ZEF-Discussion Papers on Development Policy No. 175

Understanding how producers make decisions to allot acreage among crops and how decisions about land use are affected by changes in prices and their volatility is fundamental for predicting the supply of staple crops and, hence, assessing the global food supply situation. The innovations of the present paper are estimates of monthly (i.e. seasonal) versus annual global acreage response models for four staple crops: wheat, soybeans, corn and rice. We focus on the impact of (expected) crop prices, oil and fertilizer prices and market risks as main determinants for farmers’ decisions on how to allocate their land. Primary emphasis is given to the magnitude and speed of the allocation process. Estimation of intra-annual acreage elasticity is crucial for expected supply and for input demand, especially in the light of the recent short-term volatility in food prices. Such aggregate estimates are also valuable to verify whether involved country-specific estimations add up to patterns that are apparent in the aggregate international data. The econometric results indicate that global crop acreage responds to crop prices and price risks, input costs as well as a time trend. Depending on respective crop, short-run elasticities are about 0.05 to 0.25; price volatility tends to reduce acreage response of some crops; comparison of the annual and the monthly acreage response elasticities suggests that acreage adjusts seasonally around the globe to new information and expectations. Given the seasonality of agriculture, time is of the essence for acreage response: The analysis indicates that acreage allocation is more sensitive to prices in northern hemisphere spring than in winter and the response varies across months. JEL classifications: O11, O13, Q11, Q13, Q18, Q24