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Multiproduct Cost Relationships for Retail Fertilizer Plants

Author

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  • Jay T. Akridge
  • Thomas W. Hertel

Abstract

Retail fertilizer plants produce a number of products and services. To analyze the relationship between cost and output for these multiproduct firms, a short-run, translog cost function is estimated using pooled data. Measures of economies of scope and scale are calculated. Results indicate plants can lower average cost by increasing output and by diversifying into anhydrous ammonia. Furthermore, preliminary evidence indicates that firms in the sample are overinvested in plant and equipment.

Suggested Citation

  • Jay T. Akridge & Thomas W. Hertel, 1986. "Multiproduct Cost Relationships for Retail Fertilizer Plants," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(4), pages 928-938.
    • Handle: RePEc:oup:ajagec:v:68:y:1986:i:4:p:928-938.
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    File URL: http://hdl.handle.net/10.2307/1242139
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    Cited by:

    1. Giancarlo Moschini, 1988. "The Cost Structure of Ontario Dairy Farms: A Microeconometric Analysis," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 36(2), pages 187-206, July.
    2. Yapo Genevier N’guessan & Allen Featherstone & Oluwarotimi Odeh & Sreedhar Upendram, 2017. "Choice of the empirical definition of zero in the translog multiproduct cost functional form," Applied Economics Letters, Taylor & Francis Journals, vol. 24(15), pages 1112-1120, September.
    3. Jeffrey T. LaFrance & Rulon D. Pope, 2010. "Duality Theory for Variable Costs in Joint Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 755-762.
    4. Olasunkanmi M. Bamiro & Adebayo M. Shittu, 2009. "Vertical integration and cost behavior in poultry industry in Ogun and Oyo States of Nigeria," Agribusiness, John Wiley & Sons, Ltd., vol. 25(1), pages 1-15.
    5. Thomas P. Triebs & David S. Saal & Pablo Arocena & Subal C. Kumbhakar, 2016. "Estimating economies of scale and scope with flexible technology," Journal of Productivity Analysis, Springer, vol. 45(2), pages 173-186, April.
    6. Raihana, Bilkis, 2013. "Change in Input Relations in Bangladesh Agriculture, 1973-1995," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 36(3), pages 43-67, September.
    7. Raihana, Bilkis, 2012. "Factor Substitution and Technical Change in Bangladesh Agriculture," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 35(4), pages 75-86, December.
    8. Jeffrey LaFrance & Rulon Pope & Jesse Tack, 2011. "Risk Response in Agriculture," NBER Chapters, in: The Intended and Unintended Effects of US Agricultural and Biotechnology Policies, pages 143-186, National Bureau of Economic Research, Inc.
    9. Azzeddine M. Azzam, 1998. "Testing for Vertical Economies of Scope: An Example from US Pig Production," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(3), pages 427-433, September.
    10. Jacinto Vidigal da Silva & Natércia Godinho Mira & Aurora Galego, 2003. "Análise da Produção e da Produtividade da Indústria Transformadora Portuguesa na década de 90," Economics Working Papers 8_2003, University of Évora, Department of Economics (Portugal).
    11. Jesse Tack & Rulon Pope & Jeffrey LaFrance & Timothy Graciano & Scott Colby, 2012. "Intertemporal Risk Management in Agriculture," Monash Economics Working Papers 16-12, Monash University, Department of Economics.
    12. Kwon, Oh Sang & Yun, Won-Cheol, 2003. "Measuring economies of scope for cogeneration systems in Korea: a nonparametric approach," Energy Economics, Elsevier, vol. 25(4), pages 331-338, July.
    13. Richard Nehring & Jorge Fernandez-Cornejo & David Banker, 2005. "Off-farm labour and the structure of US agriculture: the case of corn/soybean farms," Applied Economics, Taylor & Francis Journals, vol. 37(6), pages 633-649.
    14. Pokharel, Krishna & Archer, David W. & Featherstone, Allen M., 2018. "The Impact of Size and Specialization on the Financial Performance of Agricultural Cooperatives," 2018 Annual Meeting, August 5-7, Washington, D.C. 274109, Agricultural and Applied Economics Association.
    15. David G. Barton & Ted C. Schroeder & Allen M. Featherstone, 1993. "Evaluating the feasibility of local cooperative consolidations: A case study," Agribusiness, John Wiley & Sons, Ltd., vol. 9(3), pages 281-294.
    16. Renwick, Alan W. & Revoredo-Giha, Cesar, 2005. "Crop Substitution On Uk Sugar Beet Farms And Its Effects On The Environment: A Multi-Product Cost Function Approach," Environmental Economy and Policy Research Discussion Papers 31933, University of Cambridge, Department of Land Economy.
    17. Rana, Jaber & Kamruzzaman, M. & Hosain Oliver, Moinul & Akhi, Kaynath, 2021. "Financial and factors demand analysis of solar powered irrigation system in Boro rice production: A case study in Meherpur district of Bangladesh," Renewable Energy, Elsevier, vol. 167(C), pages 433-439.
    18. Pokharel, Krishna P & Featherstone, Allen M, 2016. "A Nonparametric Approach to Estimate Multiproduct and Product-specific Scale and Scope Economies for Agricultural Cooperatives," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236182, Agricultural and Applied Economics Association.
    19. Mafoua, Edouard & Hossain, Ferdaus, 2001. "Scope And Scale Economies For Multi-Product Farms: Firm-Level Panel Data Analysis," 2001 Annual meeting, August 5-8, Chicago, IL 20627, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    20. Eldon V. Ball & Ricardo Cavazos & Jeffrey T. LaFrance & Rulon Pope & Jesse Tack, 2010. "Aggregation and Arbitrage in Joint Production," Monash Economics Working Papers archive-22, Monash University, Department of Economics.
    21. Mafoua, Edouard, 2002. "Economies Of Scope And Scale Of Multi-Product U.S. Cash Grain Farms: A Flexible Fixed-Cost Quadratic (Ffcq) Model Analysis," 2002 Annual meeting, July 28-31, Long Beach, CA 19734, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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