We use field-level data to estimate the response of corn and soybean acreage to price shocks. Our sample contains more than eight million observations derived from satellite imagery and includes every field in Iowa, Illinois, and Indiana. We estimate that aggregate crop acreage responds more to price shocks in the short run than in the long run, and we show theoretically how the benefits of crop rotation generate this response pattern. In essence, farmers who change crops due to a price shock have an incentive to switch back to the previous crop to capture the benefits of crop rotation. Our result contradicts the long-held belief that agricultural supply responds gradually to price shocks through partial adjustment. We would not have obtained this result had we used county-level panel data. Standard econometric methods applied to county-level data produce estimates consistent with partial adjustment. We show that this apparent partial adjustment is illusory, and we demonstrate how it arises from the fact that fields in the same county are more similar to each other than to fields in other counties. This result underscores the importance of using models with appropriate micro-foundations and cautions against inferring micro-level rigidities from inertia in aggregate panel data. Our preferred estimate of the own-price long-run elasticity of corn acreage is 0.29 and the cross-price elasticity is -0.22. The corresponding elasticities for soybean acreage are 0.26 and -0.33. Our estimated short-run elasticities are 37 percent larger than their long-run counterparts. 2 How much more land gets allocated to a crop when relative prices change? The answer to this question is the central parameter for understanding world food prospects, the impacts of farm subsidies, and the environmental consequences from land use change, among other public and policy issues (e.g., Roberts and Schlenker 2013;Lichtenberg and Zilberman 1986;Searchinger et al. 2008;Donner and Kucharik 2008). We provide a new and better answer for an important set of commodities in the world food system. We use a conceptual approach that accounts for crop rotations, a massive sample of individual fields, and econometric methods that account for heterogeneous incentives to rotate crops and heterogeneous responses to prices. Moreover, we show that supply response is seriously misestimated when standard econometric methods are applied to county-level panel data. One consequence of this bias is a mistaken understanding of supply dynamics and, in particular, the relationship between short-run and long-run supply response.A typical agricultural field in the United States Corn Belt tends to alternate between growing corn in one year and soybeans the next. This pattern reflects a common agronomic feature of crop production: planting a crop on the same field in consecutive years decreases the productivity of the soil for growing that crop and increases pest populations. These features generate dynamic complementarity in crop production because the marginal valu...
The Renewable Fuel Standard (RFS) specifies the use of biofuels in the United States and thereby guides nearly half of all global biofuel production, yet outcomes of this keystone climate and environmental regulation remain unclear. Here we combine econometric analyses, land use observations, and biophysical models to estimate the realized effects of the RFS in aggregate and down to the scale of individual agricultural fields across the United States. We find that the RFS increased corn prices by 30% and the prices of other crops by 20%, which, in turn, expanded US corn cultivation by 2.8 Mha (8.7%) and total cropland by 2.1 Mha (2.4%) in the years following policy enactment (2008 to 2016). These changes increased annual nationwide fertilizer use by 3 to 8%, increased water quality degradants by 3 to 5%, and caused enough domestic land use change emissions such that the carbon intensity of corn ethanol produced under the RFS is no less than gasoline and likely at least 24% higher. These tradeoffs must be weighed alongside the benefits of biofuels as decision-makers consider the future of renewable energy policies and the potential for fuels like corn ethanol to meet climate mitigation goals.
Temperature increases due to climate change are expected to cause substantial reductions in global wheat yields. However, uncertainty remains regarding the potential role for irrigation as an adaptation strategy to offset heat impacts. Here we utilize over 7000 observations spanning eleven Kansas field-trial locations, 180 varieties, and 29 years to show that irrigation significantly reduces the negative impact of warming temperatures on winter wheat yields. Dryland wheat yields are estimated to decrease about eight percent for every one-degree Celsius increase in temperature, yet irrigation completely offsets this negative impact in our sample. As in previous studies, we find that important interactions exist between heat stress and precipitation for dryland production. Here, uniquely, we observe both dryland and irrigated trials side-by-side at the same locations and find that precipitation does not provide the same reduction in heat stress as irrigation. This is likely to be because the timing, intensity, and volume of water applications influence wheat yields, so the ability to irrigate-rather than relying on rainfall alone-has a stronger influence on heat stress. We find evidence of extensive differences of water-deficit stress impacts across varieties. This provides some evidence of the potential for adapting to hotter and drier climate conditions using optimal variety selection. Overall, our results highlight the critical role of water management for future global food security. Water scarcity not only reduces crop yields through water-deficit stress, but also amplifies the negative effects of warming temperatures.
The authors thank Wolfram Schlenker and Michael Roberts for sharing weather data and Ed Perry for sharing irrigation data. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.