Does a Rising Biofuels Tide Raise All Boats? A Study of Cash Rent Determinants for Iowa Farmland under Hay and Pasture

Abstract

Iowa's farmland consists of over 16% hay crops and pastureland, a significant portion of which is under cash rental contracts. This study investigates the comparative relationships between cash rental rates for cropped land and non-cropped land, where the latter includes hay and pastureland. We find that higher crop prices resulting from biofuel demand induces land use conversion from non-cropped land to crop production and thus bids up non-cropped land rents. Compared with changes in cropped land cash rents, non-cropped farmland rents could increase by a higher percentage. Non-cropped land cash rental rates are largely determined by crop and feeder cattle prices, population density, soil quality, and proportion of non-cropped land in a specific area. A primary effect of ethanol subsidies is the redistribution of income between corn growers and livestock producers, whereby higher livestock feed costs together with increasing hay and pastureland cash rents harm the dairy and feedlot beef sectors. Our study shows that, because of the positive effect on rents, the policies have an indeterminate effect on landowners operating in the cow-calf sector.

Initial nitrous oxide, carbon dioxide, and methane costs of converting conservation reserve program grassland to row crops under no‐till vs. conventional tillage

“…Since then, enrolled land had decreased to~12 million ha in 2012, and an additional 4.4 million ha of land are in CRP contracts that will expire between 2013 and 2018 (Farm Service Agency (FSA), 2012). Higher prices for corn (Zea mays L.) and other crops and expanded biofuel production are expected to induce farmers to return CRP land to grain production (Du et al, 2008;Secchi et al, 2009). Many environmental benefits may subsequently be lost.…”

Where does all the biofuel go? Fuel efficiency gains and its effects on global agricultural production

“…Their estimates are based on a meta-analysis reviewing 29 published studies. Higher commodity prices also led to an increase in land values especially in the U.S. Midwest (Du et al, 2008;Blomendahl et al, 2011). Roberts and Schlenker (2013) also argue that the economic development in Asia led to commodity price increases between 2005 to 2008.…”

Impact of Ethanol Plant Location on Corn Revenues for U.S. Farmers

“…The impact and duration of an ethanol plant location or ethanol production capacity on local corn markets can be diverse. Previous studies provide varying results on how ethanol plant location impact local corn supply [11][12][13], farmers' cropping decisions [14], and local corn market prices [4,5,15,16]. Upon closer examination of data from the Agricultural Resource Management Survey (ARMS) counties with an ethanol plant generally receive higher revenues than counties without, at the same corn prices (Figure 2a There is lack of consensus on how ethanol plant location and production capacity affect corn production.…”

“…Similarly, Motamed, McPhail, and Williams [12] find, in locations with previously low corn acreage, significant acreage response due to changes in the ethanol market. Du, Hennessy, and Edwards [14] show that increases in corn prices causes farmers to switch from non-cropped land to row crops (e.g., from forage crops to row crops). Distance to an ethanol plant also affects crop rotation decisions (e.g., from corn-soybean to corn-corn), allowing more corn to be produced [13].…”