Analysis of the Soybean-to-Corn Price Ratio and its Impact on Farmers’ Planting Decision-Making in Indiana

In Indiana agricultural land is used mostly for corn and soybean harvesting. Rotated corn is a common practice, but in recent years, essentially due to the “ethanol boom” and increased profitability of corn production, many farmers have switched to continuous corn. Corn price increase affects the soybean-to-corn (STC) ratio, however, it is hypothesized that over time market effects will be felt, and return the ratio to its stable range. The threshold autoregressive model is used to analyze the monthly time series of STC ratio in Indiana. Results suggest that exogenous shocks will not have permanent effect on the STC price ratio, but will require, however, a reasonably long time to die out. c ©Ubilava, David. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. ∗David Ubilava is Graduate Research Assistant and Edmund Muskie PhD Fellow at the Department of Agricultural Economics, Purdue University. Add: 403 W. State St., West Lafayette, IN 47907-2056. Phone: +1 765 409 3336