Commodity Programs Research Articles

Integrating Economic and Physical Models for Analyzing Water Quality Impacts of Agricultural Policies in the High Plains

Agency estimated in 1992 that 52.1 percent of all community water systems contained nitrates and 10.4 percent contained pesticides. A study by the Water Quality Task Force of the Great Plains Agricultural Council concluded that agriculture was the largest contributor of nonpoint source pollution in the Great Plains and throughout the nation. Increased public awareness of these issues continues to put significant pressure on policy makers to consider water quality impacts in agricultural legislation. The impact of government commodity programs on agricultural production has been well documented (e.g., Houck and Ryan; Houck et al.; Lidman and Bawden; Chavas, Pope, and Kao; Johnson, Wolcott, and Aradhyula). For example, Houck and Ryan found that more than 95 percent of the variation in U.S. corn acreage during 1948 to 1970 could be attributed to selected policy variables. The resulting changes in agricultural production may in turn affect water quality. Several studies have discussed possible conflicts in the objectives of agricultural and environmental policies (Just and Antle; Johnson, Wolcott, and Aradhyula; Miranowski, Hrubovcak, and Sutton). Just and Antle found that existing agricultural policies can have either positive or negative effects on nonpoint source pollution; however, they did not provide any measure of the aggregate effect because no empirical investigation was conducted. Johnson, Wolcott, and Aradhyula examined the impact of commodity programs on output supply and input demand in the U.S. agricultural sector and illustrated possible tradeoffs between agricultural and environmental policies. Miranowski, Hrubovcak, and Sutton used a general equilibrium model of the U.S. agricultural sector to examine the impact of the Acreage Reduction Programs (ARP) and the Conservation Reserve Program (CRP) on chemical use and soil erosion. The results

Role of economic analysis in the evaluation of new dryland technologies

AbstractAn evaluation of agricultural systems often involves multidisciplinary teams that include crop scientists, animal scientists, soil scientists, pest control specialists, agricultural economists, and others. Agricultural economists can improve the technical quality and comprehe nsiveness of agricultural systems research in six major areas: budgeting and investment analyses; whole-farm and institutional factors; risk considerations; aggregate effects on crop and livestock prices; society-wide welfare effects of technical or policy changes; and economic values of environmental and other nonmarket effects. Economic analysis has been part of several successful multidisciplinary research efforts in the United States Pacific Northwest. These have covered soil conservation, integrated pest management, sustainable agriculture, crop rotation choice, and beef ranch management. As an example of institutional influences on economic outcomes, one study showed that the structure and selectivity of United States commodity programs have favored conventional over low-input rotations. Regarding risk management, an appropriate “package system” including conservation tillage, a diversified crop rotation, and adequate chemical weed management was shown both to sustain profitability and to reduce income fluctuations. Properly designed economic analysis can make similar contributions to identifying successful dryl and agricultural technologies throughout the world.

Nonconstant Price Expectations and Acreage Response: The Case of Cotton Production in Georgia

AbstractAn adaptive regression model is used to examine the relative importance of cash and government support prices in determining cotton production over time. The results show that the cash price is more important as a source of price information for cotton producers than the government program price. The cash price was shown to have a greater influence on acreage response in every year, including periods thought to be dominated by government commodity programs.

A Model of Producer Participation in Farm Commodity Programs

The paper develops a model of producer participation in farm commodity programs. In the model, producers maximize profits subject to a common technology, but a differentiated resource endowment. As a result, in equilibrium, some producers participate in the program, while others do not. The model is calibrated to data for the U.S. wheat sector to assess the impact of the freeze on program yields instituted under the 1985 Farm Bill. We find that the yield freeze substantially lowered variable input use and raised net returns, for participants and non-participants. This is a striking result, given proposals by some farm groups to reverse this policy.

The Role of Planting Flexibility and the Acreage Reduction Program in Encouraging Sustainable Agriculture Practices

This paper demonstrates the interrelationship between Normal Flex Acres (NFA) and the Acreage Reduction Program (ARP) based on a profit-maximizing model of a representative westem cornbelt farm. The analysis indicates that the commodity program participation decision is jointly dependent on the ARP and NFA levels. Furthermore, the ARP and NFA policy parameters have different implications for the environment, farm income, govemment payments, and crop diversity. The model is used to illustrate the impact of increasing the NFA on program participation, farm income, crop diversity, and government payments. For example, with a zero ARP, increasing the NFA in 1994 to 63 percent would result in farmers being just as well off as in 1993 while growing a more diverse crop mix. These results hold only when the marginal return (excluding government payments) of a non-program crop exceeds that of a program crop. The paper also examines the case where the marginal return for a program crop is superior to that of a non-...

The economic consequences of substituting carbon payments for crop subsidies in U.S. agriculture

There is a growing body of literature on the costs of sequestering carbon. However, no studies have examined the interplay between farm commodity programs and carbon sequestration programs. This study investigates two dimensions of the interaction between farm commodity programs and afforestation programs, using a price-endogenous sector model of agriculture in the United States. First, this study compares the fiscal and welfare costs of achieving specific carbon targets through afforestation, with and without current farm programs. Second, it examines the welfare, fiscal, and carbon consequences of replacing existing farm subsidies, wholly or in part, with payments for carbon. Two approaches, Hicksian and Marshallian, are investigated. In the first, the sector model is used to quantify the carbon consequences and fiscal costs associated with various combinations of farm commodity and carbon sequestration programs that leave consumers and producers in the U.S. agricultural sector no worse off than under existing farm programs. The second approach focuses on the carbon and welfare consequences of various farm commodity and carbon sequestration programs that hold total program fiscal costs constant at current levels. Althouth the methodology and data are applied to the United States, the issues addressed are common in a number of developed nations, particularly within the European Union (EU). Adapting existing sector models in these nations to perform similar analyses would provide policy makers with more precise information about the nature of the trade-offs involved with second-best policies for replacing farm commodity subsidies with tree planting subsidies.

Sustainability issues of U.S. swine production.

The incorporation of livestock into agricultural systems ensures a more sustainable agriculture. Sustainable swine production systems are defined as those that combine production and management techniques to enhance profit and improve the ecological and socioeconomic surroundings. Over the long term, the systems should maintain or enhance the environment and resource base, the quality of life for the producers and society as a whole, the profit level of producers, and the quality of pork produced. Swine production in the United States is rapidly changing to fewer and larger production units. At the interface of sustainable agriculture and swine production are several levels of issues. Four levels of issues are the farm, the rural community, the society or consuming public, and the ecosystem or environment. By examining each level, long-term sustainability issues for U.S. swine production emerge. Some of these issues include swine care and husbandry, producer health, management and production systems, access to markets, information, technology and genetics, producer entrance requirements, specialization, manure utilization, industry structure, pork quality and leanness, and the impact of modern intensive systems on the environment, farms, and rural communities. The challenge beyond identifying issues is to incorporate sustainable concepts into profitable, ecologically based swine production systems. Several major groups of issues are discussed, including swine industry structure change issues, access and entrance issues, manure, by-product and nuisance issues, and pork quality issues. Many of these issues can be addressed. The solutions often rely on increased education, management, or technology applications. These processes provide broad opportunities for animal scientists. Examples of current solutions are quality assurance programs, segregated age rearing techniques, educational and promotional commodity programs, manure management programs, phase feeding, diet manipulation to alter manure nutrient concentrations, young producer assistance programs, producer networking, and environmental awareness activities. There are many more opportunities for improving the sustainability of U.S. swine production, when a long-term, issue-oriented viewpoint is maintained.

The Impact of Policies and Land Characteristics on Potential Groundwater Pollution in Wisconsin

AbstractIn this paper we present an empirical framework for quantifying the extensive margin effects of commodity programs and chemical‐use taxes on potential groundwater pollution in Wisconsin. The approach emphasizes the role of the joint distribution of crops and site characteristics in determining policy impacts on groundwater contamination. The results indicate that for a given reduction in total polluting acreage an increase in the Acreage Reduction Program rate for corn is well targeted and would reduce high‐polluting acreage more than a chemical‐use tax or a target price policy in the areas where it might be needed most.

The Effect of Feedgrain Program Participation on Chemical Use

Economic incentives created by the commodity programs are hypothesized to cause program participants to apply agrichemicals at greater rates than nonparticipants. Corn producers who participate in the USDA feedgrain program are shown to apply nitrogen, herbicides, and insecticides at statistically greater rates than those who do not participate.

Risk-Efficient Tillage Systems and Program Participation Strategies for Land Subject to Conservation Compliance

monocropped to winter wheat. The wheat commodity program has been an important riskmanagement tool contributing to the development of wheat monocropping because the program has provided long-run incentives to maintain wheat base acres (Young and Painter). The federal program has provided subsidy (deficiency) payments to participating farmers in years with low market prices. Those who farm highly-erodible land have been required to implement soil conservation production practices to maintain eligibility for direct agricultural payments and other federal programs. In Oklahoma, approximately three million acres of cropland, classified as highly erodible, are used for continuous wheat production. Winter wheat is grown for both grain and forage. Livestock may be grazed on wheat forage in the region beginning in November. If livestock are removed prior to the crop's jointing stage (typically in early March), wheat will mature and produce a grain crop (Rodriguez et al.). If grazing is extended into March and April, the grain crop will be sacrificed. This practice is referred to as grazeout. Thus, producers may elect to use livestock for winter grazing (November 15 to March 1), winter grazing and grazeout (November 15 to May I),'or grazeout (March I to May I). The vast majority of compliance plans for wheat production land include the use of a conservation tillage system designed to retain plant residue on the soil surface throughout the year. Those who use a moldboard plow and cover virtually all surface residue may fail to qualify for federal deficiency payments. However, several tillage systems studies conducted in the wetter regions of the Great Plains have found that wheat grain yield is inversely related to the amount of surface residue (Bauer and Black; Cook and Veseth; Heer and Krenzer; Zingg and Whitfield). In this region, increased surface residue on fields monocropped to winter wheat results in more diseases, more weeds, and lower yields. The purpose of this study is to generate information that could be used by farmers confronted with conservation-compliance requirements. The economic consequences of noncompliance, as well as compliance and participation in federal commodity programs will be considered. The diversification strategy of grazing wheat forage during the winter months will also be evaluated for economic feasibility. The objective of the study is to determine riskefficient tillage, program participation, and grazing strategies for a representative north central Oklahoma wheat farm with land subject to conservation compliance. The results provide an estimate of the cost of noncompliance.

Influence of Wheat-Feed Grain Programs on Riskiness of Crop Rotations under Alternate Irrigation Levels

Declining groundwater levels in parts of the Great Plains could lead to reduced irrigation and a decline in the economies of those areas. Improved irrigation efficiency has helped slow the rate of decline in aquifer levels but adoption of limited irrigation and water conserving rotations could slow the decline even more. The objective was to estimate the riskiness and profitability of these alternatives with and without farm commodity programs. Three water levels-rainfed, limited irrigation (6 in./yr water allocation) and full irrigation (meet crop evapotranspiration demands) were established for continuous corn (Zea mays L.), winter wheat (Triticum aestivum L.)-corn-soybean [Glycine max (L.) Merr.], and corn-soybean rotations. The profitability of each rotation under each water level was estimated using results of field experiments conducted since 1981 in west central Nebraska and cost estimates based on a typical center pivot irrigation system covering 126 acres. Stochastic dominance techniques were then applied to the data by using combinations of prices for corn, wheat, and soybean to generate cumulative distribution functions. Profitability and riskiness were estimated with and without participation in the wheat and feed grain programs and with alternate acreage conservation reserve (ACR) levels. Results showed that the government program improved income levels and reduced income variation for each water level and all rotations. Program participation did encourage monoculture corn under full irrigation and under limited irrigation with low ACR requirements. Under rainfed conditions the relative ranking of the three rotations was not changed by program participation.

Factors Influencing Herbicide Use in Corn Production in the North Central Region

Pesticide use has contributed to the impressive productivity growth in U.S. agriculture; however, it has caused increasing concerns about associated health and environmental risks. Consequently, statutory changes and new initiatives have been proposed by the Clinton Administration and the Congress in order to minimize risks through reduction in pesticide use (Kuchler et al.). Similarly, many European countries have implemented programs and set national goals to reduce fertilizer and pesticide use (Szmedra). Several approaches could be considered to reduce pesticide use. Regulations have been enacted to ban or restrict the use of certain pesticides.' Quantity restrictions can reduce pesticide use, but their implementation may encounter severe enforcement difficulty. Government programs can be changed to remove economic incentives that increase pesticide use, an approach being adopted in Europe (Szmedra). Under the Food, Agriculture, Conservation, and Trade Act of 1990, farmers have the flexibility to plant up to 25 percent of their base acreage to other program or specified crops without losing their future base acreage. This cropping flexibility can potentially reduce pesticide use, especially when corn base acres are planted with less chemical-intensive crops, such as soybeans. Taxes (subsidy) can be levied (provided) to internalize the external cost associated with pesticide use, and hence reduce pesticide use.2 Alternatively, the government can subsidize farmers to adopt less pesticide-intensive production practices. For example, Special Project 53 under the Agricultural Conservation Program (administered by the Agricultural Stabilization and Conservation Service, United States Department of Agriculture) provides cost sharing for adopting integrated crop management practices that are intended to reduce farm chemical use (Osborn et al.). A better understanding of the factors influencing pesticide use is essential in examining various options for reducing pesticide use. An array of pest management methods are practiced by farmers, resulting in a diverse pattern of pesticide use. What production practices currently in use can effectively reduce pesticide use? Do farmers enrolled in commodity programs use more chemicals than other farmers? What are the demand elasticities with Biing-Hwan Lin, Harold Taylor, Herman Delvo, and Len Bull are Agricultural Economists with the United States Department of Agriculture, Economic Research Service. The insightful comments of anonymous reviewers and the editor substantially improved the quality and content of the paper. The views expressed are the authors and do not necessarily represent policies or views of the United States Department of Agriculture or the Economic Research Service.

Minerals and the Common Fund for Commodities

This paper reviews the role of minerals in the Integrated Programme for Commodities and the objectives and problems of the Second Account of the Common Fund for Commodities (CFC). It focuses on the least developed countries in Africa, providing specific suggestions for R&D to improve mineral exploration techniques in rain forest and savanna regions; to reduce mine exploration costs; to design equipment suitable for mining narrow veins; to improve concentrating methods for certain ores and to optimize byproduct recovery; to reduce environmental impacts; and to use the waste products of mining. It also discusses demand oriented CFC projects and their policy implications.

Changing of the Guard: Discussion

The authors in this session recognize that future of our profession depends on economic education and analysis we are willing and able to supply and on information demanded by our clientele. However, authors could have devoted more attention to factors underlying demand for our services and to our ability to translate supply and demand for our services into essential professional resources. Brandt and Ahearn focus mainly on supply side-the changing composition of profession. They note that over half of young men and three-fourths of young women in profession do not have farm backgrounds. Most of those professionals are not working on commercial farm marketing and production economics. This is quite a departure for a profession once comprised mostly of white males with farm backgrounds working on commercial farm marketing and production economics. Brandt and Ahearn call for recruitment of more nonwhites and females into profession. I have no problem with that as long as we continue to pursue excellence. Cultural diversity becomes another name for racism or sexism when it is defined as setting a (suitably low) qualification hurdle and then giving preference to minorities or women from list who qualify. Brandt and Ahearn failed to mention sharply rising proportion of foreign graduate students. American graduate student numbers are likely to continue to slip. Consequently, I anticipate increased hiring of foreign PhDs. to fill domestic faculty vacancies. In their brief conclusion, Brandt and Ahearn say that they expect current emphasis on peer review and disciplinary orientation to give way to multidisciplinary research responding to user views. They give few clues why this will happen, but hint that a supply of culturally diverse professionals might create their own demand. My observation is that profession trains and rewards ever narrower disciplinary specialists, less and less willing or able to solve real world problems and effectively communicate results to public. These magnificent disciplinary specialists write mostly for each other. Unn vehr addresses demand-side issues, especially suburbanization, skewed distribution of income, and declining importance of farms. Offutt also notes influence of suburbanization on our future. I feel that future of o r profession depends on how well we serve interests of students, food producers and consumers, rural Americans, and public at large. We will need to provide sufficiently sound education and analysis of food system, resources, and environment to be viewed by society as worth retaining as a profession. We all agree with Offutt's observation that fewer of our profession's resources will go into traditional areas of agriculture. I and others in profession who bear many scars from questioning economic wisdom of current commodity programs are appalled by Offutt's statement that the profession has done little to illuminate or move terms of debate (about commodity programs) away from marginal analysis of status quo. Being candid about commodity programs has not endeared us to many of our traditional clientele. The thesis of remainder of this discus-

Acreage Elasticities for Corn and Soybeans

Because corn (Zea mays L.) and soybeans [Glycine max (L.) Merr.] are the top two cash crops in the USA, the choice between planting corn and soybeans plays a crucial role in determining the impact of policy changes on the U.S. agricultural sector. This study examined the joint decisionmaking process between corn and soybeans among U.S. farmers, the effects of dynamic processes for anticipating future prices and yields, and the impact of government programs on the substitutability of soybeans for corn in planting decisions. The effects of past planting decisions, productivity, and net returns, as well as shifts in commodity program parameters, are considered in a systematic framework for modelling the behavior of corn and soybean acreage, yield, and market prices [...]

Land Quality and Diversion Decisions under U.S. Commodity Programs

Field level distributions of land quality are used to explain diversion decisions under U.S. commodity programs. Regression results for North Carolina indicate that differences in the yield potential of soils may influence the opportunity costs of land diversions. These effects increase with farm size. For large farms, a decrease in mean soil quality on a field relative to the farm mean or an increase in the coefficient of variation of quality within a field increases the proportion of land diverted within a field. There is no evidence that small farmers respond to land quality distributions in making diversion decisions.

GENERIC PROMOTION OF BEEF: MEASURING THE IMPACT OF THE US BEEF CHECKOFF

Generic promotions of commodities are growing in importance. In the US, commodity industry assessments or checkoffs (i.e. a per unit levy or tax) are used to underwrite domestic and international promotions by commodity groups. The US beef checkoff is one of the largest of these new national commodity programmes. Evaluation of the economic impact of the beef promotion is an essential part of the beef checkoff. A model for evaluating the US beef programmes is estimated and the methodology is applicable to other commodity models that include advertising and promotion expenditures. The beef analysis shows a positive and significant return to the beef industry, with an average of approximately $5 for each $1 invested for the quarters 1987:1 through 1991:2.

Crop Insurance and Disaster Assistance Designs for Wheat and Grain Sorghum

AbstractThis study compares the effectiveness of two crop insurance and two disaster assistance program designs used in conjunction with a government commodity program and a linked crop insurance/government commodity program design. Stochastic dominance analysis of farm‐level net return distributions is used to select the preferred design(s). The results indicate that the disaster assistance programs are preferred over the alternatives. The results also suggest that individual crop insurance is preferred to area crop insurance. A subsidy is required for risk‐averse managers to prefer area crop insurance to individual crop insurance.

Impacts and Incidence of Agricultural Commodity Programs

Since the passage of the Agricultural Adjustment Act of 1933, commodity programs have had a major impact on resource use and returns to factors in U.S. agriculture. While the need to insulate domestic agricultural markets from the vagaries of international price movements has been emphasized in developing countries,2 farm price supports are often justified as a means of redistributing income from consumers to commodity producers.3 An important issue is whether producers are the ultimate beneficiaries of commodity programs. John E. Floyd, Paul R. Johnson, T. D. Wallace, and Gordon C. Rausser and J. W. Freebairn investigated social costs of commodity programs.4 These studies are based on estimates of producer and consumer surpluses that depend on price elasticities of demand and shortrun supply curves. For example, Floyd employed linearly homogeneous production functions and demonstrated that in the short run farm-price supports benefit landowners more than producers.5 Recently, D. Gale Johnson focused on long-run distributional consequences of commodity programs and argued that in the long run landowners are the recipients of all commodity program benefits. If they do not benefit in the long run, why do producers advocate price support programs for agricultural commodities? The puzzle is resolved (1) if rent adjustment is slow and producers gain in the short run or (2) if producers are also landowners. Although the short-run incidence of the benefits of commodity programs is influenced by the speed of

Profitability of a Resource-Conserving Crop Rotation

The Flex Acreage Provisions of the Food, Agricultural and Trade Act of 1990 have increased the potential for farm managers to use resource-conserving crop rotations. The use of a resource-conserving crop, alfalfa, in rotation with government commodity program crops, wheat and grain sorghum, is evaluated by comparing potential net returns for a central Kansas family farm. Comparisons of net returns and sensitivity analysis indicate that growing alfalfa on flex acres in rotation with wheat or grain sorghum, although not the profit maximizing strategy, is economically feasible.