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Effects of volatile output prices on agricultural land-use change

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  • Boere, Esther
  • Peerlings, Jack H.M.
  • Reinhard, Stijn
  • Kuhlman, Tom
  • Heijman, Wim J.M.
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    Abstract

    Volatile output prices lead to a fluctuating shadow price (profitability) of agricultural land, and therefore may impact land use decisions in case of risk-averse behaviour. In this paper we assess the effect of volatile agricultural output prices on agricultural land-use change over the past decade in the Netherlands. Using regional data from 2000 through 2009, the number of hectares of land for 10 land uses was calculated. To determine the joint distribution of agricultural activities, hectares of land for each land use were converted to land share equations. Land share equations were estimated to determine the contribution of increased price volatility to land use change. Results show that larger volatility affects land shares negatively. Producer’s output responses, therefore, were consistently affected by risk-averse behaviour.

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    Bibliographic Info

    Paper provided by European Association of Agricultural Economists in its series 123rd Seminar, February 23-24, 2012, Dublin, Ireland with number 122472.

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    Date of creation: 23 Feb 2012
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    Handle: RePEc:ags:eaa123:122472

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    Related research

    Keywords: land-use; risk; price volatility; Risk and Uncertainty; Q1; D8;

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    1. Chavas, Jean-Paul & Pope, Rulon D., 1982. "Hedging And Production Decisions Under A Linear Mean-Variance Preference Function," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 7(01), July.
    2. Moore, Michael R. & Negri, Donald H., 1992. "A Multicrop Production Model Of Irrigated Agriculture, Applied To Water Allocation Policy Of The Bureau Of Reclamation," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(01), July.
    3. Barry T. Coyle, 1999. "Risk Aversion and Yield Uncertainty in Duality Models of Production: A Mean-Variance Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 553-567.
    4. Paolo Sckokai & Daniele Moro, 2006. "Modeling the Reforms of the Common Agricultural Policy for Arable Crops under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 43-56.
    5. Carlos Arnade & David Kelch, 2007. "Estimation of Area Elasticities from a Standard Profit Function," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 727-737.
    6. Alfons Oude Lansink, 1999. "Area Allocation Under Price Uncertainty on Dutch Arable Farms," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(1), pages 93-105.
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