Abstract
The analysis in this paper is directed at estimating the marginal value of a base acre, the nitrogen rate of fertilizer use, the corn yield, and the excess nitrogen fertilizer application rate under alternative policy options designed to encourage planting flexibility in response to changing relative agricultural commodity prices. Encouragement of planting flexibility via an option of detaching deficiency payments from the base acreage is an effective way to reduce the excessive application rate and use of nitrogen fertilizer. Encouragement of planting flexibility via an option of reducing the base acreage is effective only if the availability of cropland is a limiting factor. However, movement toward the complete elimination of the notion of base acreage (that is, movement toward a completely free market unencumbered by government programs) would be the most effective option to reduce the value of a base acre thereby encouraging greater planting flexibility. An increase in the price of soybeans and a decrease in the price of corn would also serve to encourage switching from continuous planting of corn to a corn — soybeans rotation. However, as more soybeans and less corn are produced, the price of soybeans would fall while the price of corn would rise. As a consequence, the effectiveness of the policy options considered here in promoting planting flexibility would be reduced.
Get full access to this article
View all access options for this article.