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Staff Publications

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    'Staff publications' is the digital repository of Wageningen University & Research

    'Staff publications' contains references to publications authored by Wageningen University staff from 1976 onward.

    Publications authored by the staff of the Research Institutes are available from 1995 onwards.

    Full text documents are added when available. The database is updated daily and currently holds about 240,000 items, of which 72,000 in open access.

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Record number 435331
Title Effects of volatile output prices on land-use change in agriculture
Author(s) Boere, E.J.M.
Source In: Abstract Book- WASS PhD Day 2012, 10 May 2012, Wageningen, the Netherlands. - Wageningen UR, WASS - p. 16 - 16.
Event WASS PhD DAY 2012, Wageningen, 2012-05-10/2012-05-10
Department(s) Agricultural Economics and Rural Policy Group
WASS
Publication type Abstract in scientific journal or proceedings
Publication year 2012
Abstract Volatile output prices lead to fluctuating shadow prices (profitability) of agricultural land, and therefore may impact land use decisions. For a producer, shadow price of land is the marginal contribution of land to profit. Maximum profit, assuming no constraints on land use, is where shadow price is equal among alternative land uses. Equal shadow prices only account for risk-neutral producers and for expected output prices because the producer does not know the price for the product at the moment the production decision is made. Production decisions with a high expected output price and low expected profit fluctuations, therefore, are preferred by a risk-averse producer. A risk-averse producer, faced with increased volatility in output price, is likely to switch either to less volatile production activities or to stop producing. Land allocation decisions have either been estimated by a system of output supply, input demand and land-use equations or by land response equations. This paper used the latter approach to build a framework that determines optimal allocation of land among agricultural activities. The objective was to assess the effect of volatile agricultural output prices on changes in agricultural land-use over the past decade in the Netherlands. The Netherlands was divided for this purpose into 66 agricultural regions, using yearly data from 2000 through 2009. For each year and each region, the share in total land use for 10 land uses was calculated, using Dutch agricultural census data. Land share equations were econometrically estimated using panel data. Our results show significant effects of increased price volatility on land use. Share equations show larger decreases in land allocated to land uses that experience larger volatility than to land uses that experience less volatility. Producers’ output responses, therefore, were consistently affected by risk-averse behaviour and increased volatility of prices among land uses.
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