Seed Corn Tournament Contracts and Excess Nitrogen Application (original) (raw)
Related papers
Contract Incentives and Excessive Nitrogen Use in Agriculture
2000
This study examines incentives for input use under tournament contracts. We analyze implications of contract design for nitrate-based environmental externalities generated by agricultural producers. Outcomes are compared from contracts awarded by tournament to those from fixed-payment contracts. Our findings show contract insecurity can distort input use. The model developed in this analysis is applied to a region of the U.S.
Agronomy Journal, 2008
All rights reserved. No part of this periodical may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage and retrieval system, without permission in writing from the publisher. N itrogen has been considered as one of the best crop-input investments that a farmer can make in terms of return on dollars spent (Pikul et al., 2005); however, N is the most expensive nutrient for growing grain crops. Bundy et al. (1999) estimated that in the 12 states of the North Central United States, at least 3.3 million tonnes of N fertilizer was applied annually to corn at a cost of $800 million. Nitrogen fertilizer is universally accepted as a key component to high corn grain yield and optimum economic return. Overapplication is more frequent since producers have an economic incentive to err more frequently in that direction. Th e cost of unneeded N fertilizer in areas of overapplication is less than the cost of lost yield potential in areas of underapplication (Scharf et al., 2005). Crop rotation has been shown to increase corn yield 5 to 30% and soybean yield from 8 to 16% compared to continuous production of either crop (
Agricultural Economics, 2000
This paper applies an option-pricing model to analyze the impact of uncertainty about output prices and expectations of declining fixed costs on the optimal timing of investment in site-specific crop management (SSCM). It also analyzes the extent to which the level of spatial variability in soil conditions can mitigate the value of waiting to invest in SSCM and influence the optimal timing of adoption and create a preference for custom hiring rather than owner purchase of equipment. Numerical simulations show that while the net present value (NPV) rule predicts that immediate adoption is profitable under most of the soil conditions considered here, recognition of the option value of investment indicates that it is preferable to delay investment in SSCM for at least 3 years unless average soil quality is high and the variability in soil quality and fertility is high. The use of the option value approach reveals that the value of waiting to invest in SSCM raises the cost-share subsidy rates required to induce immediate adoption above the levels indicated by the NPV rule.
Optimal Crop Choice, Irrigation Allocation, and the Impact of Contract Farming
T he changing climate and concerns over food security are prompting a new look at the supply chain reliability of products derived from agriculture, and the potential role of contract farming as a mechanism to address climate and price risk while contributing toward crop diversification and water use efficiency is also emerging. In this study, the decision problem of a farmer associated with allocating his land among different crops with varying water requirements is considered, given that a subset of the crops may be associated with a forward contract that is being offered by a buyer. The problem includes a decision to acquire a certain amount of irrigation water capacity prior to the season and to allocate this capacity as irrigation water to be applied during the season to each of the crops selected. Rainfall in the growing season and the market price of each crop at the end of the season are considered to be random variables. Two stochastic programming models are developed to consider facets of this problem and to understand how contracts that reduce market price uncertainty from the problem may change the farmer's decision. The structural properties of these models are discussed, and selected implications are illustrated through an application to data from the Ganganagar district in Rajas-than, India.
Sequential Investment in Site-Specific Crop Management Under Output Price Uncertainty
2001
An option-value model is developed to analyze the impacts of output price uncertainty, high sunk costs of adoption, and site-specific conditions on the optimal timing of adoption of two interrelated site-specific technologies, soil testing and variable rate technology (VRT). The model incorporates the potential for adopting these two technologies jointly or sequentially. The implications of the pattern of adoption for nitrogen pollution and for the design of a cost-share subsidy policy to accelerate the adoption of these technologies to reduce nitrogen pollution are also analyzed. Ignoring the potential for sequential adoption would tend to underpredict the adoption so soil testing and overpredict the adoption of VRT. Cost-share subsidies to induce accelerated adoption of VRT would be most effective at reducing nitrogen pollution if targeted toward fields with relatively high spatial variability in soil quality or soil fertility, and either low average soil quality or low average so...
The environmental effects of crop price increases: Nitrogen losses in the U.S. Corn Belt
Journal of Environmental Economics and Management, 2014
High corn prices cause farmers to plant more corn on fields that were planted to corn in the previous year, rather than alternating between corn and soybeans. Cultivating corn after corn requires greater nitrogen fertilizer and some of this nitrogen flows into waterways and causes environmental damage. We estimate the effect of crop prices on nitrogen losses for most fields in Iowa, Illinois, and Indiana using crop data from satellite imagery. Spatial variation in these high-resolution estimates highlights the fact that the environmental effects of agriculture depend not only on what is grown, but also on where and in what sequence it is grown. Our results suggest that the change in corn and soybean prices due to a billion gallons of ethanol production expands the size of the hypoxic zone in the Gulf of Mexico by roughly 30 square miles on average, although there is considerable uncertainty in this estimate.