Lei Cui

Date of Award

2001

Level of Access Assigned by Author

Open-Access Thesis

Degree Name

Master of Science (MS)

Department

Resource Economics and Policy

Advisor

James D. Leiby

Second Committee Member

Mario F. Teisl

Third Committee Member

Kathleen P. Bell

Abstract

The USDA Agricultural Research Service is examining the feasibility and profitability of growing Canola and soybeans in potato rotation systems. The study described in this thesis is part of this research program. The primary objective of this research is to look for economic factors that influence soybean and Canola prices. Canola is a new oilseed crop to the U.S. Since the Food and Drug Administration approved its use as edible food, Canola production in the US. has increased tremendously. Because only 11 years of data are available on Canola consumption and production in the U.S., it is difficult to empirically analyze Canola prices. Fortunately, we find that Canola and soybean prices are highly correlated. As a result, if we can explain the determinants of soybean prices, we can discover information about the determinants of Canola prices. In this study, we concentrate on soybean price movements, make inferences about Canola prices. We establish a simultaneous model of the U.S. soybean market and study factors affecting soybean prices within this economic structure. Our model is based primarily on the USDA CROPS Model developed by Houck, et al. Our results indicate that soybean price is positively affected by a time trend variable, expected wholesale price of corn oil, expected real expenditures spent on food, expected variable cost of growing soybeans, and one-year lagged farm-level corn price, but negatively affected by one-year lagged soybean price, one-year lagged wheat price, and one-year lagged acreage of soybeans. Using the Canola and soybean price relationship, we infer how these economic factors affect Canola price. With the reduced form, we can forecast the future price of both Canola and soybeans.

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