Acreage Decisions Under Risk: The Case of Corn and Soybeans

An acreage supply response model is developed under expected utility maximization. The resulting framework is used to specify and estimate a system of risk-responsive acreage equations for corn and soybeans in the U.S. Particular attention is given to the truncation effects of government price supports on the distribution of corn and soybean prices. Also, a wealth variable is included in the acreage equations. The empirical results indicate that risk and wealth variables play an important role in cornsoybean acreage decisions. The analysis also shows that cross-commodity risk reduction is important in acreage allocation decisions