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Short-term global crop acreage response to international food prices and implications of volatility

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Author Info

  • Haile, Mekbib G.
  • Kalkuhl, Matthias
  • von Braun, Joachim

Abstract

Understanding how producers make decisions to allot acreage among crops and how decisions about land use are affected by changes in prices and their volatility is fundamental for predicting the supply of staple crops and, hence, assessing the global food supply situation. The innovations of the present paper are estimates of monthly (i.e. seasonal) versus annual global acreage response models for four staple crops: wheat, soybeans, corn and rice. We focus on the impact of (expected) crop prices, oil and fertilizer prices and market risks as main determinants for farmers’ decisions on how to allocate their land. Primary emphasis is given to the magnitude and speed of the allocation process. Estimation of intra-annual acreage elasticity is crucial for expected supply and for input demand, especially in the light of the recent short-term volatility in food prices. Such aggregate estimates are also valuable to verify whether involved country-specific estimations add up to patterns that are apparent in the aggregate international data. The econometric results indicate that global crop acreage responds to crop prices and price risks, input costs as well as a time trend. Depending on respective crop, short-run elasticities are about 0.05 to 0.25; price volatility tends to reduce acreage response of some crops; comparison of the annual and the monthly acreage response elasticities suggests that acreage adjusts seasonally around the globe to new information and expectations. Given the seasonality of agriculture, time is of the essence for acreage response: The analysis indicates that acreage allocation is more sensitive to prices in northern hemisphere spring than in winter and the response varies across months.

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Bibliographic Info

Paper provided by University of Bonn, Center for Development Research (ZEF) in its series Discussion Papers with number 145308.

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Date of creation: Feb 2013
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Handle: RePEc:ags:ubzefd:145308

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Keywords: food price volatility; acreage response; price expectation; land use; food supply; Agricultural Finance; Crop Production/Industries; Demand and Price Analysis; Farm Management; Institutional and Behavioral Economics; Land Economics/Use; Productivity Analysis; Risk and Uncertainty; O11; O13; Q11; Q13; Q18; Q24;

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Cited by:
  1. Kalkuhl, Matthias, 2014. "How Strong Do Global Commodity Prices Influence Domestic Food Prices in Developing Countries? A Global Price Transmission and Vulnerability Mapping Analysis," Discussion Papers 168591, University of Bonn, Center for Development Research (ZEF).
  2. Kornher, Lukas & Kalkuhl, Matthias, 2013. "Food price volatility in developing countries and its determinants," 53rd Annual Conference, Berlin, Germany, September 25-27, 2013 156132, German Association of Agricultural Economists (GEWISOLA).

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