The impact of high crop prices on the use of agro-chemical inputs in France: A structural econometric analysis

World crop prices increased dramatically during the period 2006-2009. In this context of high crop prices, farmers may tend to increase the amount of agro-chemical inputs they use in order to increase yield and manage risks related to crop production. These practices could, however, have potentially adverse environmental effects in terms of loss of biodiversity and increased water and air pollution. This study uses a structural econometric model to measure the effects of crop prices on demand for agro-chemical inputs and land allocation. We study individual farms observed in the period 2006-2009 in the French Département de la Meuse. We estimate a multi-output profit function using farm-level panel data. Our results show that an increase in the rapeseed price, which is the principal feedstock for the production of biodiesel in France, has a positive and significant effect on demand for agro-chemical inputs. Higher rapeseed prices also induce an expansion in the land area allocated to rapeseed at the expense of barley and set-aside. These results suggest that changes in the rapeseed price, partly driven by biofuel policies, induce changes in demand for chemicals and land allocation which may have potentially adverse effects on the environment.