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The Policy Implications of Corn and Soybean·Supply Response to Risk

Author

Listed:
  • Hall, Joyce A.
  • Brorsen, B. Wade

Abstract

Risk responsive corn and soybean acreage response models are estimated for the Corn Belt states (1970-1986). The elasticities with respect to risk are used in a stochastic simulation model along with previous estimates for land price. Alternate program scenarios are simulated with and without allowing risk to affect acreage response and land price. The econometric estimates show acreage to be significantly responsive to price risk. The simulations show the effect of risk on supply response to have a quantifiable impact on the level and variation of producer revenues and land prices.

Suggested Citation

  • Hall, Joyce A. & Brorsen, B. Wade, 1989. "The Policy Implications of Corn and Soybean·Supply Response to Risk," 1989 Annual Meeting, July 30-August 2, Baton Rouge, Louisiana 270502, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea89:270502
    DOI: 10.22004/ag.econ.270502
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    References listed on IDEAS

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    1. B. Wade Brorsen & Jean-Paul Chavas & Warren R. Grant, 1987. "A Market Equilibrium Analysis of the Impact of Risk on the U.S. Rice Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(4), pages 733-739.
    2. Richard E. Just, 1974. "An Investigation of the Importance of Risk in Farmers' Decisions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(1), pages 14-25.
    3. Joyce Hall Krause & B. Wade Brorsen, 1995. "The Effect of Risk on the Rental Value of Agricultural Land," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 17(1), pages 71-76.
    4. Duffy, Patricia A. & Richardson, James W. & Wohlgenant, Michael K., 1987. "Regional Cotton Acreage Response," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 19(1), pages 1-11, July.
    5. B. Wade Brorsen & Jean-Paul Chavas & Warren R. Grant & L. D. Schnake, 1985. "Marketing Margins and Price Uncertainty: The Case of the U.S. Wheat Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(3), pages 521-528.
    6. Bailey, Kenneth W. & Womack, Abner W., 1985. "Wheat Acreage Response: A Regional Econometric Investigation," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 17(2), pages 1-10, December.
    7. W.L. Nieuwoudt & Abner W. Womack & Stanley R. Johnson, 1988. "Measurement of Importance of Risk on Supply Response of Corn and Soybeans," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 10(2), pages 281-292.
    8. Bailey, Kenneth W. & Womack, Abner W., 1985. "Wheat Acreage Response: Investigation a Regional Econometric Investigation," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 17(2), pages 171-180, December.
    9. Rulon D. Pope & Arne Hallam, 1986. "A Confusion of Agricultural Economists?—A Professional Interest Survey and Essay," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(3), pages 572-594.
    10. Christopher Hurt & Philip Garcia, 1982. "The Impact of Price Risk on Sow Farrowings, 1967–78," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(3), pages 565-568.
    11. Witt, Craig A. & Reid, Donald W., 1987. "U.S. Farm Price Support Programs Analyzed as Put Options," 1987 Annual Meeting, August 2-5, East Lansing, Michigan 269964, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Bruce L. Gardner, 1977. "Commodity Options for Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 59(5), pages 986-992.
    13. Black, Fischer, 1976. "The pricing of commodity contracts," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 167-179.
    14. Rulon Pope & Jean-Paul Chavas & Richard E. Just, 1983. "Economic Welfare Evaluations for Producers under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(1), pages 98-107.
    15. Turvey, Calum G. & Brorsen, B. Wade & Baker, Timothy G., 1988. "A Contingent Claim Pricing Model for Valuing Non-Recourse Loan Programs and Target Prices," 1988 Annual Meeting, August 1-3, Knoxville, Tennessee 270319, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    16. Marcus, Alan J. & Modest, David M., 1986. "The Valuation of a Random Number of Put Options: An Application to Agricultural Price Supports," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(1), pages 73-86, March.
    17. Houck, James P. & Ryan, Mary E., 1972. "Supply Analysis For Corn In The United States: The Impact Of Changing Government Programs," Staff Papers 13554, University of Minnesota, Department of Applied Economics.
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    Cited by:

    1. Alfons Weersink & Mike Massow & Scott Rozelle, 1991. "A Risk Analysis of the Ontario White Bean Sector," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 39(2), pages 271-281, July.
    2. Meilke, Karl D. & Weersink, Alfons, 1991. "An Analysis of the Effects of Government Payments to Grain and Oilseeds Producers on Cropping Decisions," Working Papers 244081, Agriculture and Agri-Food Canada.

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