Profit Patterns Across American Agriculture

By: Blank, Steven C.; Erickson, Kenneth W.; Moss, Charles B.


Blank, Steven C.; Erickson, Kenneth W.; Moss, Charles B., Profit Patterns Across American Agriculture, Journal of Agricultural and Resource Economics, Volume 30, Issue 2, August 2005, Pages 205-230

To remain viable, agriculture in each location must offer returns that are competitive with those from alternative investments and sufficient to cover producers' financial obligations. Economic theory says that rates of return converge over time as resources flow into more-profitable industries and out of less-profitable industries, causing factor price changes. Both traditional growth and trade theories say factor markets will adjust to equalize commodity returns over time. This study examines spatial relationships in agriculture's profitability over time. Results show temporal and spatial convergence of returns consistent with trade and development theories. However, there are profit patterns unique to state/regional agriculture, raising policy implications.