Projects Funded for Daniel A. Sumner

2021-2022

Economic and Environmental Impacts of Feeding for Lower Enteric Methane Emissions from California Dairy Cows

  • Scott Somerville
  • Daniel A. Sumner

2020-2021

Effects of Federal Milk Marketing Orders on U.S. Imports and Exports of Dairy Products

  • Tristan Hanon
  • Daniel A. Sumner

Abstract

Specific Objectives of the Project
Production of a dissertation investigating the effects of the Federal Milk Marketing Orders on international trade in dairy products.

Summary of Results
This project is investigating the effects of the U.S. Federal Milk Marketing Orders (FMMOs) on trade in dairy products. The FMMOs implement price discrimination in the beverage milk market and redistribute gains to milk producers through blend pricing. Higher returns for dairy farmers increase the quantity of milk supplied to the market, while high prices in the beverage milk market reduce quantity demanded, leading to increased quantity in the dairy product manufacturing sector. Over the past two decades the U.S. has become a net exporter of dairy products, and this project investigates the role played by the marketing orders in that transition.

The research funded by this grant focused on the movement of farm milk and trade in dairy products within the United States. The marketing orders set regional prices for beverage milk, influencing the price received by milk producers in that region. This paper uses recent developments in the trade literature to model the process by which milk is delivered to different regions across the U.S and how dairy products are distributed to buyers. The dairy product market will include domestic demand from across the U.S. as well as demand facing the U.S. from the international market. We use simulations to compare a baseline scenario with the FMMOs in play to counterfactual scenarios that remove the regional price discrimination and revenue pooling.

The model of interstate trade will be supported by a second paper focused on empirical estimation of dairy product demand. Whether U.S. dairy policies have an impact on the international dairy product market depends on whether the U.S. faces a downward sloping world demand curve for tradable dairy products. This paper will use an econometric model of U.S. net exports and exogenous shifts in marketing order policies to estimates the world demand curves for tradable dairy products.

This research will be extended to an international scope to investigate the impacts of FMMO policies on international trade more broadly. While the model of interstate trade allows dairy product manufacturers to export products to the international market, the impacts of the FMMOs on that market are not explicitly modeled. The international trade model with consider U.S. imports and exports in the context of the global market for dairy products. This paper will focus on the U.S. shift from net importer to net exporter of dairy products and the extent to which changes in FMMO policies caused that shift.

Alongside the main goals of this project, it was a natural extension to study the impacts of the COVID-19 pandemic on the dairy industry. In the early stages of the pandemic school and restaurant closures impacted demand for dairy products, and milk producers reacted to falling prices by reducing production. Milk and dairy product prices were volatile throughout 2020. We initially focused on explaining these impacts in the western states for a publication in the Western Economic Forum. We outlined the government response to the pandemic and payments received by the dairy industry in 2020. This study was expanded to use forecasting methods to evaluate the magnitude of the impacts relative to historical data. There are outstanding questions to investigate, such as the impact of government purchasing programs on the market for dairy products, so we are developing a follow-up project to study these questions.

2013-2014

Agri-environmental Incentives and the Waste Management Practices of Dairy Farms in California

  • Daniel A. Sumner

Abstract

Specific Objectives of the Project

The project summarizes the existing federal and local agri-environmental incentives for waste-management practices of livestock operations and examines specially the choices faced by dairy farmers in California. This research will contribute to our understanding of how specific incentive mechanisms interact with each other and under what conditions multiple levers are necessary. This research will also help us to understand farmers' decision-making under regulatory uncertainty and complexity. Findings of this project will shed light on the future design of agri-environmental payment programs.

Summary of Results

This grant supported research on how a local air quality regulation (Rule 4570) has affected the economic performance of dairy farms in the San Joaquin Valley. Estimated adoption rates of different pollution-mitigation practices reveal that dairy farms have adopted labor-intensive production practices to comply with the air quality regulation. Using farm-level cost data on a panel of dairy farms, The project estimated the effects of the regulation on the costs of milk production. Econometric results indicate that the air quality regulation has not significantly affected the total costs of milk production. Estimates from different specifications indicate that the regulation may have reduced feed costs during some periods, perhaps because some pollution-mitigation practices can reduce feed fermentation.

2012-2013

Economic Analysis of Food Safety Regulation

  • Daniel A. Sumner

Abstract

Specific Objectives of the Project

Model producer provision of food safety, with empirical applications to the fresh produce and shell egg industries that are important in California. The applications include estimating effects on nutrition through reduced consumption of fresh products in response to heightened safety concerns. Lacking econometric estimates, we are likely to design and conduct experiments to ge nerate needed data.

Simulate the effects of the Food Safety Modernization Act of 2011 (FSMA) on imports of fresh tomatoes.

Summary of Results

Using the funding from the grant, John Bovay was able to finish his strong dissertation on "Regulation of Production Practices and Product Attributes: Farm Animal Welfare and Food Safety". This consisted of three essays on the regulation of food safety and one on the economic and political factors that drove California voter support for a referendum on standar ds for the housing of egg-laying hens. We have published one and expect to publish two additional peer-reviewed articles based on material in John Bovay's dissertation. One will be about the effects of the Food Safety Modernization Act, and the other about factors that drove voter support for legislation on the housing of egg-laying hens in California

2011-2012

Estimating the Demand for Pollination Services in Almond Production

  • Daniel A. Sumner

Abstract

The first round of analysis that we have carried supports the simulation results of our bioeconomic model of bee foraging. In the conditions of commercial almond orchards, bees fly quickly and reach most of the trees in an orchard under most weather conditions. The effect of hive distance to a tree on yield is accordingly small. This finding is helps understand a common practice among almond growers which is to place bee hives in groups of 20 to 24 every 10 acres or so. The rapid diffusion of bees through the landscape also has implications for the prevalence of externalities, which we document and model in a related research effort. We are in the process of extending the analysis to the temporal aspects of pollination by combining data on bloom development and bee activity in collaboration with Patrick Brown from the Department of Plant Sciences at UC Davis.

2003-2004

Performance of California Dairy Cooperatives

  • Daniel A. Sumner

2001-2002

The Payoff to UC Pest Management Research and Extension

  • Daniel A. Sumner
  • Julian Alston

Economic Effects of Domestic Subsidy and Trade Barriers with Differentiated Goods: Processed Tomato Products in the European Union

  • Daniel A. Sumner

Agriculture in the WTO: Prospects and Consequences for California

  • Daniel A. Sumner

1999-2000

Milk Quality and Marketing Orders

  • Daniel A. Sumner