Scale Effects of Seasonal Production in the United States Raw Cane Sugar Industry
Radell, Willard Wesley, Jr.
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https://hdl.handle.net/2142/67668
Description
Title
Scale Effects of Seasonal Production in the United States Raw Cane Sugar Industry
Author(s)
Radell, Willard Wesley, Jr.
Issue Date
1980
Department of Study
Economics
Discipline
Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Commerce-Business
Language
eng
Abstract
This study is an exploration of the comparative influence of season length on economics of and returns to scale and size in Louisiana, Florida, and Hawaii raw sugar factories. Four basic techniques are used to detect the presence of net economies of and returns to scale and size associated with season length. (1) Ordinary least squares regression models are used to detect statistical relationships between days of factory operation, output, and various cost components. (2) Surrogate statistical production functions are specified in log-linear Cobb-Douglas form to detect net returns associated with large scale operations. These specifications use data which are plant-specific, unlike earlier studies which have often aggregated farm and factory inputs. (3) Isoquants are constructed with a capacity variable to detect net returns from larger factories and a season length variable to detect net returns from an extended season of production. (4) The survivor technique is used both to estimate minimum efficient plant sizes in each of the three raw cane sugar areas, and as an independent verification of the results found with the other three methods. Each of the three raw sugar areas is treated separately and the results from each area are coordinated in the final chapter.
Net economies associated with greater scale and with a longer season of production are found to be present in Louisiana and Florida mills. Returns to increased scale and size are found to be greatest in Florida raw sugar factories, followed by Louisiana and Hawaii respectively. Hawaiian raw sugar factories are found to be approximately in the range of constant returns to greater scale, while Louisiana mills show increasing returns only with the model that specifies season length. Florida raw sugar factories are found to have the greatest returns to scale, size, and from an extended season of production. Although strong net economies of scale, size, and time are detected in Florida raw sugar manufacturing, even there the economies can be overwhelmed by sustained periods of low prices. When the effects of the disparate season lengths are accounted for, mill sizes in the three cane areas are shown to reflect rational decision making by factory owners and managers.
Current sugar policy is examined in light of the above results and several alternative sugar policy frameworks are discussed. Special emphasis is given to the possibility of the extension of the effective season by the distilling of ethanol from unripe cane or sweet sorghum. Linkages between oil prices and consumption sugar prices are discussed in the evaluation of sugar policy alternatives. The policy alternatives considered range from total de-control of oil prices, coupled with an end to price supports for raw sugar, to a return to the pre-1975 Sugar Act milieu of acreage allotments and marketing quotas.
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