Supply Response Under The 1996 Farm Act And Implications For The U.S. Field Crops Sector
The 1996 Farm Act gives farmers almost complete planting flexibility, allowing producers to respond to price changes to a greater extent than they had under previous legislation. This study measures supply responsiveness for major field crops to changes in their own prices and in prices for competing crops and indicates significant increases in responsiveness. Relative to 1986-90, the percentage increases in the responsiveness of U.S. plantings of major field crops to a 1-percent change in their own prices are wheat (1.2 percent), corn (41.6 percent), soybeans (13.5 percent), and cotton (7.9 percent). In percentage terms, the increases in the responsiveness generally become greater with respect to competing crops' price changes. The 1996 legislation has the least effect on U.S. wheat acreage, whereas the law may lead to an average increase of 2 million acres during 1996-2005 in soybean acreage, a decline of 1-2 million acres in corn acreage, and an increase of 0.7 million acres in cotton acreage. Overall, the effect of the farm legislation on regional production patterns of major field crops appears to be modest. Corn acreage expansion in the Central and Northern Plains, a long-term trend in this important wheat production region, will slow under the 1996 legislation, while soybean acreage expansion in this region will accelerate. The authors used the Policy Analysis System-Economic Research Service (POLYSYS-ERS) model that was jointly developed by USDA's Economic Research Service and the University of Tennessee's Agricultural Policy Analysis Center to estimate the effects of the 1996 legislation.
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- V. Eldon Ball, 1988. "Modeling Supply Response in a Multiproduct Framework," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(4), pages 813-825.
- J. P. Houck & M. E. Ryan, 1972. "Supply Analysis for Corn in the United States: The Impact of Changing Government Programs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 54(2), pages 184-191.
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- David R. Lee & Peter G. Helmberger, 1985. "Estimating Supply Response in the Presence of Farm Programs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(2), pages 193-203.
- Westcott, Paul C. & Hoffman, Linwood A., 1999. "Price Determination for Corn and Wheat: The Role of Market Factors and Government Programs," Technical Bulletins 33581, United States Department of Agriculture, Economic Research Service.
- Barten, Anton P. & Vanloot, Chris, 1996. "Price dynamics in agriculture: An exercise in historical econometrics," Economic Modelling, Elsevier, vol. 13(3), pages 315-331, July.
- Houck, James P. & Ryan, Mary E., 1972. "Supply Analysis For Corn In The United States: The Impact Of Changing Government Programs," Staff Papers 13554, University of Minnesota, Department of Applied Economics.
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