Impact Of Switchgrass Production On Oklahoma Hay Markets

Abstract

Ordinary Least Square estimation was used to determine the inverse demand function for hay in Oklahoma with price of hay as the dependent variable and time trend, hay production, price of soybean, and beef cow inventory as the independent variables. Linear Programming model was used to determine the production options between hay and switchgrass based on the economic returns of each subject to a land constraint. Oklahoma hay price is fairly stable and unresponsive to the amount of hay produced, partly because some farmers may be producing their own hay to feed their livestock. Oklahoma hay price partly depend on the amount of hay produced in the surrounding states of Oklahoma. Finally, switchgrass production could be more profitable than hay production even at a point when switchgrass price is below the price of hay because switchgrass requires less land to produce the same unit as hay, and switchgrass has lower production cost than hay.