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Abstract

This research identifies and quantifies the impact of biophysical and economic variables on Kansas grain supply for the period 1977- 2007. This research estimates total supply response by aggregating yield and acreage responses. Previous methods have effectively analyzed the response of crop supply through either acreage or yield responses. However, the method proposed in this research incorporates both yield and acreage response to various production variables through recursive modeling. The results include the negative impact of acreage expansion on aggregate yields and thus the impact on total supply. The results also show that previous methods underestimate supply response elasticities by as much as 97%. Furthermore, this research estimates supply response to estimated changes in climate temperatures and precipitation. Results show the importance of incorporating both responses in estimating supply as acreage and yields are constantly changing, sometimes in contradictory ways. This research extends previous research on producer price expectations. The results show strong statistical significance of both futures and basis prices affecting total supply, which indicates both prices are instrumental in estimating expectations. Understanding these results is important given the volatility in current agricultural commodity markets.

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