Modelling agricultural land use allocation in regional Australia

An analysis of the drivers of agricultural land use is important for policy makers as the issues of climate change and food security become increasingly prominent in the political landscape. This paper analyses the role of prices, total land holdings and climate on land use in Australia. The analysis relates to a unique comprehensive coverage of commodity types at a regional level. An explicit treatment of missing data and the novel use of cluster analysis is employed within a partial adjustment framework for modelling land allocation. The majority of commodity types across regions exhibit significant degrees of slow partial adjustment for land allocation, the frequency of slow adjustment is greatest with crops and livestock and weakest for vegetables. In general, relative own and cross prices, total land holdings and rainfall only have a minor impact on short-term land allocations, however numerous individual commodity/regional combinations have identified significant short-run impacts.