Author:
Adelaja Adesoji O.,Miller Tracy,Taslim Mohammad
Abstract
The role of land values in the dairy industry of an urban-influenced region is investigated by estimating a dairy herd equation based on pooled cross-section and time-series data from counties in New Jersey, Pennsylvania, and New York. The use of cross-terms between hypothesized causal variables and a dummy variable capturing the effect of location allowed the estimation of the differences across states in the effects of milk, feed, and land prices. Results confirm the important role of rising land values in the decline of the dairy industry in the tri-state area, and suggest greater vulnerability of dairy enterprises in urban-influenced areas to rising adverse economic forces. The adverse effects of declining milk prices and higher land values are greatest in New Jersey. The results support the notion that programs such as price support, farmland preservation, farmland assessment, and right-to-farm may have to be maintained in order to retain dairy farms at the urban fringe, where land values are rising rapidly.
Publisher
Cambridge University Press (CUP)
Subject
Economics and Econometrics,Agronomy and Crop Science
Reference31 articles.
1. Perez A. 1994. “Changing Structure of U.S. Dairy Farms.” Agricultural Economic Report no. 690. USDA-ERS.
2. Economic Change and Rural-Urban Land Conversions
3. The standard practice in the dairy literature is to use feed price as the proxy for the price of dairy herds, the primary capital input in dairy. The reasons are: (1) feed and cows are complementary, (2) feed cost is typically 25% to 50% of total production cost, (3) as a determinant of cow demand, feed price tends to overshadow capital cost or interest rate, both of which represent the price of acquiring additional herds. Interest rate is not explicitly accounted for in this model for these reasons.
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