The Role of Yield-Price Correlation in Setting Optimal N Application Rates for Corn Production
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Recent natural gas price increases have resulted in acutely higher fertilizer prices. Profit and environmental concerns have increased interest in identifying optimal nitrogen application rates. Previous estimates of the profit maximizing nitrogen rate (PMNR) have been estimated assuming that price is fixed and exogenous of yield. We construct a model in which price is correlated to yield shocks, and estimate the PMNR. We find that incorporating correlation information systematically affects the PMNR, however, these effects are small.