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Does a Rising Biofuels Tide Raise All Boats? A Study of Cash Rent Determinants for Iowa Farmland under Hay and Pasture

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Author Info
Xiaodong Du (Iowa State University)
David Hennessy (Iowa State University)
William Edwards (Iowa State University)

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Abstract

Iowa's farmland consists of over 16% hay crops and pastureland, a significant portion of which is under cash rental contracts. This study investigates the comparative relationships between cash rental rates for cropped land and non-cropped land, where the latter includes hay and pastureland. We find that higher crop prices resulting from biofuel demand induces land use conversion from non-cropped land to crop production and thus bids up non-cropped land rents. Compared with changes in cropped land cash rents, non-cropped farmland rents could increase by a higher percentage. Non-cropped land cash rental rates are largely determined by crop and feeder cattle prices, population density, soil quality, and proportion of non-cropped land in a specific area. A primary effect of ethanol subsidies is the redistribution of income between corn growers and livestock producers, whereby higher livestock feed costs together with increasing hay and pastureland cash rents harm the dairy and feedlot beef sectors. Our study shows that, because of the positive effect on rents, the policies have an indeterminate effect on landowners operating in the cow-calf sector.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Journal of Agricultural & Food Industrial Organization.

Volume (Year): 6 (2008)
Issue (Month): 2 ()
Pages: 1238-1238
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Handle: RePEc:bep:bjafio:v:6:y:2008:i:2:p:1238-1238

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Related research
Keywords: biofuels; land values; farmland; Iowa;

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References listed on IDEAS
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  1. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July. [Downloadable!] (restricted)
    Other versions:
  2. Gardner, Bruce L, 1987. "Causes of U.S. Farm Commodity Programs," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 290-310, April. [Downloadable!] (restricted)
  3. Amani Elobeid & Simla Tokgoz, 2008. "Removing Distortions in the U.S. Ethanol Market: What Does It Imply for the United States and Brazil?," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 90(4), pages 918-932, November. [Downloadable!] (restricted)
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  4. Sergio H. Lence & Ashok K. Mishra, 2003. "The Impacts of Different Farm Programs on Cash Rents," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 85(3), pages 753-761, 08. [Downloadable!] (restricted)
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  5. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May. [Downloadable!] (restricted)
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  6. Michael J. Roberts & Barrett Kirwan & Jeffrey Hopkins, 2003. "The Incidence of Government Program Payments on Agricultural Land Rents: The Challenges of Identification," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 85(3), pages 762-769, 08. [Downloadable!] (restricted)
  7. Lyubov A. Kurkalova & Christopher Burkart & Silvia Secchi, 2004. "Cropland Cash Rental Rates in the Upper Mississippi River Basin," Center for Agricultural and Rural Development (CARD) Publications 04-tr47, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
  8. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312. [Downloadable!]
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  9. Kurkalova, Lyubov & Burkart, Christopher & Secchi, Silvia, 2004. "Cropland Cash Rental Rates in the Upper Mississippi River Basin," Staff General Research Papers 12204, Iowa State University, Department of Economics. [Downloadable!]
  10. Elhorst, J. Paul, 2008. "Serial and spatial error correlation," Economics Letters, Elsevier, vol. 100(3), pages 422-424, September. [Downloadable!] (restricted)
  11. Grigorios Livanis & Charles B. Moss & Vincent E. Breneman & Richard F. Nehring, 2006. "Urban Sprawl and Farmland Prices," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 88(4), pages 915-929, November. [Downloadable!] (restricted)
    Other versions:
    • Livanis, Grigorios & Moss, Charles B. & Breneman, Vincent E. & Nehring, Richard F., 2005. "Urban Sprawl and Farmland Prices," Working Papers 15657, University of Florida, International Agricultural Trade and Policy Center. [Downloadable!]
  12. Du, Xiaodong & Hennessy, David A. & Edwards, William M., 2007. "Determinants of Iowa Cropland Cash Rental Rates: Testing Ricardian Rent Theory," Staff General Research Papers 12845, Iowa State University, Department of Economics. [Downloadable!]
    Other versions:
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