Drivers of Profit Inefficiency in Iowa Crop Production

Wendiam Sawadgo and Alejandro Plastina

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: In this paper, we use data envelopment analysis and a panel of Iowa farms to evaluate profit inefficiency in corn and soybean production. We find that farms have, on average, profit inefficiency scores of 89.4% in combined corn and soybean production, suggesting that profit could be increased by 89.4% if farms eliminated technical and allocative inefficiencies. Overall, profit efficiency improved from 2011 to 2018, a period generally characterized by decreasing farm net worth. Moreover, while factors such as farm size and operator age affect technical inefficiency, these variables do not have a significant effect on profit inefficiency, while farms’ net worth per acre and crop insurance indemnity payments positively affect profit inefficiency. Land tenure does not have a significant effect on technical or profit inefficiency.

Date: 2020-01-01
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Working Paper: Drivers of Profit Inefficiency in Iowa Crop Production (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:202001010800001056

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