Abstract:
Two essays are focused on crop choice and the growth of corn production in
the Corn Belt and surrounding areas. The first essay develops a partially
degenerate nested logit model to examine the effect of price islands and local
ethanol capacity on corn production and crop mix. The primary data sets in
estimating the econometric model are the 2001 and 2005 Corn Agricultural
Resource Management Survey (ARMS), and the 2002 and 2006 Soybean
ARMS. These are large and informative survey data sets that have the
potential for actual policy implications. The estimation of the nested partition
(containing corn and soybeans) suggests that local prices have some
influence on whether a farmer will choose to plant corn or soybeans, while
estimation of the upper-level suggests that farmers may plant more corn,
soybeans, or wheat relative to other crops, as ethanol capacity increases.
The second essay uses a multinomial logit model to estimate a corn-soybean
price ratio in different acreage scenarios that are designed to accommodate
additional continuous corn production in the Upper Mississippi
River Basin, in response to increased demand for corn-based ethanol. The
land use scenarios are drawn from Soil and Water Assessment Tool estimation
and are used in an Environmental Protection Agency (EPA) report
authored by Aqua Terra Consultants and Texas A & M Spatial Sciences
Laboratory (2008). The results suggest that as the corn-soybean price ratio
increases, due to an increase in corn price or decrease in soybean price,
farmers are more likely to plant continuous corn relative to a corn-soybean
rotation. Parameter estimates are used to estimate the price of corn in
future scenarios, with results suggesting a minimum corn price increase of
70% in order to encourage farmers to plant enough corn to meet ethanol
mandates through 2022. Discussion includes the likelihood of a sustained
corn price increase through 2022, and potential impacts beyond the EPA
report, if such a price increase did occur.
