Elasticities of demand for energy inputs in crop production: impact of rotation
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This study estimates the elasticities of derived demand for energy inputs for the state of Iowa using a bottom-up simulation model of farmers’ choices of crop rotation, tillage, and nitrogen fertilizer application rate. We find that as diesel prices increase, the changes towards fewer years of corn in rotations and less intensive tillage progress gradually from the lower- to the higher-quality land, and the majority of the decrease in diesel use is attributable to the crop rotation changes rather than to the reduced tillage. The results of analysis suggest that the own-price elasticity of diesel is – 0.135, and the own-price elasticity of the demand for Nitrogen fertilizer is – 0.783. The estimated marginal effects of the changes in energy prices could be used to improve the accuracy of existing, large-scale models of the U.S. energy and agricultural sectors.