Economic Analysis of Nitrogen Recommendations in an Environment of Increased Price Volatility.

Our study examined the effect that decision-maker risk preferences have on nitrogen application rate decisions to corn in Indiana.  Previous research suggests that uncertainty increases the rate at which farmers apply nitrogen fertilizer.  With increased volatility that has arisen in crop and input prices since the Energy Policy Act of 2005, it is important to once again examine the effect uncertainty has on nitrogen application rates.  This study found that the distributions of input prices and outputs (net gain/loss, break even corn price) differ substantially in the five years prior to 2005 versus the five years after 2005.  This study also finds that this change in price distribution resulted in differences in choices that would be expected from decision-makers.