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Rising Fuel Prices and the Potential of Input Substitution in US Corn Production



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Rising Fuel Prices and the Potential of Input Substitution in US Corn Production Authors Contact Information Henry Thompson Department of Agricultural Economics Rural Sociology Auburn University 309 Comer Hall Auburn AL 36849 Tel 334 844 2910 Fax 334 844 5639 Email thomps1 auburn edu Osei Agyeman Yeboah Department of Agribusiness Applied Economics Agriscience Education N C A T State University A 25 C H Moore Agricultural Research 1601 E Market St Greensboro NC Phone 336 344 7056 Fax 336 344 7658 E mail Facility 27411 oyeboah ncat edu Victor ofori Boadu Facility 27411 Department of Agribusiness Applied Economics Agriscience Education N C A T State University A 29 C H Moore Agricultural Research 1601 E Market St Greensboro NC Phone 336 256 2259 Fax 336 344 7658 E mail voboadu ncat edu Abstract Energy prices are projected to continue a slow increase over the coming decades as reserves of oil are depleted The economy will adjust to rising energy prices and the degree of substitution between energy capital and labor will determine output and factor price changes This is a proposal to examine the potential output and factor price adjustments to a doubling of energy prices focusing on core agricultural commodities Selected Symposium Paper for the AAEA Annual Meetings Long Beach CA July 23 26 2006 There is no doubt that rising diesel prices will play a role in agricultural production decisions over the coming years Outcomes of energy policies often hinge on energy substitution but there is little consensus on energy substitution As classic examples Berndt and Wood 1975 find energy a substitute for labor but a complement with capital while Griffin and Gregory 1976 find energy a substitute for both labor and capital in US manufacturing The present paper estimates energy substitution in US corn production from 1975 to 2004 in a translog cost function Cross price elasticities describe the adjustment in capital labor energy and fertilizer inputs to the price of energy as well as



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