(NFAPP)

Objectives

Technical, economic and political change have greatly increased the complexity of agricultural policy decisions and the demand for policy analysis.  At the same time, the substantial deregulation of agriculture has meant that there is less information available for both public and private policy analysis.  Indeed, the fruit and vegetable industry has been affected by the changing environment possibly more than any other agricultural sub-sector.  Policy decisions related to this industry not only affect its economic viability in the United States, but also the welfare of U.S. consumers.  The National Food and Agricultural Policy Project (NFAPP) is designed to help meet the increasingly critical information needs of policy makers and the public by supplying timely research and analysis of the implications of proposed policy changes and market developments.

The objectives of the project are:


While the USDA and private sector research groups routinely prepare short term, ad hoc forecasts for different fruit and vegetable products, NFAPP is the only research group which prepares medium to long term forecasts for these products with equilibrium market models estimated with historical data.  These projections provide information needed for policy and management decisions.  At times the models used to develop these projections are also used to analyze the impact of polices or changes in the market environment.  However, due to the diversity of policy issues and complexity of some fruit and vegetable markets, it is also necessary to develop micro-policy models for some issues in response to requests by congressional or industry members.

Indeed, during the past year, NFAPP has provided timely information to ongoing policy discussions on farm labor availability, the Food Quality Protection Act, the Market Access Program, specialty crop insurance, food safety, foreign direct investment, trade in produce, and dietary health promotions.  In each instance, upon receiving a request for research into these matters, NFAPP worked to promptly provide meaningful, objective analysis that could be used in policy decision making.  These and other NFAPP activities are summarized in the next section.

Procedures

Developing economic models of the U.S. fruit and vegetable sector requires three approaches, including econometric methods, mathematical programming, and artificial neural networks.  The choice of the method depends on the problem at hand and the available data.  Examples of applications of these alternative approaches in problems related to agricultural markets, notably fruit and vegetable markets, can be found in the reference section.

NFAPP’s baseline models use full structural econometric market models.  These models are used for developing forecasts and policy analysis.  For some policy problems, it is necessary to develop more detailed, micro-policy models.  These econometric models have been used to address problems related to market power, pricing efficiency, and demand estimation.

While econometric models are useful for testing hypotheses on behavior and for developing forecasts, they do require extensive time series or cross sectional data.  At times, data may not be available for a particular problem. In these instances, NFAPP researchers typically use some form of a simulation model.  Most often, mathematical programming models are employed for this purpose.

Although econometric and simulation models can be used to develop forecasts, there are other methods that are often found to be desirable within specific applications, namely artificial neural networks.  Numerous studies have shown ANNs to produce forecasts that are superior to those obtained from econometric models and other forecasting techniques.  While they do provide good forecasts, they do not lend themselves to hypothesis testing.  Further, the use of ANNs requires extensive data series for model development.
 Beyond these technical analytical procedures, there are also instances where policy analysis must be conducted on the basis of a sound review and application of economic theory and other qualitative information.  These types of problems are at times the most difficult to address.

Organizational Structure

NFAPP researchers collaborate with a number of institutions and groups, within and outside of Arizona State University.  At the core of the modeling and policy analysis group are NFAPP and FAPRI (University of Missouri) researchers.  Iowa State University and Texas A&M University collaborate with NFAPP as part of the FAPRI Consortium of research projects.  Within Arizona State University, NFAPP has close ties with faculty in the Morrison School of Agribusiness and interacts with faculty in other schools and colleges.  These faculty can be called upon to address issues ranging from risk management strategies to the impact on land values to labor policy.

In addition to this University structure, NFAPP works closely with a number of industry groups and academic researchers at other institutions on a commodity or regional basis on numerous research and policy issues.  Over the past year, researchers have collaborated with the Washington Apple Commission, California Tree Fruit Agreement, National Potato Promotion Board, California Strawberry Commission, the California Avocado Commission, WEFA Group, the United Fresh Fruit and Vegetable Association, the Arizona and California Departments of Health Services, the Arizona Department of Agriculture, the Washington State Employment Security Office, and the USDA’s Risk Management Agency, Federal Crop Insurance Corporation, Rural Business-Cooperative Service, Agricultural Marketing Service, and Foreign Agricultural Service.   Individual researchers are members of the American Agricultural Economics Association and the Food Distribution Research Society, and the NEC-63, NCR-134, and SS-222 research committees.

Justification

Fruit and vegetable markets differ from other sectors of agriculture, particularly the bulk commodities, in terms of form and market structure.  Importantly, fruit and vegetable crops were never under government price support programs.  Because the market is largely unregulated, periodic economic analysis, oversight, and inquiry are important to assure that the sector operates in the best interest of all interested parties--growers, consumers, and traders.

 Although largely unregulated, many current food and agricultural policy issues, like market access and trade liberalization, farm labor availability, and food safety, promise to have a significant impact on the fruit and vegetable sector.  The recent advances in U.S. agricultural exports have been largely led by trade in high value products, including fruits and vegetables.  Changes in immigration policies have created labor availability challenges for many involved in production agriculture, particularly labor intensive fruit and vegetable crops.  Also, recent consumer concerns over food safety were raised in part by the contaminated fruit and vegetable products.  All of these issue continue to be high priority research areas, not only for the fruit and vegetable sector, but for all of U.S. agriculture.

These mounting research and information needs arise at a time when the federal government seeks to shift responsibility for these services from the federal government directly to states and state universities.  With regard to fruits and vegetables, Arizona State University is in a unique position to handle requests for information and policy analysis.  Arizona is the third largest producer of fruits and vegetables and its proximity to California and Mexico place it in a good position for gathering information on winter fruit and vegetable trade and the produce distribution channel.  Furthermore, NFAPP is structured to act as a link between agriculture, business and government.  This particular institutional structure helps ASU faculty contribute their experience and expertise to policy makers and the public.

Last updated on 3/21/99
By Jingjuan Xia