Optimum Resource Allocation for Selected U. S. Agricultural Commodities

The commercial farm problem is often defined as a disequilibrium condition in which agriculture's productive capacity exceeds utilization at socially acceptable prices. However, commodity supplies are determined by the level and composition of resources committed to their production. While the commercial farm problem surfaces as a production-utilization disequilibrium, basically it is a resource imbalance problem.Resource imbalances in agriculture result in an inefficient organization of the industry. To be efficient, resource use in the farm industry must satisfy three conditions:1. the allocation of resources among agricultural and non-agricultural products must result in output and price levels that reward identical resources equally,2. the use of resources in agriculture must result in a product mix geared to the relative demands for different products, and3. each farm product must be produced at minimum factor cost.The research reported in this paper focuses on the last efficiency condition. More specifically, we estimate the level and combination of resources for historical production levels of feed grains, wheat, soybeans, cotton and tobacco that minimize factor cost.