criteria to inform which one they chose: a percentage measure called internal rate of return (IRR) and a dollar measure called net present value (NPV). The numbers' purpose is to show which of two investments will give the better return.
Until now, though, there's been a caveat: depending on how they were calculated, the numbers could give conflicting answers. Two criteria with the aim of simplifying investment ranking frequently did the exact opposite.
Economists have searched for ways to make the two values match for decades, Robison said. Robison's research, co-authored with
Peter J. Barry and
Robert J. Myers, proves that the issue is not with the criteria themselves but with the conditions that surround them.
"Instead of arguing about IRR or NPV to rank investment, what we really should be discussing is what set of conditions should we adopt to ensure that we get consistent rankings," Robison explained.
He used a metaphor to explain the problem.
In a horse race, the two horses represent competing investments, and two judges represent NPV and IRR.
"The horses run the race, and one judge says horse A won, and the other judge says horse B won. They go back and forth and so on, so it's a conflict. What we showed was that there are ways to get the judges to give the same ranking," he said.
Robison's article identifies two conditions needed to achieve consistent IRR and NPV rankings: differences in initial investment sizes must be eliminated, and all cash flows should be reinvested until the investment's last period.
The article outlines various methods to satisfy these conditions. It also provides guidelines to help investors decide which methods to use depending on the characteristics of the considered investments. The investor chooses the methods that fit his/her particular situation. When those methods are used consistently, NPV and IRR will always suggest the same thing.
"If you tell two judges at the horse race, 'This is how you evaluate it,' they'll both agree, but if you say, 'No, evaluate it this way,' they may still agree, but it may be a different horse," Robison said.
This is an entirely new approach for economists, Robison said.
"It's a big, big deal."
Robison's research isn't exactly a crystal ball-figuring out which investment is best still requires some informed guesswork and decision making by the investor. But it does help to eliminate unnecessary uncertainty.
"We can give you the right method, but we can't say, 'Now your problems are done,'" Robison said. "Making investment decisions is complicated and uncertain, but at least what I can say is 'Here are the processes or the methods that you use.'"
Robison has incorporated the technique into his teaching. In Agribusiness Management 435, a capstone course, one project requires student teams to analyze investments with this approach.
by Marie Orttenburger
|
People and Awards
Jordan Chamberlin
(Ph.D., 2013) resigned as assistant professor in AFRE at the Indaba Agricultural Policy Research Institute in Lusaka, Zambia, to accept the position of spatial economist with the International Maize and Wheat Improvement Center based in Addis Ababa, Ethiopia, starting in August 2015.
The
Farm Information Resource Management (FIRM) Team received the
2015 Institute Team Award from MSU Extension for outstanding team efforts, collaboration, programming, outreach and impact. The award was presented Oct. 13 at the 2015 MSU Extension Key Partner and Staff Awards Banquet. FIRM Team members are
J. Roy Black
, Roger Betz,
James Hilker
, Adam Kantrovich, Dennis Stein, Curtis Talley, Katelyn Thompson,
David Schweikhardt
and
Christopher Wolf
.
Saweda Liverpool-Tasie
was named associate editor of Agricultural Economics, the journal of the International Association of Agricultural Economists, as of September.
Christopher Peterson
was presented with a tribute letter from Gov. Rick Snyder. In the letter, presented at the Making It in Michigan Conference at the Lansing Center in Lansing Nov. 10, the governor expressed deep appreciation for Peterson's years of dedication to his work with the Product Center. Details in the
MSU Extension Spotlight
(Nov. 19, 2015).
Mark Skidmore
has been named director of the
North Central Region Center for Rural Development
(NCRCRD). He will replace Scott Loveridge as director Jan. 1. The NCRCRD works with Extension professionals, researchers and their partners to enhance rural development outcomes in the north central region, which comprises Illinois, Indiana, Iowa, Kansas, Michigan, Ohio, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wisconsin.
Student News
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AFRE Alumni News
2000's
2010's
Jordan Chamberlin
(PhD 2013) left his position as Assistant Professor in AFRE located at the Indaba Agricultural Policy Research Institute (IAPRI) in Lusaka, Zambia, for a position as Spatial Economist with the International Maize and Wheat Improvement Center (CIMMYT) based in Addis Ababa, Ethiopia, starting August 2015.
Helder Lopes (MS 2010) has been named Vice Minister of Finance of Timor-Leste.
Cem Tekesin (MS expected 2015) has taken a position as Agricultural Business Analyst at the International AgriBusiness Group, LLC, in Farmington Hills, MI.
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Masthead
A
dvancing Economics, Transforming Lives
is the quarterly newsletter of the Department of Agricultural, Food, and Resource Economics at Michigan State University (
http://www.afre.msu.edu/
).
Editor:
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Scott M. Swinton
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Writers:
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Marie Orttenburger
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Assistant Editor:
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Debbie Conway
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Editing Assistance:
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ANR Communications
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