Supply Response of Farm Program in Rice-Growing States

By Chowdhury, A. A. Farhad; Herndon Jr., Cary W. | International Advances in Economic Research, November 2000 | Go to article overview
Save to active project

Supply Response of Farm Program in Rice-Growing States

Chowdhury, A. A. Farhad, Herndon Jr., Cary W., International Advances in Economic Research


This study aims to develop an acreage response model for rice-growing states using a policy-inducing variable. The single equation regression model for each rice-producing state is estimated by using the ordinary least square multiple regression procedure after log transformation. Data for the period 1959 to 1988 for acreage plantation, market price, target price, loan rate, and acreage reduction rate are used in designing the policy-inducing price. The estimated parameter shows a significant inverse relationship between the rice acreage planted and policy-inducing prices in all of the rice-growing states, with the exception of Louisiana. The estimated short-run elasticities for Arkansas, California, Louisiana, Mississippi, and Texas are -0.36, -0.68, 0.30, -0.37, and -0.59, respectively. The heterogeneity in the magnitude of the elasticities suggests the need for redesigning the rice programs to generate desirable acreage responses from all of the rice-growing states. (JEL Q10)


In the U.S., rice is grown mainly in five states: Arkansas, California, Louisiana, Mississippi, and Texas. These states differ in physical restraints, average yields, acreage planted, types of rice planted, market price, and returns above cost. The farmers' response to acreage planted in these states is influenced by expected crop prices, input costs (such as machinery, fertilizer, and seed), climactic expectations, presence of plant pests (such as insects and diseases), the nature and extent of fixed-scale factors, the current state of technology, and, also importantly, government farm policy provisions. As a result, while designing the acreage response model, this research gave considerable attention to the method of incorporating a government farm policy variable in the acreage response equation.

There have generally been three rice policy periods:

1) 1955-73, during which acreage allotments [1] and marketing quotas [2] were in effect, following a dramatic increase in rice production in 1954;

2) 1974-81, when acreage allotments and marketing quotas were abolished for the 1974 and 1975 crop years. Target prices [3] and loan rates [4] were made effective with the beginning of the 1976 crop year; and

3) 1982-90, which was based on provisions of the 1981 and 1985 farm bills.

The 1981 program eliminated the rice acreage allotment system and introduced the base acreage [5] concept. The payment-in-kind (PIK) provision went into effect in 1983 when there was a surplus rice production. This reduced Commodity Credit Corporation [6] inventories and raised market prices within reason [Green, 1990].

Although the objective of government farm policies has been to achieve increases in farm income, reduce surpluses, and stabilize prices, rice stocks and rice market prices during the different policy periods increased and varied widely [U.S. Department of Agriculture (USDA), 1992, p. 21]. As a result, forecasting producer planting expectations has been a challenging task for policy makers and national agricultural planners [Garst and Miller, 1975, pp. 30-7]. However, this could be overcome by formulating a supply-inducing variable, in conjunction with market information which adequately reflects the essence of government farm programs, and then to incorporate it with the acreage response equation [Bailey and Adams, 1989, p. 3].

Another concern regarding the farm program is that it contains no regional considerations. All rice-producing states have a uniform loan rate and target price, in spite of their differences in physical restraints, availability of irrigation water, average yields, and returns above cost. Therefore, designing a supply-inducing variable incorporating farm programs with regional disparities may be more conducive to predicting producer planting expectations in different rice-growing states. This, in turn, would help policy planners to undertake policy measures with the goal of providing uniform benefits to rice growers consistent with regional needs.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Supply Response of Farm Program in Rice-Growing States


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?