Worldwide Acreage and Yield Response to International Price Change and Volatility: A Dynamic Panel Data Analysis for Wheat, Rice, Corn, and Soybeans

American Journal of Agricultural Economics 2015; doi: 10.1093/ajae/aav013

Posted: 9 May 2015

See all articles by Mekbib Haile

Mekbib Haile

University of Bonn - Center for Development Research (ZEF)

Matthias Kalkuhl

University of Bonn - Center for Development Research (ZEF); Potsdam-Institut für Klimafolgenforschung (PIK)

Joachim von Braun

University of Bonn - Department of Economic and Technological Change

Date Written: April 15, 2015

Abstract

This article estimates a worldwide aggregate supply response for key agricultural commodities — wheat, rice, corn, and soybeans — by employing a newly-developed multi-country, crop-calendar-specific, seasonally disaggregated model with price changes and price volatility applied accordingly. The findings reveal that, although higher output prices serve as an incentive to improve global crop supply as expected, output price volatility acts as a disincentive. Depending on the crop, the results show that own-price supply elasticities range from about 0.05 to 0.40. Output price volatility, however, has negative correlations with crop supply, implying that farmers shift land, other inputs, and yield-improving investments to crops with less volatile prices. Simulating the impact of price dynamics since 2006, we find that price risk has reduced the production response of wheat in particular — and to a lesser extent, rice — thus dampening price incentive effects. The simulation analysis shows that the increase in own-crop price volatility from 2006-2010 dampened yield by about 1-2% for the crops under consideration.

Keywords: Food prices, price volatility, global supply response, staple food commodities, supply elasticity

JEL Classification: O11, O13, Q11, Q13, Q18, Q24

Suggested Citation

Haile, Mekbib and Kalkuhl, Matthias and von Braun, Joachim, Worldwide Acreage and Yield Response to International Price Change and Volatility: A Dynamic Panel Data Analysis for Wheat, Rice, Corn, and Soybeans (April 15, 2015). American Journal of Agricultural Economics 2015; doi: 10.1093/ajae/aav013 . Available at SSRN: https://ssrn.com/abstract=2604015

Mekbib Haile (Contact Author)

University of Bonn - Center for Development Research (ZEF) ( email )

Walter-Flex-Str. 3
Bonn, NRW 53113
Germany

Matthias Kalkuhl

University of Bonn - Center for Development Research (ZEF) ( email )

Walter-Flex-Str. 3
Bonn, NRW 53113
Germany

Potsdam-Institut für Klimafolgenforschung (PIK) ( email )

Telegraphenberg
Potsdam, Brandenburg 14412
Germany

Joachim Von Braun

University of Bonn - Department of Economic and Technological Change ( email )

Walter-Flex-Str. 3
Bonn, 53113
Germany

Register to save articles to
your library

Register

Paper statistics

Abstract Views
169
PlumX Metrics