Is Yield Endogenous to Price? An Empirical Evaluation of Inter- and Intra-Seasonal Corn Yield Response

An extensive empirical literature has examined the behavior of crop yields over time. Corn yields have been characterized by signficant increases reflecting an array of technological developments that have substantially boosted productivity. While much of the focus has been on modeling deterministic and possibly stochastic trends in yields over time, an equally important question involves the extent to which yield changes may occur in response to price. This paper addresses two dimensions of this issue. We first look at the extent to which realized yields (i.e., at harvest) tend to be influenced by planting{time quotes of post{harvest futures contracts. Second, we examine the potential for intra{seasonal responsiveness of yields to significant price swings. The latter response is especially important in light of recent arguments that weather offers identification through instruments that are completely exogenous to market conditions; a view often expressed in terms of a "natural experiment." We challenge this argument by finding that the potential does exist for yields to be affected by significant price changes that occur early in the growing season.