Semester

Summer

Date of Graduation

2012

Document Type

Dissertation

Degree Type

PhD

College

Chambers College of Business and Economics

Department

Economics

Committee Chair

Gerard E. D Souza.

Abstract

The objectives of this study center over the course of the beef production life cycle as a management strategy to optimize the financial and natural resource endowment on farms at the county level based on the data available. Although the application is to West Virginia, implications can be derived for other areas with similar resource endowments. The beef farms located in adjacent locations within a county are identified as suppliers of inputs to the farm of interest (or contracting farm) in order to provide the basic foundation for agglomeration economies.;Both an intertemporal component and a spatial component are involved since clustering systems are enhanced when key players are interconnected over space. This is accomplished by using an optimal control framework as the basis of a NetLogo agent-based model (ABM) that explicitly includes a spatial component. This model is intended to provide a foundation for developing agglomeration economies in which other locations are able to supply resources to given locations - or to serve as input markets - by taking advantage of the spatially integrated nature of the agriculture industry. The spatial component provides the basis for regional economic development through clustering among the agricultural and other sectors since they might share locally produced inputs/outputs in the supply chain, thereby enhancing both scope economies and agglomeration economies. Thus, the integration of environmentally friendly technologies that enhance diversified products for the area such as renewable energy as well as digested manure along with high quality beef products and carbon offsets would create new markets which expand market channels and spur economic development, of interest to policy makers at all levels. As a result, farmers would be able not only to produce essential inputs for their own farms but, given appropriate incentives, would also supply them to adjacent farms boosting the local economy. Furthermore, a comparison with conventional, confined animal feeding operations (CAFOs), is briefly provided for perspective as well as the basis for environmental improvement through PBB techniques. Our intention is to replicate a diversified PBB industry and its interaction with surrounding communities in order to identify the optimized paths of the farmer and society in an intertemporal setting. The design of policy instruments is based on the results from the ABM wherein maximizing farm-level profitability that is able to bring benefits to society in which clustering among locations contributes in intensifying the benefits from the adoption of sustainable best management practices (BMPs). Thus, the explicit recognition and use of multifunctional land attributes enables us to address bio-fuel production and climate-related issues such as carbon offsets as well as to expand adoption of sustainable BMPs across space and time. In order to determine policy instruments, we ran our ABM with the absence of carbon prices and cost-share programs as well as different carbon prices and cost-share percentages under different clustering systems along a planning horizon of 15 years. We also compared the profitability between a diversified entrepreneur with a specialized business as an approach to identify the financial motivation to establish our proposed business concept. Results indicate that in order to observe environmental and social benefits as well as economic development in Appalachia through the introduction of a diversified PBB industry, a combination of cost-share policies and carbon prices must be considered. Our results imply that for an average grass-fed beef enterprise with 93 acres of pastureland (as is typical of Appalachia) as the primary resource surrounded by nearby cow/calf farms within an approximate 20 mile radius, will need to rely on a minimum of {dollar}13 per ton CO2e reduced along with a cost share program willing to share the risk of no less than half of the capital investment associated with an anaerobic digester within a clustering system of up to two participants to successfully diversify its business bringing environmental and economic development to the region. Alternatively, a policy combination of 50 percent cost share with a {dollar}26 carbon price not only will enhance environmental improvement but also profitability under unexpected as well as certain weather conditions. We also found that more renewable energy can be generated when more farms join a regional cluster, implying a synergistic effect through clustering. We estimate results under both deterministic and stochastic situations. The latter relate primarily to weather uncertainty and animal death loss, since those are the variables for which data is available. (Abstract shortened by UMI.).

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