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Dynamic Equilibrium in Markets for Perennial Crops

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  • Keith C. Knapp

Abstract

A dynamic equilibrium model for perennial crop markets is formulated. Price expectations are formed according to perfect foresight, and both the age composition of the crop and the optimal rotation are determined endogenously. The model is applied to the California alfalfa market. The calculated long-run equilibrium acreage is quite close to average acreage over the base period. The results also exhibit cyclical fluctuations in acreage with a six percent coefficient of variation. Thus, cyclical behavior can arise from technical characteristics of the production process as well as from imperfectly formed expectations or random exogenous shocks.

Suggested Citation

  • Keith C. Knapp, 1987. "Dynamic Equilibrium in Markets for Perennial Crops," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(1), pages 97-105.
    • Handle: RePEc:oup:ajagec:v:69:y:1987:i:1:p:97-105.
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    File URL: http://hdl.handle.net/10.2307/1241310
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    Citations

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    Cited by:

    1. Blank, Steven C. & Orloff, Steve B. & Putnam, Daniel H., 2001. "Sequential Stochastic Production Decisions For A Perennial Crop: The Yield/Quality Tradeoff For Alfalfa Hay," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(1), pages 1-17, July.
    2. Kazim Konyar & Keith Knapp, 1988. "Market analysis of alfalfa hay: California case," Agribusiness, John Wiley & Sons, Ltd., vol. 4(3), pages 271-284.
    3. Cittadini, E.D. & Lubbers, M.T.M.H. & de Ridder, N. & van Keulen, H. & Claassen, G.D.H., 2008. "Exploring options for farm-level strategic and tactical decision-making in fruit production systems of South Patagonia, Argentina," Agricultural Systems, Elsevier, vol. 98(3), pages 189-198, October.
    4. Bradley Franklin & Keith C. Knapp & Kurt A. Schwabe, 2017. "A Dynamic Regional Model of Irrigated Perennial Crop Production," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 1-30, January.
    5. Roosen, Jutta, 1999. "Economic analysis of pesticide regulation in the U.S. apple industry," ISU General Staff Papers 1999010108000013606, Iowa State University, Department of Economics.
    6. Zhao, Xin & Brady, Michael P. & Tozer, Peter R., 2015. "Do Farmers Really Plant Apples for Their Income and Cherries for Their Retirement? The Effects of Risk, Scope and Scale on Orchard Land Allocation," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205663, Agricultural and Applied Economics Association.
    7. Bazen, Ernest F. & Roberts, Roland K. & Travis, John & Larson, James A., 2008. "Factors Affecting Hay Supply and Demand in Tennessee," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6889, Southern Agricultural Economics Association.
    8. Bradley Franklin & Kurt Schwabe & Lucia Levers, 2021. "Perennial Crop Dynamics May Affect Long-Run Groundwater Levels," Land, MDPI, vol. 10(9), pages 1-18, September.
    9. Knapp, Keith & Konyar, Kazim, 1990. "A Dynamic Spatial Equilibrium Model of the California Alfalfa Market," Research Reports 251936, University of California, Davis, Giannini Foundation.
    10. Devadoss, Stephen & Luckstead, Jeff, 2010. "An analysis of apple supply response," International Journal of Production Economics, Elsevier, vol. 124(1), pages 265-271, March.

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