EFFECTS OF NATURAL GAS DECONTROL ON FARMING COSTS AND INCOME

Michael LeBlanc

No 276831, Staff Reports from United States Department of Agriculture, Economic Research Service

Abstract: (;tural gas decontrol will likely have only a small effect on agriculture unless accompanied by renewed growth in crude oil prices or fertilizer import restrictions. Rising natural gas prices directly affect agricultural production by increasing costs for crop drying and irrigation. However, the largest effects will occur indirectly through increases in fertilizer prices where natural gas comprises 50 to 60 percent of domestic fertilizer production costs. An economic model of agricultural production is developed where profits are maximized subject to the quantity of a quasi-fixed production factor. Factor demand functions and an aggregate supply function are derived from this simple representation to evaluate alternative gas price impacts. Alternative fertilizer price trajectories are used to simulate effects on inpu demand, production costs, and income for 1981 through 1990.

Keywords: Agricultural Finance; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Pages: 24
Date: 1984-01
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uerssr:276831

DOI: 10.22004/ag.econ.276831

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