Year of Publication

2017

Degree Name

Master of Science (MS)

Document Type

Master's Thesis

College

Agriculture, Food and Environment

Department

Agricultural Economics

First Advisor

Dr. Michael R. Reed

Abstract

The United States is the leading producer and exporter of corn and soybeans in the world. The United States exports 20% of the world’s corn and 30% of soybeans in a typical year (USDA, ERS). The U.S., being the top producer and exporter of these commodities, is also confronting major rivals such as Argentina, Brazil, and Ukraine, which are increasing their exports and causing the U.S. to lose some of its market share. In order to stop this decline in market share, the U.S. can adopt and implement different policies to manage resources and employ advanced technology more effectively.

In this study, we empirically estimate the export demand function of U.S. corn and soybeans to the top four export destinations: China, Japan, European Union, and Mexico in the current context of energy and agriculture linkages and production of ethanol from corn. A log-linear, panel data equation is used to estimate the U.S. corn and soybeans export demand function. Own price, cross price, income and exchange rate elasticities are estimated econometrically. Data for the U.S. and its top four importer countries were gathered for the 1980-2012 period. A Hausman test implies that a random effects estimator is better for the estimations.

Elasticity analysis indicates that U.S. corn demand is elastic to own price, cross price, income and poultry inventory, while inelastic to real exchange rate and pig inventory. The positive cross price elasticity reveals that corn and soybeans are substitutes in these countries. Conversely elasticity analysis for the U.S. soybean demand shows elastic cross price, real exchange rate, and pig and poultry inventory effects, while inelastic own price and income effects. Consequently, for the U.S. to gain more international market share, U.S. corn and soybean producers need to take advantage of their advanced technology and high management skills to increase quality and have more competitive pricing compared to rivals. The U.S. can gain more market share by employing better regulation to increase the quality of products, and provide incentives to U.S. farmers and exporters that could help boost their advantages in a highly competitive international environment. Higher quality and more product differentiation could help in this regard. This could help U.S. farmers increase exports to currently existing foreign destinations and access new markets, to expand market shares.

Digital Object Identifier (DOI)

https://doi.org/10.13023/ETD.2017.166

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