Estimating crop yield supply responses to be used for market outlook models: Application to major developed and developing countries

The evolution of yields is one of the driving factors explaining crop supply growth. Part of this is explained by how yields react to prices, though there is a lot of uncertainty about the price-responsiveness of yields. Using information from various sources such as agronomy, economic theory and economic literature an in-depth assessment of yield price responsiveness is made. The result is used as a set of prior-information, which is subsequently taken into account to re-estimate yield price supply responses for 20 main crops in major producing developed and developing countries, using OLS and Mixed Estimation (ME) approaches. The outcomes indicate that price-responsiveness is usually low. Moreover, the ME results are different than the current estimates used in the OECD-FAO's market outlook model, showing stronger differentiation among crops/countries. The Mixed Estimation is found useful to overcome typical problems encountered when estimating yield-price responsiveness, such as violations of economic theory, insignificance of estimated parameters and inconsistencies with agronomic knowledge regarding the size of the estimated responses.