A new study conducted by researchers at North Carolina State University and the University of Illinois at Chicago found a statistical correlation showing that as prices increase, farmers make changes that result in higher per acre yields. Farmers also react to lower prices. The study's findings support the use of yield-price elasticity in indirect land use models, but found that commonly used models currently use factors at the low end of the actual range which underestimates real yield performance. The study assessed two dimensions of this correlation known as yield-price elasticity: first, the extent to which realized yields tend to be influenced by planting-time futures prices; and second, the potential for in-season changes responding to significant price swings. The study found that not only do farmers respond to price from season to season, they also respond to price during the season in order to optimize productivity. "Based on these findings there is no question that price has an effect on yields," stated Jay Lynch, a farmer from Humboldt, Iowa and board director for the Iowa Corn Growers Association. "And given the factors involved in achieving higher yields, such as investment in new equipment, it is likely that new, higher yields resulting from high prices are sustained even after prices drop." The study adds to the growing body of evidence that actual indirect land use effects are lower than current models indicate and...
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