Crop Price and Land Use Change: Forecasting Response of Major Crops Acreage to Price and Economic Variables in North Dakota

Abstract

The objective of this study is to examine land use change for cropping systems in North Dakota. Using Seemingly Unrelated Regression with full information maximum likelihood estimation method, acreage forecasting models for barley, corn, oats, soybean, and wheat were developed to examine the extent to which farmers’ expectations of prices and costs affect their crop choices. The results of the study show that farmers’ decision for acreage allocation is varied across the crops depending on how responsive they are to price, cost and yield of its own and competing crops. Substitutability and complementarity relationship of crops in the production have positive effect on crops selection when facing price, cost, and yield changes. In addition, the results revealed that expected prices have little effect on acreage response compared to expected costs and yield variables in most of the crop models.