-- Thoroughbred breeding programs handicap quality -- Pressure on grazing permits lowers value of resource -- Market prices to lead to more water for environment -- Organic farming needs price premiums on produce -- Generic ag promotion costly for quality brands -- Higher quality advantageous for national brands Several faculty members and graduate students from the University of California, Davis, will present research at the annual meeting of American Agricultural Economics Association at the Renaissance Nashville Hotel in Nashville Aug. 8 to 11. Below are summaries of six papers. Thoroughbred breeding programs handicap quality Paper: "Breeding Incentive Programs and Demand for California Thoroughbred Racing: The Tradeoff Between Quantity and Quality" Author: Martin D. Smith, doctoral candidate in the Department of Agricultural and Resource Economics at UC Davis. Date and Time: Tuesday, 3:30 p.m. Controversial programs to encourage the breeding of thoroughbred racehorses in California may handicap horse quality, but they probably increase public demand for racing, according to Smith. His research suggests that breeder incentive programs distort horse markets, result in fewer yearling sales and may lead to an increase in the quantity of horses at the expense of quality. Smith says the overall success of the programs will depend on their ability to attract high-quality stallions and broodmares from out of state. In analyzing data from all races run in California in 1997 and 1998, he found racing fans go in greater numbers to meets with higher quality races and bet more on better races. But, he says, they also bet more on races with larger fields. In 1997, the total pari-mutuel handle in California was about $3 billion, with takeout for conventional wagers including 0.365 percent for the incentive programs. Contact: Martin D. Smith, (530) 754-8172, smith@primal.ucdavis.edu. Pressure on grazing permits lowers value of resource Paper: "Effects of Policy Risk on Rancher Wealth and Range Health: Grazing Permits in the Western United States" Authors: Lorraine Egan Marsh, doctoral candidate in the Department of Agricultural and Resource Economics, and Daniel A. Sumner, Frank H. Buck, Jr. Professor and director of the University of California Agricultural Issues Center Date and Time: Tuesday, 10:30 a.m. Increasing demands for public forage lands to be converted to wildlife habitat or recreational uses are causing the value of Western grazing resources to decline, according to Marsh and Sumner. Their research shows that as the threat of losing their grazing permits increases, ranchers have more incentive to manage the permit lands not for long-term benefits, but for short-term gains. Examining 89 ranch sales in northern Nevada and several other factors, Marsh and Sumner found the value of public grazing resources decreased by 11.24 percent between 1978 and 1994 while the value of private grazing resources decreased by 7.9 percent. They offer two explanations for a further finding that ranchers are putting fewer livestock on the land: ranchers are decreasing stocking levels as a preemptive measure against more stringent regulations, or poor stewardship has led to a decline in the health of the range and the number of animals it can support. Contacts: Lorraine Egan Marsh, (530) 743-2328, egan@primal.ucdavis.edu; Daniel A. Sumner, (530) 752-1688, dasumner@ucdavis.edu. Market prices to lead to more water for environment Paper: "Measuring the Economic Impacts of Environmental Reallocations of Water in California" Authors: Richard E. Howitt, professor of agricultural and environmental resources, and Jay R. Lund, professor of civil and environmental engineering, both at UC Davis Date and Time: Wednesday, 10:30 a.m. Dollars, not laws, will redirect the flow of water in California as increasing demands for urban and industrial uses compete with efforts to provide more water for environmental projects, according to Howitt and Lund. Because traditional means of developing supply are precluded by their financial and environmental costs, the professors write, "substantial changes in the property rights and payment for California water will be necessary to effect the required reallocation." Their research on special markets established for water during three drought years in the 1990s shows that demand for water in California is responsive to price; the set price for water varied by 60 percent, and the amount of water purchased at those rates varied by 56 percent. "Allowing water to be valued at market prices would encourage users with lower-return crops, such as wheat, to sell water, " Howitt says. "That would find more water for rehabilitating or enhancing the environment." Contacts: Richard Howitt, (530) 752-1521, howitt@primal.ucdavis.edu; Jay Lund, (530) 752-5671, jrlund@ucdavis.edu. Organic farming needs price premiums on produce Paper: "Sustainable Agriculture Farming Systems Project at the University of California, Davis" Author: Karen Klonsky, extension specialist in the Department of Agricultural and Resource Economics at UC Davis Date and Time: Monday, 1:30 p.m. Price premiums for organically grown produce significantly increase net income and make organic farming systems competitive with conventional ones, according to research at a UC Davis farm. The Sustainable Agriculture Farming Systems project, established in 1989, studies conventional, low input and organic farming systems for crop rotations typical to the Sacramento Valley. The gross income, production costs and net returns were estimated for each of seven crops, each of the systems and on a whole farm basis to compare the economic viability and profitability of the systems. Price premiums -- 40 to 125 percent above conventional prices for the farm's crops in 1998 -- were also considered. Klonsky says that with the price premiums, the organic system had the highest net income of all the systems in eight out of 10 years; without premiums, the organic system showed an average net loss. "The results point to the difficulty in generalizing about the relative profitability of sustainable farming practices," she says, "and the need to conduct research on a crop-by-crop and location-by-location basis." Contact: Karen Klonsky, (530) 752-3563, klonsky@primal.ucdavis.edu. Generic ag promotion costly for quality brands Paper: "Generic Commodity Promotion and Product Differentiation" Author: John M. Crespi, doctoral candidate in the Department of Agricultural and Resource Economics at UC Davis. Date and Time: Tuesday, 3:30 p.m. Dancing raisins, California cheese billboards and other generic promotion of agricultural products may come at the expense of high-quality brands, according to Crespi. At stake in the debate about the merits of generic promotion -- a controversy that reached the U.S. Supreme Court in 1996 -- are the millions of dollars assessed against growers to fund the campaigns. Conventional wisdom in the industry suggests that generic advertising affects consumers' perceptions of all brands in the same way, so that all brands benefit from an increase in demand. What most industry specialists have not considered, Crespi says, is that generic promotion may disproportionately raise consumers' perceptions of lower-quality brands. That, he says, may hinder the efforts of a high-quality brand to differentiate itself through brand promotion. "For the high-quality brand, the question is whether the increase in revenue from the overall growth in consumer demand offsets any decrease from a loss of differentiation," Crespi adds. Contact: John Crespi, (530) 752-2092, jmcrespi@primal.ucdavis.edu. Higher quality advantageous for national brands Paper: "The Importance of Brand Name and Quality in the Retail Food Industry" Author: Eidan Apelbaum, doctoral candidate in the Department of Agricultural and Resource Economics at UC Davis Session: "Food Product Branding: Impact on Quality, Welfare and Consumer Choice" Date and Time: Tuesday, 1:30 p.m. You hold a package of Oreo cookies in one hand and a package of store-brand chocolate sandwich cookies with white icing in the other. "You can see the different prices on the packages," Apelbaum says. "But what do you get for the national brand's higher price -- better quality or just a name you know?" Quality, he answers in his paper on the role of quality and brand-name recognition in the competition between national brands and private labels in the retail food industry. He used quality ratings from Consumer Reports' tests of 756 products in 78 categories to show that the consumer's choice is, indeed, a trade-off between a name-brand product of higher quality and a private label with a lower price. Apelbaum says it is advantageous for national brand companies to have higher-quality products. He says a larger market share enables national brand companies to spread the marginal cost of higher quality over a larger volume of sales. Contact: Eidan Apelbaum, (530) 752-7721, apelbaum@primal.ucdavis.edu.