A Supply Response Model for Rice and Soybeans in the Mississippi Delta.

Abstract

This study examines the economic sources of variation in the supply of rice and soybeans in the Mississippi Delta. As farmers alter their land allocations to various crops, they cause fluctuations in the supply of agricultural products. Traditional theory posits that acreage planted is a function of lagged prices, but does not explicitly recognize some technological constraints. One prevalent technological constraint is that the monocropping of particular crops results in a significant decrease in land productivity. The model in this study attempts to improve the specification of the technological constraint of declining soil productivity due to monocropping. Two different statistical methods were used to estimate the system of equations derived from the mathematical model. The empirical results depend upon the statistical technique. The technique involving the fewest restrictions on parameters supports the "adjustment costs" concept associated with the traditional models. When certain restrictions are placed on the parameters of the price process, which also appear in the decision rule, the results support the hypotheses of this study. The first hypothesis is that declining soil productivity plays a significant role in farmers' land allocation decisions. The second hypothesis is that farmers optimally allocate their land in each time period.