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Price and Profit: Investigating a Conundrum

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  • Carl R. Zulauf
  • Gary Schnitkey
  • Carl T. Norden
  • Erick Davidson

Abstract

Corn and soybean prices do not differ significantly among farms participating in the Illinois farm business farm management (FBFM) program from 1996 through 2005. While consistent with the literature, the finding is inconsistent with farmers' opinion of the importance of price. A conundrum exists. However, the study also finds that price and profit per acre are positively related when a given farm is examined over time. Thus, the conundrum can be explained as a difference in perspective: researchers examine variation between price and profit across farms at a point in time while farmers examine this variation within his/her farm over time. Nevertheless, the relationship a farmer observes is likely due to market supply and demand factors, not the farmer's managerial control over the price received.

Suggested Citation

  • Carl R. Zulauf & Gary Schnitkey & Carl T. Norden & Erick Davidson, 2008. "Price and Profit: Investigating a Conundrum," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(2), pages 352-359.
    • Handle: RePEc:oup:revage:v:30:y:2008:i:2:p:352-359.
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    File URL: http://hdl.handle.net/10.1111/j.1467-9353.2008.00408.x
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    References listed on IDEAS

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    1. Harwood, Joy L. & Heifner, Richard G. & Coble, Keith H. & Perry, Janet E. & Somwaru, Agapi, 1999. "Managing Risk in Farming: Concepts, Research, and Analysis," Agricultural Economic Reports 34081, United States Department of Agriculture, Economic Research Service.
    2. Irwin, Scott H. & Martines-Filho, Joao Gomes & Good, Darrel L., 2003. "The Pricing Performance of Market Advisory Services in Corn and Soybeans Over 1995-2001," AgMAS Project Research Reports 37510, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    3. Joao Martines-Filho, 2006. "The Performance of Agricultural Market Advisory Services in Corn and Soybeans," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 162-181.
    4. Nivens, Heather D. & Kastens, Terry L. & Dhuyvetter, Kevin C., 2002. "Payoffs To Farm Management: How Important Is Crop Marketing?," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 34(1), pages 1-12, April.
    5. Irwin, Scott H. & Good, Darrel L. & Martines-Filho, Joao Gomes & Batts, Ryan M., 2006. "The Pricing Performance of Market Advisory Services in Corn and Soybeans Over 1995-2004," AgMAS Project Research Reports 37513, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    6. Steven T. Sonka & Robert H. Hornbaker & Michael A. Hudson, 1989. "Managerial Performance and Income Variability for a Sample of Illinois Cash Grain Producers," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 11(1), pages 37-47.
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    Cited by:

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