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The Influence of Commodity Programs on Acreage Response to Market Price: With an Illustration Concerning Rice Policy in the United States

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  • Jeffrey D. McDonald
  • Daniel A. Sumner

Abstract

Farm programs influence the parameters of typically estimated supply functions. We develop and apply an approach that uses detailed information about farm program incentives and constraints to identify underlying structural acreage response parameters when the data reflect behavior under complex government commodity programs. We illustrate the approach with data on rice acreage response to market price in the United States. For U.S. rice, estimates that fail to appropriately incorporate the program rules under which market data were generated are three to four times smaller than the structural parameters that are useful for most policy analysis or projections under alternative policies. Copyright 2003, Oxford University Press.

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  • Jeffrey D. McDonald & Daniel A. Sumner, 2003. "The Influence of Commodity Programs on Acreage Response to Market Price: With an Illustration Concerning Rice Policy in the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 857-871.
  • Handle: RePEc:oup:ajagec:v:85:y:2003:i:4:p:857-871
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    File URL: http://hdl.handle.net/10.1111/1467-8276.00493
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    Cited by:

    1. Boussios, David & Barkley, Andrew, 2014. "Producer Expectations and the Extensive Margin in Grain Supply Response," Agricultural and Resource Economics Review, Cambridge University Press, vol. 43(03), pages 335-356, December.
    2. Shepherd, Ben, 2006. "Estimating Price Elasticities of Supply for Cotton: A Structural Time-Series Approach," MPRA Paper 1252, University Library of Munich, Germany.
    3. Alston, Julian M. & Sumner, Daniel A. & Balagtas, Joseph Valdes & Brunke, Henrich, 2004. "Economic Implications Of The Australia-U.S. Free Trade Agreement For U.S. Dairy Markets And Domestic Dairy Farm Programs," 2004 Annual meeting, August 1-4, Denver, CO 20164, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Alston, Julian M. & Balagtas, Joseph Valdes & Brunke, Henrich & Sumner, Daniel A., 2006. "Supply and demand for commodity components: implications of free trade versus the AUSFTA for the US dairy industry," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(2), June.
    5. Outlaw, Joe L. & Richardson, James W. & Fumasi, Roland J., 2006. "Lifting the Fruit and Vegetable Cropping Restriction: Potential Impacts on Cropping Preference in the Lower Rio Grande Valley, Texas," 2006 Annual Meeting, February 5-8, 2006, Orlando, Florida 35373, Southern Agricultural Economics Association.
    6. Lin, William W. & Lucier, Gary, 2008. "Effects of Marketing Loans on U.S. Dry Peas and Lentils: Supply Response and World Trade," Economic Research Report 56454, United States Department of Agriculture, Economic Research Service.
    7. Sumner, Daniel A & Antle, John M & Gardner, Bruce L, 2004. "Contributions of D. Gale Johnson to the Economics of Agriculture," Economic Development and Cultural Change, University of Chicago Press, vol. 52(3), pages 659-679, April.
    8. Ahearn, Mary Clare & Collender, Robert N. & Diao, Xinshen & Harrington, David H. & Hoppe, Robert A. & Korb, Penelope J. & Makki, Shiva S. & Morehart, Mitchell J. & Roberts, Michael J. & Roe, Terry L. , 2004. "Decoupled Payments In A Changing Policy Setting," Agricultural Economics Reports 33981, United States Department of Agriculture, Economic Research Service.
    9. Key, Nigel D. & Lubowski, Ruben N. & Roberts, Michael J., 2004. "The 1996 Federal Agriculture Improvement and Reform Act: Correcting a Distortion?," 2004 Annual meeting, August 1-4, Denver, CO 20128, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Boussios, David & Barkley, Andrew P., 2012. "Kansas Grain Supply Response to Economic and Biophysical Factors, 1977-2007," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124385, Agricultural and Applied Economics Association.
    11. Gray, Richard S. & Sumner, Daniel A. & Alston, Julian M. & Brunke, Henrich & Acquaye, Albert K.A., 2005. "Economic Consequences of Mandated Grading and Food Safety Assurance: Ex Ante Analysis of the Federal Marketing Order for California Pistachios," Monographs, University of California, Davis, Giannini Foundation, number 11935.

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