THE USE OF EXTRANEOUS INFORMATION IN THE DEVELOPMENT OF A POLICY SIMULATION MODEL

commodity groups so as to be consistent with the
supply and demand quantities. Estimates of crop
production expense per acre for the four crops, total
livestock production expenses and expenses for other
crops for 1930-1967 were developed in an earlier
study by Ray [22]. A trend analysis of these expense
series along with published USDA expense estimates
was used to project the 1980 production expense
series. Total production expenses in 1980 are
estimated at $60.2 billion compared with $44.0
billion in 1971. Direct payments to farmers under the
various governmental farm programs are assumed to
be $4.0 billion. Of this total, feed grain producers are
assumed to receive $1800 million, wheat producers
$925 million and cotton producers $875 million.
Variable data for 1972 to 1979 were generally
derived by interpolating between the last published
estimate (usually 1971 but some preliminary 1972
estimates were used) and the 1980 projection.
Complete Ustings of the base data are available from
the author.

PRICE RESPONSE PARAMETERS

Supply Elasticities

A change in relative crop prices influences a
crop’s production level through its effect on acreage
and on yield. The acreage elasticity indicates the
increase (decrease) in crop acreage resulting from a
price rise (decline). The yield elasticity reflects
change in the application of fertilizer, pesticides and
other nonland inputs to each crop acre. As prices rise,
farmers purchase and use larger amounts of
yield-increasing inputs and, conversely, reduce input
usage as prices fall.

Table 1 summarizes the short run and long run
acreage and yield elasticities used in the model. The
direct acreage elasticities were selected as being
representative of empirical analyses conducted by
other researchers. Nerlove [17] estimated the short
run price elasticity for corn acreage at .09 and the
long run elasticity at .18. Colyer and Irwin [5]
' derived a short run elasticity of feed grain production
with respect to corn price of .11. Estimates of
short-run acreage price elasticity for wheat varies
from zero obtained by Bowlen [2] for nine western
Kansas counties to .93 derived by Nerlove [17].
Cochrane’s [4] informal estimate of wheat supply
price elasticity (including both the acreage and yield
components) was between .1 and .2. Vandenborre
[19], Houck and Subotnik [15] and Heady and Roa
[11] obtained soybean supply price elasticity
estimates of between .8 and .9. Houck and Mann
[13] derived acreage price elasticity estimates of .16
for the first crop year following a sustained price
increase and .29 for the second crop year. Estimates
of the elasticity for cotton obtained by Blakley [1]
range from .16 for selected years during 1934-1956
when allotments were in effect to .75 for

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