Florida has an estimated 618 trillion gallons of fresh water in the aquifer system. In addition, there is a considerable amount of water in lakes, and annual runoff from streams (and underground aquifer seepage) has been estimated at 40 billion gallons [1, p. 9]. The annual runoff alone is seven times the withdrawal (about 14 percent) and 22 times the consumption (about 5 percent). A curious development has occurred in Florida, however, that would not have been expected by the reviewer of such aggregated figures. The general populace and, as a result, the legislators, became concerned enough with water management and use in the early 1970s to develop and implement sweeping water legislation. The nature of this legislation had not heretofore been observed in the southeast nor, for that matter, almost anywhere else in the eastern United States. The Florida Water Act of 1972 [3] was enacted to deal with localized shortages that were developing in, and have been compounded since, the late 1960s.

Spiny lobster (Panulirus argus) is produced in the warmer ocean waters and is distinguished from the northern American lobster (Homarus americanus) by its lack of claws and relatively smaller size. Florida lobstermen currently account for 98 percent of the U.S. spiny lobster landings. This industry has grown from annual landings of less than a million pounds prior to the 1950s to 11 million pounds in 1974, with a value of over $13 million [5, 6]. Although no formal demand analysis has been completed, it appears that U.S. demand for this luxury seafood has increased considerably faster than domestic production. In current dollars, prices at dockside increased 251 percent from 39 cents per pound in 1960 to over $1.36 per pound at dockside in 1975 (an increase of 73 percent in constant dollars). Increased demand in the U.S. is further suggested by the fact that U.S. consumption of total world production increased from 53 to slightly over 80 percent in this same period.

The foliage industry is the most rapidly expanding segment of commercial agriculture in Florida [1]. The industry accounted for about $13 million of the agricultural income in 1966 and over $187 million in 1975. The area in production in the state has more than doubled in the last ten years; it was increased from about 26 million square feet in 1966 to just over 65 million square feet in 1975. Nurserymen were expected to expand their production area by about 8.6 million square feet during 1976 [14].

This rapid increase in production area has been from expansion of established producers and entry of new growers into the industry. The producers increased from 163 in 1966 to 262 in 1975. The average foliage nurseryman participating in the Florida Cooperative Extension nursery business analysis program expanded employment from 23 employees in 1970 to 30 in 1975.

Traditional farms can play an important role in the agricultural development process [4, 6, 7, 8]. Less developed countries (LDCs) emphasize production and productivity increases for basic grains by relying on modern yield-increasing technology [2]. Technological advance, however, may produce diverging results; productivity may increase while production stagnates or declines. Due to both major seasonal and cyclical price fluctuations in basic grains and income limitations, traditional farmers in LDCs choose, quite rationally, to grow only enough of some food crops for home consumption. Yet policy makers often seek to increase the marketed supply of food crops and to determine possible changes in land utilization to meet that objective.

Use of debt in financing agricultural firms is an issue of perennial interest. Much of this interest reflects farmers’ disastrous experience with debt during the Great Depression. The foreclosed mortgages and bankruptcies of that era reaffirmed an historical feeling that achieving a level of zero debt or financial leverage was a high priority goal. E. G. Johnson, who was Chief of the Economic and Credit Research Division of the Farm Credit Administration, articulated the position in the 1940 Yearbook of Agriculture that this goal is even more important than increasing profits: “It may be well to emphasize again that while credit properly used may help farmers to increase their income and raise their standard of living, the fact must not be overlooked that more credit will not cure all the ills of agriculture. The greatest need is to assist the farmers in getting out of debt, not deeper into it,” [6, p. 754]. As memories of the Great Depression faded, agricultural economists tended to emphasize the effect of debt on farm size and therefore net income.

Little work has been done on the effect of income taxes on the firm-level decisions made by farmers and ranchers. Krause and Shapiro [4] identified this gap in agricultural economic research, noting that much of the published work on income taxes is descriptive rather than an analysis of the effect on firm level decision-making and resource allocation. Yet farmers make few investment or production decisions which do not affect their income tax liability for one or more years.

An exception to the usual practice of omitting income taxes from a research study is a recent article by Lin, Dean and Moore [5].

Over the last decade consumption of vegetable oil products in the United States has increased enormously. Per capita consumption of vegetable oil products rose from 30.6 pounds in 1965 to 43.1 pounds in 1975—an increase of more than 40 percent. This expansion continues a historic trend and represents the single largest ten-year increment in the last fifty years [1, 2, 3]. The principal vegetable oils used in domestic products are soybean, cottonseed and corn oil. For this reason the increase in consumer demand for vegetable oil products over the last decade has had an important effect on the derived demand for soybeans, cottonseed and corn.

Because level and variability of the basis at the time a hedge is lifted affects level and variability of returns from hedging [1, 4], an understanding of the determination of basis values is important both to hedgers and to those with regulatory responsibilities. This analysis focuses on the determination of par-delivery-point basis values during the delivery period of a live-cattle futures contract; i.e., on determination of the difference between futures price and cash price for a lot of live cattle that meets all futures contract specifications (including place and time of delivery). Results of the analysis suggest that, during the delivery period, par-delivery-point basis values for live cattle frequently differ from zero by more than the transaction costs associated with arbitrage, and that fluctuations in basis values may be partly explained by trader expectations and by risk associated with returns to arbitrage.

Recent commodity price volatility and development of new futures contracts has kindled interest in hedging among farmers in many parts of the country. Due to the importance of feeder cattle production in Kentucky and in the South generally, recent development of a feeder cattle contract is of special interest. This paper addresses some potential problems associated with use of feeder cattle futures markets by Kentucky producers. Specifically, it tries to: (1) determine the effect, if any, of location basis variability on ex post hedging results in Kentucky markets versus delivery markets at Omaha and Oklahoma City, (2) assess the ability of hedging to reduce revenue variability as compared to cash marketing and (3) determining the presence of bias in feeder cattle futures prices.

Several definitions of diversification exist. Typically, the concept is dynamic and refers to the relationship among various activities or enterprises in which the firm is engaged. As new activities are acquired by a firm from some existing base of activities, complementarity of the newly acquired activity relative to the existing base is subjectively determined. Judgment is rendered on whether the result represents diversification or conglomeration.

Conventional wisdom has not succinctly differentiated between diversification and conglomeration. Some writers have considered conglomeration a special case of diversification [2, 7]. For purposes of this paper, this taxonomic argument need not be settled.

Numerous recent articles have dealt with causes and implications of domestic agricultural market instability [2, 3, 4, 7]. In these articles large, unexpected and erratic grain exports since 1972 are hypothesized to be a primary contributor to recent agricultural market instability. More specifically, Seevers [4] and others have stated that recent severe instability in agriculture markets began in late 1972 with a combination of increased export demand and strong domestic economic expansion. These analyses have largely based their conclusions upon intuition rather than a thorough empirical investigation.

The discussion of my paper by Emanuel Melichar presented elsewhere in this issue of the Journal initially focuses on use of mathematical notation when discussing concepts and theory in the absence of corresponding empirical estimates. Apparently attempting to demonstrate how a relatively simple task—illustrating the areas in which financing considerations should be included in sector projections models—was made difficult by using “hieroglyphics,” Melichar summarizes the equations in my paper with brief, one sentence descriptive statements. Unfortunately, he chooses to ignore the fact that economic relationships inherent in each equation were discussed so that “decoding by faithful readers” is not required by those uninterested in issues related to specification of variables or aggregate model design.