An econometric analysis of the citrus industry and estimated impacts of withdrawing selected pesticides

Abstract

Pesticides are a significant input into commercial agriculture. In 1964, 89 percent of the citrus acreage in the U.S. was treated with pesticides. By 1975, pesticide treated acreage had increased to 97 percent. Total expenditures for pesticides used in citrus production during 1964 and 1975 were 13.8 and 50.98 million dollars, respectively. Headley estimated the return to the farmer for an additional one dollar investment in pesticides yield three to four dollars. Concern for environmental quality has produced political pressure towards discontinuing use of some pesticides. The impact of withdrawing specific agricultural pesticides has become a highly debated issue. The focus of this study is on developing an econometric model to estimate regional and national effects of the withdrawal of selected agricultural pesticides from citrus production. The second purpose of the study is to evaluate social value changes resulting from pesticide withdrawal. Developing the simulation model required making assumptions on yield and production cost changes due to pesticide withdrawals. These assumptions in conjunction with the given data were used in the econometric-simulation model to evaluate changes in regional prices, national prices, acreage, output and economic surplus for the period of 1977-78 to 1986-87. Cancellation of selected pesticides resulted in a slight decline in the regional orange and grapefruit acreage through 1986-87. Total output of oranges and grapefruit was affected most by yield reduction. California orange prices were more sensitive than Florida orange prices to the decline in yield. National fresh orange prices were more sensitive to yield changes than processed orange prices. Corresponding to the increasing decline in yield and increasing cost, national fresh orange prices rose rapidly, while national processed orange prices decreased proportionately as yield decreased. In summary, the orange industry was more sensitive to yield changes than cost changes. Unlike oranges, regional grapefruit prices behaved similarly in each region. National processed grapefruit prices exhibited greater sensitivity to yield and cost changes than national fresh grapefruit prices. The whole grapefruit industry was more sensitive to the cost effect than to the yield effect...