Land Economics/Use, Resource /Energy Economics and Policy,

Kurkalova, Lyubov A.

Randall, Stephen

Secchi, Silvia

English

Research Papers in Economics

Land-Use Implications of the Changes in Energy Prices 
 
Lyubov A. Kurkalova*, Stephen Randall*, and Silvia Secchi** 
 
*North Carolina A&T State University 
**Southern Illinois University 
 
Selected Poster prepared for presentation at the Agricultural & Applied Economics 
Association’s 2010 AAEA, CAES & WAEA Joint Annual Meeting, Denver, Colorado, July 25- 
27, 2010. 
 
Copyright 2010 by L.A. Kurkalova, S. Randall, and S. Secchi. All rights reserved. Readers may make 
verbatim copies of this document for non-commercial purposes by any means, provided this 
copyright notice appears on all such copies. LAND-USE IMPLICATIONS OF THE CHANGES IN ENERGY PRICES
The Impact of Conflicting Economic Incentives
Lyubov A. Kurkalova
North Carolina A&T State University
Silvia Secchi
Southern Illinois University
Stephan Randall
North Carolina A&T State University
We find a significant, spatially heterogeneous increase in tillage intensity as-
sociated with the introduction of a corn stover market. Concurrent incentives 
for the adoption of conservation tillage partially alleviate the increase, but 
such a program is expected to be expensive. Our results underscore the im-
portance of coordinating the agricultural conservation policies with those that 
encourage the growth of the production of biomass for energy production. An 
extension of this study is underway to estimate the environmental impacts of 
the identified changes in cropping and tillage patterns.
CONCLUDING COMMENTS
Our study complements the large-scale studies on the effect of energy 
prices on land use generally fail to capture the full spatial heterogeneity of 
growing conditions. We find a significant, spatially heterogeneous de-
crease in tillage intensity and corn monoculture associated with the in-
crease in energy prices. It must be noted that we are investigating what 
could be termed a medium-run response of farmers to the changes in 
energy prices. We assume that farmers perceive the price change as per-
manent so that they change their profit-maximizing choices on crops to 
grow. However, we leave to future studies the consideration of the poten-
tial farm practices adjustments that may happen in the long run including, 
e.g., the wide-spread adoption of precision agriculture practices such as 
yield monitoring, GPS systems, and variable rate applicators (Miranowski, 
2005; Daberkow et al., 2007). 
FINDINGS 
Daberkow, S., D. Lambert, and W. Musser. 2007. “U.S. corn producer’s response to 
increased energy prices: evidence from producer surveys in 2001 and 2005,” West-
ern Economic Forum 6(1): 14-27.
Miranowski, J.A. 2005. “Energy consumption in US agriculture.” In J. Outlaw, K.J. 
Collins, and J.A. Duffield (Eds.), Agriculture as a Producer and Consumer of Energy, 
pp. 68-111.
Secchi S., Kurkalova L.A., Gassman P.W., and Hart C. Land use change on the in-
tensive and extensive margin in a biofuels hotspot: the case of Iowa, USA. Under 
review.
REFERENCES
ACKNOWLEDGEMENTS 
This research was made possible in part by USDA-CSREES grant 2005-51130-
02366,  USDA-NRCS Prairie Rivers RC&D grant Q6861146200, USEPA grant 
R83209401, and USDA-Rural Development grant 68-3A75-6-511.
Crop production uses a number of energy inputs: diesel fuel to power planting and 
harvesting machinery, LP gas to dry harvested crops, and nitrogen fertilizer (which 
is derived from natural gas) to supply crop nutrients. The increases in energy prices 
act as fertilizer, fuel, and LP gas taxes, thus increasing the costs of operation and 
reducing the net returns to farming for energy and/or fertilizer intensive crops. While 
recent discussions suggest that the increase in fuel prices is likely to widen the use 
of conservation tillage and lower fertilizer application rates (Daberkow et al., 2007), 
little is known about the magnitude of these responses. We assess the responsive-
ness of the compositional distribution and spatial patterns of cropping systems and 
tillage use to changes in energy prices for the state of Iowa.
RESEARCH QUESTION  DATA AND MODELS 
To capture the spatial heterogeneity of soils and crop growing conditions, we conduct 
the analysis on a grid of a field scale, with a 30 by 30 meter resolution. The GIS-
based, USDA NASS remote sensing crop cover maps for the years from 2002 to 2006 
have been combined to construct historical rotations on each of the fields in Iowa. The 
cropland data are supplemented by the GIS-based, USDA NRCS SSURGO 2.2 soils 
data, and the Corn Suitability Rating (CSR) that measures land’s productivity in crop 
production. Environmental vulnerability of cropland is measured by the Highly Erodible 
Land (HEL) code. Details on data construction are provided in Secchi et al. (under 
review). While most of Iowa cropland is of high productivity, most of the presently 
cropped HEL is of medium productivity (Figure 1).
 
We assume that farmers maximize expected profits by choosing crop rotations and till-
age intensity, and simulate the field-by-field choices by comparing multiple-year cumu-
lative expected net returns.
 
Cost estimates are based on crop production and corn stover collection budgets devel-
oped by ISU extension (http://www.extension.iastate.edu/agdm). We consider three 
crop rotations that are currently dominating state cropland: continuous corn (CC), corn-
soybeans (CS), and corn-corn-soybeans, and three tillage systems: conventional, 
mulch, and no-till. The latter two tillage systems are conventionally termed conservation 
tillage.
Given the current instability in crop markets, we assume crop prices to be as in the 
Chicago Board of Trade futures contracts for the fall of 2010 traded in the summer of 
2008, $3.9/bushel and $9.8/bushel, for corn and soybeans, respectively. 
The simulations assume that the prices of all energy inputs considered (diesel fuel, 
LP gas, and fertilizer) are positively correlated. We consider diesel prices ranging 
from $2/gallon to $6/gallon. The outcome of each scenario is the prediction of rotation 
and tillage system, for each of the 30 by 30 meter fields currently cropped in the state.
SCENARIOS 
Figure 2 Predicted rotation and tillage at $2/gal diesel price Figure 3 Predicted rotation and tillage at $6/gal diesel price
Figure 1 Distribution of Iowa cropland by soil erodibility and soil productivity

Land-Use Implications of the Changes in Energy Prices

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