Local Geography of Row-Crop Quality Land and Cropland Cash Rental Rates

While farmland rental markets are likely to be spatially differentiated, the fine spatial structure of row-crop quality land should have a significant effect on cash rent determination. This study provides a rigorous empirical understanding of the effect of land spatial heterogeneity on cash rental rates. The lacunarity index is employed to measure spatial heterogeneity of land quality, which is built directly upon a soil quality measure, the land parcel’s corn suitability rating index (CSR). A panel data random effect model is applied on annual survey data of farmland cash rental rates of Iowa for 1987-2009. As expected, land spatial heterogeneity has a statistically significant and negative effect on local cash rent rates. The effect’s origin warrants further research.land spatial heterogeneity, rental market, Agricultural Finance, C5, G1, Q1,

Inside the Black Box: Price Linkage and Transmission Between Energy and Agricultural Markets

This study addresses the complex relationship between energy and agricultural markets—represented by corn, ethanol, and gasoline prices—particularly in light of the growth in biofuel production. Contemporaneous price response and transmission of market shocks are investigated in a simultaneous-equation system to disclose fundamental driving forces before and after the development of large-scale ethanol production. We use a dynamic conditional correlation multivariate GARCH model to demonstrate a strengthening relationship among corn, ethanol, and gasoline prices. We identify a structural change point at March 25, 2008 using the test by Bai and Perron (2003). The strengthened market relationship is further illustrated by variance decomposition based on a structural VAR model.corn, ethanol, gasoline, structural break, Structural VAR, GARCH, Agricultural and Food Policy, Demand and Price Analysis, Research Methods/ Statistical Methods, Resource /Energy Economics and Policy, C32, Q11, Q4,

Impact of Ethanol Production on U.S. and Regional Gasoline Prices and On the Profitability of U.S. Oil Refinery Industry

Using pooled regional time-series data and panel data estimation, we quantify the impact of monthly ethanol production on monthly retail regular gasoline prices. This analysis suggests that the growth in ethanol production has caused retail gasoline prices to be $0.29 to$0.40 per gallon lower than would otherwise have been the case. The analysis shows that the negative impact of ethanol on gasoline prices varies considerably across regions. The Midwest region has the biggest impact, at $0.39/gallon, while the Rocky Mountain region had the smallest impact, at$0.17/gallon. The results also indicate that ethanol production has significantly reduced the profit margin of the oil refinery industry. The results are robust with respect to alternative model specifications.crack spread, crude oil prices, ethanol, gasoline prices, Resource /Energy Economics and Policy,

Determinants of Iowa Cropland Cash Rental Rates: Testing Ricardian Rent Theory

Based on the Ricardian rent theory, this study employs the variable profit function to analyze the determinants of Iowa cropland cash rental rates using county-level panel data from 1987 to 2005. Accounting for spatial and temporal autocorrelations, responses of local cash rental rates to changes in output prices and other exogenous variables are estimated. We find that Iowa cash rental rates are largely determined by output/input prices, soil quality, relative location, and other county-specific factors. Cash rents go up by $79 for a$1 increase in corn price in the short run. The marginal value of cropland quality, as represented by row-crop corn suitability rating index, is about $1.05. Ethanol plants are not found to have a significant local effect on cash rental rates, impacting local rental markets mainly through the national futures price. Scale of the local livestock industry and adoption of genetically engineered crops have significant impacts on local cash rental rates. In addition, changes in crop output prices are found to have long-run effects on cash rental rates. The long-run change in cash rents is approximately$109-$114 for a$1 change in corn price and is reached in about four years. Our research may be viewed as a test of the Ricardian rent theory. We find limited support for the theory.Land Economics/Use,

Speculation and Volatility Spillover in the Crude Oil and Agricultural Commodity Markets: A Bayesian Analysis

This paper assesses the roles of various factors influencing the volatility of crude oil prices and the possible linkage between this volatility and agricultural commodity markets. Stochastic volatility models are applied to weekly crude oil, corn and wheat futures prices from November 1998 to January 2009. Model parameters are estimated using Bayesian Markov chain Monte Carlo methods. The main results are as follows. Speculation, scalping, and petroleum inventories are found to be important in explaining oil price variation. Several properties of crude oil price dynamics are established including mean-reversion, a negative correlation between price and volatility, volatility clustering, and infrequent compound Poisson jumps. We find evidence of volatility spillover among crude oil, corn and wheat markets after the fall of 2006. This could be largely explained by tightened interdependence between these markets induced by ethanol production.Gibbs sampling, Merton jump, leverage effect, stochastic volatility, Demand and Price Analysis, Financial Economics, Resource /Energy Economics and Policy, G13, Q4,

Are Crop Yield Distributions Negatively Skewed? A Bayesian Examination

Crop Production/Industries,

The Impact of Biofuels Policy on Agribusiness Stock Prices

Corn markets are important for many industries. These include the seed, fertilizer, meat production/processing and agricultural machinery sectors, all of which are highly concentrated. Oligopoly theory suggests that corn input and field equipment suppliers likely benefit from policies that support corn markets, such as U.S. biofuels policy, while meat companies likely lose. This study investigates the impact of biofuels policy on U.S. agribusiness stock prices. Corn futures prices are found to have a structural change in November 2006, consistent with the expansion of U.S. biofuels policy support. A linear two-factor (S&P500 and corn prices) equilibrium asset pricing model is estimated on two subsamples, one before and one after the estimated change point. Conditional heteroskedasticity in stock returns is accounted for using a GARCH(1,1) model. In the more recent period, corn price increases are found to have positive effects on excess stock returns for seed, fertilizer and machinery companies, while the impact on meat companies is negative. The results may be interpreted as evidence that crop input suppliers gain from U.S. biofuels policies while meat processors lose.Biofuels policy, excess stock returns, GARCH effect, linear factor model., Agribusiness, Agricultural and Food Policy, Agricultural Finance, D43, L13, Q14,