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Drivers of Profit Inefficiency in Iowa Crop Production

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  • Sawadgo, Wendiam PM
  • Plastina, Alejandro

Abstract

In this paper, we use data envelopment analysis and a panel of Iowa farms to evaluate profit inefficiency in corn and soybean production. We find that farms have, on average, profit inefficiency scores of 89.4% in combined corn and soybean production, suggesting that profit could be increased by 89.4% if farms eliminated technical and allocative inefficiencies. Overall, profit efficiency improved from 2011 to 2018, a period generally characterized by decreasing farm net worth. Moreover, while factors such as farm size and operator age affect technical inefficiency, these variables do not have a significant effect on profit inefficiency, while farms’ net worth per acre and crop insurance indemnity payments positively affect profit inefficiency. Land tenure does not have a significant effect on technical or profit inefficiency.
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  • Sawadgo, Wendiam PM & Plastina, Alejandro, 2020. "Drivers of Profit Inefficiency in Iowa Crop Production," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304356, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea20:304356
    DOI: 10.22004/ag.econ.304356
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    1. Amin W. Mugera & Michael R. Langemeier & Andrew Ojede, 2016. "Contributions of Productivity and Relative Price Changes to Farm-level Profitability Change," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(4), pages 1210-1229.
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    3. Yeager, Elizabeth A. & Langemeier, Michael R., 2011. "Productivity Divergence across Kansas Farms," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 40(2), pages 1-11, August.
    4. Sansi Yang & C. Richard Shumway, 2016. "Dynamic Adjustment in US Agriculture under Climate Change," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(3), pages 910-924.
    5. Mugera, Amin W. & Langemeier, Michael R., 2011. "Does Farm Size and Specialization Matter for Productive Efficiency? Results from Kansas," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 43(4), pages 515-528, November.
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    8. Ray,Subhash C., 2012. "Data Envelopment Analysis," Cambridge Books, Cambridge University Press, number 9781107405264.
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    Keywords

    Agricultural Finance; Productivity Analysis; Production Economics;
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