|
|
Abstract
Yeboah, O., T. Thomas, V.
Ofori-Boadu and P.E. Faulkner. 2008. Fuel prices and substitution of nitrogen
fertilizer input in irrigated corn production. JEMREST
5:151-158.
Rising fuel prices have
already started playing a crucial role in various production decisions and
the present paper examines potential effects on fertilizer use through
substitution between fuel and other inputs in a major US
agricultural product, corn. Crude oil
prices have risen from around $35 per barrel in June 2004 to over $97 per barrel in January 2008. Natural gas prices, a large component of
nitrogen fertilizer, have risen from $5.25 per mmbtu in March 2004 to over
$13.25 per mmbtu today. The share for
fuel expense has almost doubled in most agricultural regions in the country
since 2004. Fertilizer expense share
has increased by an average of 6.8%.
Outcomes of energy policy hinge on energy substitution, but there is
little consensus on substitution between energy and other inputs. This paper uses translog cost functions to
estimate the related cross price elasticities of substitution between input
pairs in a time series setting. Results indicate that the fertilizer share
especially increases as does the fuel share.
However, higher fertilizer prices have elastic own effect with enough
substitution that fertilizer spending falls with a higher price. A 10%
increase in fertilizer prices reduces the application rate by more than 20%.
|
