Essays on the economics of agriculture and energy in Texas

This dissertation is a collection of economic analyses of current agriculture and energy situation in Texas. Considering the current Texas natural resources, these three essays focus on alternative crops that can be introduced into Texas to realize local environmental and societal benefits. The first section presents an assessment of the life-cycle energy and GHG emission impacts associated with winter safflower seed-derived biodiesel to determine its suitability as an energy crop on the Texas High Plains. Winter safflower is considered a potential feedstock for biodiesel production that can be grown on the Texas High Plains. It requires fewer inputs in terms of irrigation and fertilizer than current irrigated crops, and could be grown on semi-arid or marginal land. In addition, this study identifies the factors that have the greatest impact on GHG emissions and the likelihood that winter safflower would be adopted by farmers on the High Plains. Finally, in order to analyze farmers’ planting decisions corresponding to different carbon policies, a production function of safflower and GHG emissions is developed, and a profit maximization model is used to evaluate possible incentives to change behavior. The second section established an econometric supply/demand simulation and forecast model of U.S. corn to quantify the effects of key exogenous variables on the corn supply and demand relationships. The model parameters were estimated through a system of simultaneous equations using the three-stage least squares (3SLS) method, based on annual time-series data from1981 to 2011. Then this model was validated using the Theil’s inequality coefficient. The validated model is expected to forecast a baseline and simulate impacts of plausible scenarios for key exogenous variables in the future. The third section focuses on a new crop, guar, which is considered suitable to be grown on the Texas High Plains to help local farmers to increase revenue. Guar gum is highly valuable and sought after as an ingredient from small quantities in numerous food products to large scale uses in oil field services. Traditionally, much of the guar consumed in the U.S. is imported from India. However, the U.S. energy companies are seeking for stable domestic supply of guar to meet oil field demands. Production contracts are seen as effective methods for maintaining a steady supply of high quality guar seed for processors to ensure their production goals. This current study examined different contract choices that farmers could face in a certain guar production contract. A principle-agent model was established to simulate the incentives inherit in guar production contracts. Specifically, we conducted a choice-based experiment to observe producers’ preferences over different contract attributes. The results of this survey are expected to reveal the value producers place on the different attributes. Finally, the ultimate goal of this study is to determine an efficient contract that will attract sufficient producer participation to ensure a steady supply of high quality guar seed.