Supply response of Texas agricultural commodities

Abstract

Few empirical studies have developed estimates of the interrelationships in supply of many agricultural commodities produced in the U. S. or in any diversified region. This study uses a linear supply model with a constant elasticity of transformation (CET) constraint on the product transformation surface to estimate Texas short-run supply response, including cross-product relations, for major agricultural commodities. Separate supply models are developed for two different commodity groups, field crops and livestock-poultry. Six crops (corn, cotton, hay, rice, sorghum, and wheat), representing 93% of 1971-75 Texas harvested acreage and 94% of value of production, are included in the crop model. Five commodities (cattle feeding, milk, hogs, broilers, and eggs), representing 92% of 1971-75 Texas cash receipts from the sale of livestock and poultry, are included in the livestock-poultry model. Independent variables in the fully-specified crop supply model include price of each crop, two risk variables, and four product transformation surface shifts variables (input level, technology, government programs, and weather). Independent variables in the livestock-poultry model include price of each livestock commodity, two risk variables, input level, and technology. Because a considerable number of unexpected parameter signs are obtained, the sensitivity of estimated parameters to alternative specifications in model scope and in non-price variables is examined..