The Impact of Increased Planting Flexibility on Planting
Source: American Society of Farm Managers and Rural Appraisers, by J. Marc Raulston, Steven L. Klose, Joe L. Outlaw, and James W. Richardson
Introduction
The last three farm bills have provided legislation allowing varying levels of freedom
with regard to choice of crops grown ranging from marginal flexibility to complete
flexibility. Increased acreage planting flexibility over the last fifteen years has allowed
agricultural producers to make production choices with less control and influence from
government program provisions. Several relevant studies have been completed using a
wide range of methodologies to examine producer behavior when granted more liberties
concerning planting decisions. Thompson, Knight, and Boren (1990) used a decision
model (decision tree structure) to study the benefit of 50/92 and 0/92 reduced planting
alternatives provided for in the 1985 farm bill for central Texas farm program
participants. They found that risk neutral producers would not benefit from these
provisions; however, risk averse producers would derive considerable gains from these
provisions in growing seasons when low yields are likely by reducing acres planted. A
mean-standard deviation (E-S) analysis was used by Chien and Leatham (1994) to
evaluate impacts of planting flexibility provided for in the 1990 farm bill on crop mix,
farm income, and uncertainty involved in farming.
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Abstract
Increased acreage planting
flexibility granted through the
last three farm bills has allowed
agricultural producers to make
production choices without
government programs driving
their decisions. Planted acre
data for program crops in seven
Texas regions is used to
describe producers’ responses
to the increased flexibility.
J. Marc Raulston; Research Associate; Texas A&M University
Steven L. Klose; Assistant Professor and Extension Economist; Texas A&M University
Joe L. Outlaw; Professor & Extension Economist; Texas A&M University
James W. Richardson; Regents Professor and Senior TAES Faculty Fellow; Texas A&M
University
They concluded that benefits derived from planting flexibility
were not great enough to overcome the 15 percent loss in
deficiency payments for those participating in the farm
program. Wu, Walker, and Brusven (1997) used an integrated
systems model to evaluate the relationship between planting
flexibility and conservation compliance terms in the 1985 and
1990 farm legislation. One key finding relevant to their research
is that when both provisions are working in tandem, producers’
behavior is more driven by prevailing market conditions.
Westcott, Young, and Price (2002) approached the broader
scope of studying the impacts of the 2002 Farm Act on planting
decisions of major field crops. Key, Lubowski, and Roberts
(2004) utilized Agricultural Census data to compare changes in
planted acres for the 1992-1997 period between farm program
participants and a control group of producers not participating
in commodity programs.
The primary objective of this research is to examine producer
response with respect to crops planted after the passage of each
piece of legislation that granted increased planting flexibility.
This study will focus specifically on planted acreage changes
for program crops occurring after the 1990, 1996, and 2002
farm bills were implemented in seven multi-county regions of
Texas.
Background
Prior to passage of the 1990 farm bill, the Food Security Act of
1985 (1978-1985) was the prevailing farm program. Under the
1985 farm bill, producers were required to plant to their base to
receive government payments, essentially limiting the ability to
respond to changing market conditions. The Food Agricultural
Conservation and Trade Act of 1990 (1991-1996) allowed
producers to grow any eligible commodity except for fruits and
vegetables on a maximum of 25 percent of base acres. Under
the 1990 Act, 15 percent of base acreage was referred to as
normal flex acreage. A producer could plant the normal flex
acres to the original crop or another eligible commodity.
Regardless of their planting decision on the flex acres,
producers did not receive deficiency payments on 15 percent of
crop base acres. On an additional 10 percent of the base
acreage, producers received deficiency payments only if they
planted the original program crop. This acreage was called
optional flex acreage. Prior to this legislation, producers were
required to grow the original program crop on base acreage to
receive government support.
In an effort to further expand planting flexibility, the Federal
Agriculture Improvement and Reform Act of 1996 (1997-2002)
provided for full planting flexibility on previous crop acreage
bases, with the only restrictions involving growing fruits and
vegetables.
The Farm Security and Rural Investment Act of 2002 (2002-
present) retained provisions for full planting flexibility on crop
acreage bases with the continued fruit and vegetable restriction
and permitted farmers the option to update base acres and
program payment yields.
Data and Methods
Planted acre data was collected from the National Agricultural
Statistics Service database for all program crops grown in seven
multi-county regions in Texas (USDA National Agricultural
Statistics Service 2006). Acreage was analyzed for program
crops including corn, cotton, oats, peanuts, rice, sorghum,
soybeans, sunflower, and wheat. The locations of the seven
regions in the study are shown in Figure 1 and include the
Panhandle (Moore and Sherman Counties), South Plains
(Dawson and Gaines Counties), Blacklands (Milam and
Williamson Counties), Middle Coast (Colorado and Wharton
Counties), Coastal Bend (San Patricio and Nueces Counties),
Winter Garden (Zavala and Uvalde Counties) and the Lower
Rio Grande Valley (Cameron and Willacy Counties). These
regions provide a cross section of major crop production areas
to examine planted acreage trends. The data were divided by
commodity into four time periods (Period 1: 1985-1990; Period
2: 1991-1996; Period 3: 1997-2002; and Period 4: 2003-2004)
corresponding to implementation of major farm bill legislation.
Commodities comprising less than five percent of total program
crop acreage in a given county will not be discussed, but those
results are reported in Table 1 for the seven regions. Planting
patterns were examined between these periods to determine the
extent to which producers have made crop mix changes under
the changing environment of farm bill planting flexibility.
Average planted acres for each period was compared to the
previous period to determine if a statistically significant shift in
planted acres occurred. Because the number of years in the
individual periods were not equal, a two sample student-t test
was utilized to test for statistically significant changes in the
means. Depending on the comparison between a calculated test
value and a critical value for each series, the test either fails to
reject with 95 percent confidence the hypothesis that the two
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means are equal or rejects with 95 percent confidence the
hypothesis that the means are equal. Table 1 reports the
program crop acres planted in each of the seven multi-county
regions. Numbers in bold indicate that the average planted acres
for a crop is statistically different from the average planted
acres for the crop under the previous farm program. Table 2
provides a regional summary of significant changes in planted
acres of government program crops between farm bill periods.
Available state average market prices for all program crops
were also collected from USDA-NASS and categorized into the
aforementioned farm bill periods (Table 3). A two sample
student-t test was utilized for comparing average prices between
farm bill periods to determine if statistically different average
market prices were prevalent between the periods. Price
comparisons serve to isolate shifts in market conditions that
may have encouraged planted acreage responses with increased
flexibility granted through the 1990 farm bill and the 1996 farm
bill.
Results
The strongest planted acreage shift occurred following passage
of the 1996 farm bill dubbed “Freedom to Farm” (Period 2 to
Period 3). The changes in acres planted following passage of
the 1990 legislation were a close second. These two time
periods represent more significant changes in flexibility
compared to the 2002 farm bill. The analysis suggests that most
producer reaction allowed by increased planting flexibility had
already occurred before passage of the 2002 legislation.
Changes in planting patterns following the 2002 bill are
minimal reflecting the continuation of flexibility similar to the
1996 legislation.
The two regions that experienced the least change in planted
acreage were the Lower Rio Grande Valley and the Winter
Garden. These are also the major areas of the state with a
history of growing fruits and vegetables or other specialty
crops, indicating that the remaining fruit and vegetable planting
restriction could be limiting any potential acreage shifts in
program crops in these regions.
The only statistically different price shift occurred when
examining the periods before and after passage of the 1996
farm bill. The price shifts in the late 1990s definitely provided
market signals for producers to react to in the new era of
planting flexibility. Interestingly, mean peanut price decreased
during the period while planted acres of peanuts showed a
statistically significant increase in the South Plains region. The
peanut shift coincides with the elimination of the peanut quota
system, but the increase in peanut acres in a historically cotton
producing region supports the hypothesis that planting
flexibility has allowed producers to align planting decisions
with more favorable market conditions.
Following are results of the comparison by multi-county region,
highlighting changes in planted acreage of program crops.
Blacklands
Average acres planted to corn more than doubled following
passage of the 1996 legislation, while cotton saw a 60 percent
decline and sorghum experienced a 36 percent reduction in
planted acres (Table 1). Previously, cotton had experienced a
37 percent increase following passage of the 1990 bill. Wheat
experienced a 43 percent decline in planted acres in the years
following passage of the 1990 bill.
Coastal Bend
The years following passage of the 2002 bill saw a 67 percent
decrease in average corn acres planted (Table 1). This is only
one of three significant shifts that occurred following the 2002
legislation. The Coastal Bend region realized a 47 percent
increase in cotton acres after passage of the 1990 bill. In fact,
the area saw a 22 percent increase in total acres planted to
program crops following the 1990 farm bill.
Lower Rio Grande Valley
The Lower Rio Grande Valley made a significant shift from
corn to grain sorghum following the 1990 bill (Table 1). Corn
experienced a 57 percent decline in planted acres while
sorghum experienced a 52 percent increase in average planted
acres. Acreage shifts in other time periods were negligible.
Middle Coast
Cotton acres increased by a magnitude of 2.6 times (160
percent) after the 1990 bill went into effect in the Middle Coast
region (Table 1). Another significant increase of 46 percent
occurred after passage of the 1996 bill. Rice acreage in the
region has steadily declined since the 1996 bill (13% decrease
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