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Dynamic Corn Supply Functions: A Model with Explicit Optimization

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  • Tegene, Abebayehu
  • Huffman, Wallace E.
  • Miranowski, John A.

Abstract

A model of optimal dynamic agricultural supply is derived and fitted assuming farmers have two annual stochastic crop production activities, a joint limitation on production capacity, interdependencies between past acreage utilization and current productivity, and rational expectations. A five-equation specification is fitted to annual data, 1948–80. Estimated parameters are consistent with the theory, and the model simulates well. The long-run price elasticity of corn acreage is 0.2, which is similar to those obtained from ad hoc dynamic models, but our short-run elasticities are different.

Suggested Citation

  • Tegene, Abebayehu & Huffman, Wallace E. & Miranowski, John A., 1988. "Dynamic Corn Supply Functions: A Model with Explicit Optimization," ISU General Staff Papers 198802010800001356, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:198802010800001356
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    1. Drafor, Ivy & Kunze, Dagmar & Sarpong, Daniel Bruce, 2013. "Food Security: How Rural Ghanaian Households Respond to Food Shortages in Lean Season," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 2(4), pages 1-8, July.
    2. Skold, Karl Durwood, 1989. "The integration of alternative information systems: an application to the Hogs and Pigs report," ISU General Staff Papers 1989010108000010239, Iowa State University, Department of Economics.
    3. Burton, Diana M. & Love, H. Alan, 1996. "A Review of Alternative Expectations Regimes in Commodity Markets: Specification, Estimation, and Hypothesis Testing Using Structural Models," Agricultural and Resource Economics Review, Cambridge University Press, vol. 25(2), pages 213-231, October.
    4. Foster, William E. & Babcock, Bruce A., 1993. "Commodity Policy, Price Incentives, and the Growth in Per-Acre Yields," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 25(1), pages 253-265, July.
    5. Femenia, F. & Carpentier, A. & Gohin, A. & Sodjadhin, R., 2018. "Using farm accountancy data to estimate crop rotation effects," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277161, International Association of Agricultural Economists.
    6. Cho, Gyu D., 1992. "Estimation of a Wheat Acreage Response Function for Kansas," Staff Papers 118174, Kansas State University, Department of Agricultural Economics.
    7. Mindy L. Baker & Dermot J. Hayes & Bruce A. Babcock, 2008. "Crop-Based Biofuel Production under Acreage Constraints and Uncertainty," Center for Agricultural and Rural Development (CARD) Publications 08-wp460, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    8. Hikaru Hanawa Peterson & William G. Tomek, 2005. "How much of commodity price behavior can a rational expectations storage model explain?," Agricultural Economics, International Association of Agricultural Economists, vol. 33(3), pages 289-303, November.
    9. Alain Carpentier & Alexandre Gohin, 2015. "On the economic theory of crop rotations: value of the crop rotation effects and implications on acreage choice modeling," Working Papers SMART 15-04, INRAE UMR SMART.
    10. Boisvert, Richard N. & Peterson, Jeffrey M., 2001. "Control Of Nonpoint Source Pollution Through Voluntary Incentive-Based Policies: An Application To Nitrate Contamination In New York," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 30(2), pages 1-12, October.
    11. Taffesse, Alemayehu Seyoum, 1997. "Government policy and dynamic supply response: a study of the compulsory grain delivery system," MPRA Paper 18674, University Library of Munich, Germany.
    12. Gouel, Christophe & Laborde, David, 2021. "The crucial role of domestic and international market-mediated adaptation to climate change," Journal of Environmental Economics and Management, Elsevier, vol. 106(C).
    13. Nyairo, Newton Morara & Kola, Jukka & Sumelius, John, 2010. "Impacts of agricultural trade and market liberalization of food security in developing countries: comparative study of Kenya and Zambia," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 96172, African Association of Agricultural Economists (AAAE).
    14. Mindy L. Mallory & Dermot J. Hayes & Bruce A. Babcock, 2011. "Crop-Based Biofuel Production with Acreage Competition and Uncertainty," Land Economics, University of Wisconsin Press, vol. 87(4), pages 610-627.
    15. Clark, J. Stephen & Spriggs, John, 1991. "Policy Implications Of Unit Root Nonstationarity In Multiproduct Acreage Response Systems," 1991 Annual Meeting, August 4-7, Manhattan, Kansas 271207, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    16. Peterson, Hikaru Hanawa & Tomek, William G., 2000. "Commodity Price Behavior: A Rational Expectations Storage Model of Corn," Working Papers 127682, Cornell University, Department of Applied Economics and Management.
    17. Roger Claassen & Richard Horan, 2001. "Uniform and Non-Uniform Second-Best Input Taxes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 19(1), pages 1-22, May.
    18. Lin, Chien-Pang & Barkley, Andrew P., 1997. "Declining Commodity Program Payments and Enhanced Environmental Regulations: Impacts on Acreage Allocation in the Great Plains," 1997 Annual Meeting, July 13-16, 1997, Reno\ Sparks, Nevada 35932, Western Agricultural Economics Association.
    19. Nicholas J. Pates & Nathan P. Hendricks, 2021. "Fields from Afar: Evidence of Heterogeneity in United States Corn Rotational Response from Remote Sensing Data," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1759-1782, October.
    20. Bachewe, Fantu Nisrane & Taffesse, Alemayehu Seyoum, 2018. "Supply response of smallholder households in Ethiopia," IFPRI book chapters, in: The economics of teff: Exploring Ethiopia’s biggest cash crop, chapter 8, pages 181-204, International Food Policy Research Institute (IFPRI).
    21. Horan, Richard D. & Claassen, Roger & Cooper, Joseph C., 2000. "Environmental Risk And Agri-Environmental Policy Design," 2000 Annual meeting, July 30-August 2, Tampa, FL 21827, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    22. Bachewe, Fantu Nisrane & Taffesse, Alemayehu Seyoum, 2015. "Dynamic supply response of farm households in Ethiopia:," ESSP working papers 78, International Food Policy Research Institute (IFPRI).

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