Estimated impacts of a land set-aside policy on United States agriculture in 1985: a quadratic programming analysis

Albert Essel

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: Agricultural policy makers in the United States have become increasingly concerned with several facets of economic and structural developments in American agriculture. Over most of the last fifty years, technological innovations and various input substitutions have combined to bring about enormous increases in food supply. At this same period, the important characteristics that influence domestic demand of farm products such as prices and income elasticities of demand and population growth have been declining or growing at very slow rates. The interaction of these have resulted in lowered food prices, depressed farm incomes, labor migration and pressures on the rural community;Public policies designed to remedy the problems have generally taken the form of voluntary land retirement to control supply and expansion of demand through domestic food aid plans as well as international export promotion. Current changes in agricultural policy emphasis underscores the need for methods of policy analysis which can be initiated before proposed policies are implemented with unknown consequences;This study is concerned with the analysis of a supply control policy using a mathematical programming approach. A quadratic programming model of United States agriculture is used to evaluate the effects of a ten percent land set-aside policy on the equilibrium farm level prices and associated quantities demanded of principal crops and livestock products for 1985. The effect of this policy on the geographical distribution of potential capacity in U.S. agriculture is also considered;In the model, the 48 contiguous states of the United States, including the District of Columbia, is divided into 10 spatially separated consuming regions that coincide with livestock producing regions. Further, these regions are divided into 103 crop producing areas and 10 irrigated crop producing areas. A transportation sector is defined to facilitate commodity movements between the consuming regions;Results of the study indicate that the equilibrium farm level prices as well as the values of production of all commodities are increased with the set-aside policy. Moreover, the price increases cause the consumption of some products, particularly livestock products, to decline. Considerable shifts in regional patterns of crop production and demand for farm land are also observed.

Date: 1980-01-01
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