ENERGY-RELATED INPUT DEMAND BY CROP PRODUCERS

response functions imply that fanners who are less risk-
averse use (directly and/or indirectly) more energy.
For example, reducing the risk-aversion coefficient
associated with δ = 1.0 by 0.1 increases estimated en-
ergy consumption by about 27 million BTU’s. Reduc-

Table 5. Estimated Coefficients for Crop-Producer
Energy Demand Functions, by Type of Risk-Aversion
Measure

Table 6. Estimated Elasticities of Energy Demand
for a Risk-Averse Farmer

ing the risk-aversion coefficient associated with δ =
2.0 by 0.01 implies an increase in energy consumption
of 65 million BTU’s. Since these changes in risk-aver-
sion coefficients do not necessarily represent equiva-
lent changes in risk preferences, the associated changes
in energy consumption are not directly comparable.
However, regardless of the measure of risk aversion,
the results suggest that farmers with lower degrees of
risk aversion will produce crops that use more energy
per acre.

Less risk-averse farmers would also choose crop
mixes which yield higher expected net incomes. The
model used in this study makes it possible to relate
changes in energy consumption to changes in expected
net and gross income for movements along the E-V
frontier. Reducing the risk aversion coefficient asso-
ciated with δ = 1.0 by 0.1 not only increases es-
timated energy consumption by about 27 million
BTU’s, it also increases expected income by about
$1,980. Approximately 13,800 additional BTU’s are
used per additional dollar of expected net income. The
elasticity of energy consumption with respect to ex-
pected net returns is about 0.78, which suggests (for
this portion of the E-V frontier) that lower degrees of
risk aversion result in less energy use per dollar of ex-
pected net income.

On the other hand, energy consumption per dollar of
expected gross receipts increases slightly in this region
of the E-V frontier. Reducing the risk aversion coef-
ficient by 0.1 increases total receipts by about $2,030.
The elasticity of BTU consumption with respect to to-
tal expected receipts is 1.07.

SUMMARY

This study uses E-V analysis to examine the effect
of alternative energy and crop prices on the energy
consumed (directly and indirectly) by risk-averse crop
producers. Expressingfuels, chemicals, and fertilizers
in terms of their BTU equivalents allows aggregating
these energy-related inputs. Energy demand functions
are estimated from the solutions associated with many
price and risk-aversion coefficient combinations.

Quadratic approximations of the energy demand
functions are presented. For input and output price lev-
els close to those prevailing in the recent past, energy
demand by crop producers is moderately responsive to
changes in energy price levels. Energy consumption
elasticities with respect to crop prices are generally

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