Forschungsvorhaben



weitere Forschungsprojekte: Forschungsdatenbank der Humboldt-Universität




Structural Change in the German Dairy Sector

The European Union is the largest milk producer in the world and the EU dairy sector is one of Europe’s most important farming sectors. This sector reflects both, the complexity of agricultural production in highly regulated markets, as well as a complex system of livestock production. Since 1984 the milk market is regulated by intervention prices and a milk quota scheme. It is conjectured in the literature that the introduction of quantity quotas limits the growth of profitable firms and thereby slows down structural change in an industry.

Since the end of 2007, the milk prices decline drastically. German dairy farmers started protesting against, however, this is not surprising since the German dairy sector plays an important role in the agricultural sectors' value added. Such strong price declines force farms to stop milk production or even to exit the sector. The sector faces a rather strong structural change and this is expected to speed up with the planned milk quota removal in 2014/15. The major aim of this research is to quantify the impact of the milk quota scheme on structural change in order to deduce specific policy recommendations how the expected abolishment of the milk quota scheme in the EU will affect the structural change in the German dairy sector.

Thereby, the presence of the more or less stable share of small (dairy) farms and the particular role of them within structural change is still an enigma. It is commonly known that the net farm exit rate strongly depends on the current share of small farms’ exit rate. However, to our knowledge, the literature does not provide a clear explanation whether small farms represent a transitory state or a stable size category with the ability to survive motivated by considerations other than current profits. Small farms may also benefit from low opportunity costs of fixed factors due to sunk costs.

This research aims in addition to identify the determinants of the abandonment of milk production and explore the potential differences between different scales. The relevant literature offers a large variety determinants such as input and output price levels, price volatility, technical progress, the value of non-farm capital and the value of the milk quota, i.e. the milk quota rent. Also the possibilities to grow also in other production branches, the degree of specialization (sunk costs), a farm successor and the farm specific efficiency are important determinants that need to be tested. Of further interest is the interaction among farms on the land and quota market and the respective impact on farm growth, decline and exit. Based on theoretical considerations the challenge is to show how the identified region-specific interactions can explain regionally differing structural evolvements that even persist over time. The crucial hypothesis that differing dynamics of regional structural change rely on strategic interaction of farms on the market for land and quota is aimed to be tested empirically.

Contact: Prof. Dr. Silke Hüttel
silke.huettel(at)agrar.hu-berlin.de

Cooperation
Dr. Roel Jongeneel, Wageningen University



Dynamic Efficiency and Structural Change in Agriculture

The objective of the research is to investigate the relation between efficiency and structural change in German agriculture. Only efficient farms can be competitive in the long run. Thus it can be conjectured that structural change takes place faster in the presence of inefficient farms. However, in reality differences in economic performance and efficiency are persistent and solid empirical work is necessary for explaining this observed heterogeneity.

From a methodological viewpoint this project contributes to the development of dynamic efficiency models. Based on a dual model of inter temporal decision making a shadow cost approach is used that allows for an econometric estimation of dynamic efficiency under uncertainty.

Contact: Rashmi Narayana, Christina Wagner
rashmi.nayarana.1(at)agrar.hu-berlin.de, christina.wagner(at)agrar.hu-berlin.de

Cooperation: Dr. Werner Kleinhanss, vTI Braunschweig




Systemic Risk of Climate Change

Systemic weather risk is a major obstacle for the formation of private (non-subsidized) crop insurance. This project explores the possibility of spatial diversification of insurance by estimating the joint occurrence of unfavourable weather conditions in different locations. For that purpose copula methods are employed that allow an adequate description of stochastic dependencies between multivariate random variables. The estimation procedure is applied to weather data in Germany. Our results indicate that indemnity payments based on temperature as well as on cumulative rainfall show strong stochastic dependence even at a national scale. Thus the possibility to reduce risk exposure by increasing the trading area of the insurance is limited. Irrespective of their economic implications our results pinpoint the necessity of a proper statistical modelling of the dependence structure of multivariate random variables. The usual approach of measuring stochastic dependence with linear correlation coefficients turned out to be questionable in the context of weather insurance as it may overestimate diversification effects considerably.

Contact: Dr. Wei Xu
xu.wei(at)agrar.hu-berlin.de

Funding: This project was supported by German Research Foundation (DFG) through the Collaborative Research Center 649 (CRC 649) “Economic Risk”. More details about the CRC 649: http://sfb649.wiwi.hu-berlin.de/

Cooperation:

Related Publication: Xu, W., Filler, G., Odening, M., Okhrin, O. (2009): On the Systemic Nature of Weather Risk. SFB 649 Discusion Paper 2009-002. http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2009-002.pdf




Innovationsnetzwerk Klimaanpassung Brandenburg Berlin (INKA-BB): Versicherungen als Anpassungsstrategie an Wetterrisiken

Das Wetter ist ein wichtiger Produktionsfaktor in der Landwirtschaft. Leider kann dieser Faktor nicht oder kaum beeinflusst werden und stellt eine große Risikoquelle für landwirtschaftliche Unternehmen dar. Der Klimawandel erhöht die Schwankungsbreite der Wettersituationen (Klimavariabilität) und forciert die Suche nach Anpassungsalternativen an die sich verändernden Rahmenbedingungen. Im Rahmen des vom BMBF geförderten Innovationsnetzwerks Klimaanpassung Brandenburg Berlin (INKA-BB) sollen Adaptionsoptionen untersucht, geeignete Anpassungsstrategien abgeleitet und für ausgewählte Untersuchungsregionen in Brandenburg und Berlin dauerhaft implementiert werden. Die Zielstellung des Teilprojektes "Versicherungen als Anpassungsstrategie an Wetterrisiken" fokussiert auf die Prüfung der Alternativen, einzelbetrieblich mit Hilfe von Versicherungen proaktiv auf den Klimawandel zu reagieren und der zunehmenden Wetter-Volatilität besser zu begegnen.

Kontakt: Günther Filler
guenther.filler(at)agrar.hu-berlin.de

Informationen: Innovationsnetzwerk Klimaanpassung Brandenburg Berlin (INKA-BB), Teilprojekt 11.



Meteorological Forecasts and the Pricing of Weather Derivatives

In usual pricing approaches for weather derivatives, forward-looking information like meteorological weather forecasts is not considered, so that important knowledge used by market participants is ignored in theory. By extending a standard model for the daily temperature, meteorological forecasts are incorporated in the framework of weather derivative pricing, and the information gain compared to a benchmark model without meteorological forecasts is estimated. This approach is applied for temperature futures referring to New York, Minneapolis and Cincinnati with forecast data 13 days in advance. Despite this relatively short forecast horizon, the models using meteorological forecasts outperform the classical approach and forecast the market prices of the temperature futures traded at CME better. Moreover, a concentration on the last two months or on days with actual trading improves the results.

Contact: Matthias Ritter
Matthias.Ritter(at)agrar.hu-berlin.de

Funding: This project was supported by Georg-August-Universität Göttingen and the German Research Foundation (DFG) through the Collaborative Research Center 649 (CRC 649) “Economic Risk”. More details about the CRC 649: http://sfb649.wiwi.hu-berlin.de/



Demand and Supply for Crop Insurance in Agriculture

Crop insurance plays an important role in hedging weather risk in agriculture because agricultural production is severely affected by weather conditions. However, worldwide experience shows that it is rather difficult to establish a market for private (non-subsidized) crop insurance. In recent years, numerous studies have examined the causes of market failures and have conjectured that these failures mainly result from the existence of systemic weather risk. Nevertheless, it is still unclear how to model the impact of systemic weather risk on the viability of crop insurance markets.

Against this background, the objective of the research project is to analyze the demand and supply for weather insurance. For that purpose we develop an equilibrium pricing model based on the expected utility maximization of market participants that takes into account the effect of systemic weather risk. Moreover, this study analyzes the necessity and the efficiency of government subsidies in the crop insurance market.

Contact: Zhiwei Shen
shenzhiw(at)agrar.hu-berlin.de



Impact of Capacity Constraints on Structural Change in Agriculture

Land is an immobile and non-replicable production factor. Since in most Western countries all agricultural land is under usage, this represents a capacity constraint and thus determines an upper production limit. A single firm can only expand its capacity and reach a significantly higher output if another one ceases production and drops out of the market. Thus, exit is a precondition for external market entry and further growth of incumbents. Unfortunately, most of the former studies dealing with entry/exit of firms and dynamic competition do not provide a model that takes these features into account.

The main objective of this research project is to develop a dynamic framework which describes the optimal investment/disinvestment strategies of heterogeneous firms under the above mentioned constraints. The optimal individual behaviour allows computing a dynamic equilibrium and deriving implications for the prospective market structure in the agricultural sector. For this purpose it is necessary to incorporate uncertainty into the model as demand or productivity shocks may force firms to withdraw from the market. This usually causes a new allocation of resources and may give rise to an increasing market concentration.

Kontakt: Stefan Kersting
kersting(at)agrar.hu-berlin.de