Competitive partial equilibrium analysis of U.S. agriculture under alternative energy and export situations - application of separable and chance constrained programming

As an energy source for machinery operations, irrigation, crop drying and manufacture of fertilizer and agricultural chemicals, fossil fuels form a critical group of inputs in crop production. In the United States, agricultural exports are becoming increasingly important in balancing trade deficits caused by imported energy. A national quadratic programming model is used in this study to analyze the impact of alternative energy price and agricultural export situations on U.S. agriculture in the year 1985. The model is solved by using separable programming. Uncertainty incorporated in export, the model also is solved under a chance constrained programming framework. The model simulates a pure competition situation in agriculture. Mainland U.S. is divided into 105 agriculturally homogeneous producing areas, which are aggregated into nine market regions. Linear demand functions for barley, corn, oats, wheat, and soybean and cottonseed oil are incorporated in the model. The production submodel represents production of food and feed grains, oil and fiber crops, hay and silage, and oil meal in a linear programming framework. The livestock sector is handled exogenously. Transportation is defined for food and feed grains, oil, and oil meal among the nine market regions. Land, water, nitrogen, and energy are the inputs explicitly considered in the model. Diesel fuel, gasoline, natural gas, electricity, and liquid petroleum gas are the energy sources considered. When solved, the model estimated the impacts of alternative energy and export situations on interregional distribution of crop production, allocation of various inputs, prices of agricultural commodities and farm incomes. The impacts are measured at national and regional levels;The model results indicate that as the export levels increase, more pressure is developed on the resources like land and water which are fixed in supply. Consequently, rental prices of these resources increase. Also, the prices of crop commodities increase causing a higher food cost for the consumers. Farm sector, however, realizes a higher net income because of the increased export levels;With the increase in energy prices, use of energy intensive inputs are substituted by nonintensive energy inputs. Thus, whereas more dry cropland is estimated to be used under increased energy prices, the use of irrigated cropland, nitrogen, and water for irrigation reduces. Rental prices for land and water increase with the increase in energy prices. Crop commodity supply, however, decreases and as a consequence higher prices for the crop commodities result. Because of the price inelastic demand structure of the crop commodities, consumer food costs increase by a considerable amount. Also, it is estimated that farm sector not only covers the increased costs of production due to higher energy prices, but because of the very inelastic demand for the crop commodities it actually gains in its income from an increase in the energy prices. The gain is, however, not distributed in the same proportion among all the farm regions. The position of a particular region in the distribution depends on its efficiency in energy input use and the type of crop it is growing.