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Supply Response Of Texas Field Crops: An Evaluation Of The Cet Linear Supply Model

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  • Shumway, C. Richard
  • Chang, A. Anne

Abstract

The constant elasticity of transformation (CET) linear supply model is adapted and evaluated in this analysis of short-run supply response of six Texas field crops. Cross-product supply elasticities are estimated and direct supply elasticities are derived. The sensitivity of estimated parameters to alternative specifications of variables inducing shifts in the production possibilities surface is examined. Shift variables considered include input level, technology, government programs, and weather. The effect of risk on supply response is also examined. The model's symmetry assumption is tested and not rejected. All of the own-price elasticities derived from the fully-specified supply model estimates have expected signs, but less than half of the alternative-product price elasticities do. Price parameter signs are quite stable, but the large number of significant risk parameters and unexpected price parameter signs challenges the general adequacy of the CET model for measuring Texas field crop supply response.

Suggested Citation

  • Shumway, C. Richard & Chang, A. Anne, 1980. "Supply Response Of Texas Field Crops: An Evaluation Of The Cet Linear Supply Model," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 5(2), pages 1-16, December.
    • Handle: RePEc:ags:wjagec:32397
    DOI: 10.22004/ag.econ.32397
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    References listed on IDEAS

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    1. Askari, Hossein & Cummings, John Thomas, 1977. "Estimating Agricultural Supply Response with the Nerlove Model: A Survey," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 257-292, June.
    2. Just, Richard E., 1974. "Econometric Analysis of Production Decisions with Government Intervention: The Case of the California Field Crops," Monographs, University of California, Davis, Giannini Foundation, number 251950.
    3. Cooper, J Phillip, 1972. "Asymptotic Covariance Matrix of Procedures for Linear Regression in the Presence of First- Order Autoregressive Disturbances," Econometrica, Econometric Society, vol. 40(2), pages 305-310, March.
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    1. Ahouissoussi, Nicolas B. C. & McIntosh, Christopher S. & Wetzstein, Michael E., 1995. "Rational Expectations Estimation of Georgia Soybean Acreage Response," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 27(2), pages 500-509, December.
    2. Ruslana Rachel PALATNIK, 2008. "Climate Change Assessment and Agriculture in General Equilibrium Models: Alternative Modeling Strategies," EcoMod2008 23800101, EcoMod.
    3. Aradhyula, Satheesh Venkata, 1989. "Policy structure, output supply and input demand for US crops," ISU General Staff Papers 198901010800009909, Iowa State University, Department of Economics.
    4. Arnade, Carlos Anthony & Cooper, Joseph, 2013. "Price Expectations and Supply Response," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150490, Agricultural and Applied Economics Association.
    5. Nieswiadomy, Michael L., 1988. "Input Substitution In Irrigated Agriculture In The High Plains Of Texas, 1970-80," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 13(01), pages 1-8, July.
    6. Shumway, C. Richard, "undated". "Economic Interrelationships in Texas Field Crop Production," Departmental Reports 256827, Texas A&M University, Department of Agricultural Economics.
    7. Meilke, K.D. & Weersink, A., 1991. "An Analysis of the Effects of Government Payments to Grain and Oilseeds Producers on Cropping Decisions," Papers 9-91, Gouvernement du Canada - Agriculture Canada.
    8. Shumway, C. Richard & Powell, Alan A., 1984. "A Critique Of The Constant Elasticity Of Transformation (Cet) Linear Supply System," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 9(2), pages 1-8, December.
    9. Shideed, Kamil H. & White, Fred C., 1989. "Alternative Forms Of Price Expectations In Supply Analysis For U.S. Corn And Soybean Acreages," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(2), pages 1-12, December.
    10. Sukcharoen, Kunlapath & Golden, Bill & Vestal, Mallory & Guerrero, Bridget, 2020. "Do crop price expectations matter? An analysis of groundwater pumping decisions in Western Kansas," Agricultural Water Management, Elsevier, vol. 231(C).
    11. Shideed, Kamil H. & White, Fred C. & Brannen, Stephen J., 1987. "The Responsiveness Of U.S. Corn And Soybean Acreages To Conditional Price Expectations: An Application To The 1985 Farm Bill," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 19(2), pages 1-9, December.

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