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

for the period average), as producers were no longer required to

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plant the crop to receive their government payments. Soybeans

saw a 145 percent increase after the 1996 bill and planted

acreage has remained at that level in recent years.

Panhandle

The Panhandle region as a whole experienced the most

significant shifts in average planted acres of program crops

(Table 1). Corn acres effectively doubled following passage of

the 1990 bill, followed by a 26 percent increase after passage of

the 1996 bill. Acres planted to sorghum have experienced a

considerable amount of volatility throughout the study period.

They decreased 42 percent after the 1990 bill was passed, then

increased 36 percent in the years following passage of the 1996

bill. Finally, sorghum acres have declined by 38 percent since

passage of the 2002 bill.

South Plains

The South Plains is a region of Texas where average planted

acres of program crops have remained relatively stable (Table

1). The only significant change was an explosion of peanut

acreage following passage of the 1996 bill, effectively tripling

the acres planted to peanuts.

Winter Garden

The only significant change occurring in the Winter Garden

region was a 24 percent decline in grain sorghum acreage since

passage of the 2002 bill (Table 1).

Discussion

A variety of factors may contribute to the absence of major

shifts in cropping decisions as increased planting flexibility is

granted through farm legislation. Some producers express

concern that future farm legislation may rely on planting

histories for updating government program payment acres and

yields, as did the 2002 farm bill. Local market conditions and

the accessibility of these markets are other hurdles. Due to

current fruit and vegetable planting restrictions, the potential

loss of government payments is a possible reason for the lack of

shifts in regions where vegetable and other specialty crops are

grown.

Limited irrigation water or the prevalence of drought conditions

may have limited producers in the Lower Rio Grande Valley on

the crops they can plant. Additionally, limited water may

prevent producers from modifying their current planting

patterns, especially in regions that must compete with growing

populations and municipalities for water. Complementary crops

also affect cropping patterns. For example, corn and grain

sorghum may both be planted and harvested with the same

equipment. In addition, the maturities of the crops are staggered

enough to allow for timely harvests. The requirement of highly

specialized equipment along with providing work for labor year

round may also be reasons for planting particular crops.

The hope for higher returns on alternative crops that involve

increased production risk given local growing conditions may

be identified in certain regions. Corn has become increasingly

expensive to grow in the Panhandle region as irrigation fuel

costs have dramatically increased. With energy prices on the

rise, producers began experimenting with growing cotton, a

crop traditionally grown in more southern regions of the state.

Data at the time of the analysis was not available past 2004;

however, it is expected that planted acres for 2005 and 2006

will illustrate an even greater shift to cotton occurring in the

Panhandle Region. Equipped with shorter season cotton

cultivars, producers are able to experiment with growing cotton

due in part to planting flexibility granted through farm bill

legislation. Improved market conditions for corn are expected to

curtail the trend toward cotton, a response allowed by current

flexibility provisions. Increasing stress will likely be placed on

the availability of water in the Panhandle region with the

expected increase in corn production and as the construction of

ethanol plants occur in the region.

In addition, the prospect of growing higher valued specialty

crops may entice some producers to shift acreage to these crops

if certain proposed legislation comes to fruition. For example,

the Winter Garden region historically plants less acreage to

program crops, as they plant a significant quantity of fruits,

vegetables, and other specialty crops. Recent WTO rulings

against the U.S. cotton program have brought into question the

WTO compliance of the bulk of U.S. agricultural policies,

specifically the aforementioned fruit and vegetable planting

exclusion. The Farming Flexibility Act of 2005 proposed by

Representative Mike Pence (HR2045) provided for even more

planting flexibility, as his proposal would have removed the

planting restriction on program crop base acres, allowing a

producer to grow fruits and vegetables as long as they are

grown for processing.

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Conclusion

Some areas of Texas have experienced significant acreage shifts

over the last fifteen years. While these shifts may have been the

result of changing weather patterns, market conditions,

available crop varieties, or policy changes, one certainty is that

the gradually increasing planting flexibility provisions of

federal legislation have opened the door to producer responses

in planted acres. Acreage responses under free market

conditions would be expected to occur intermittently as market

signals warrant; however, planting restrictions of historic farm

bills limited acreage responses. When these restrictions are

removed, shifts in planted acres are observed in periods marked

by the progression of planting flexibility in farm legislation.

Observed acreage shifts in some regions may indicate a build

up of market and production conditions for which acreage

responses were previously not possible. Still other regions,

following many years of planting restrictions, show no changes

reflecting the limited production options in the area. These

results can have significant implications for the use of planted

acres data. Any analysis of supply response should consider the

legislative environment of the time and the degree of planting

flexibility extended to producer choices.

References

Chien, Ming-Che and David J. Leatham. 1994. “The Value of

Planting Flexibility Provisions in the 1990 farm bill to Three

Representative Texas Farms.” Journal of Agricultural and

Applied Economics 26:148-157.

Farming Flexibility Act of 2005. H.R. 2045. .S. House. 109th

Congress, 1st Session. Introduced May 3, 2005.

http://thomas.loc.gov/cgi-bin/bdquery/D?d109:2045:./

list/bss/d109HR.lst::|TOM:/bss/109search.html.

Farm Security and Rural Investment Act of 2002 (2002 farm

bill), U.S. Statues at Large 116 (2002): 134.

Federal Agriculture Improvement and Reform Act of 1996

(1996 farm bill), U.S. Statues at Large 110 (1996): 888.

Food Agricultural Conservation and Trade Act of 1990 (1990

farm bill), U.S. Statues at Large 104 (1990): 3359.

Food Security Act of 1985 (1985 farm bill), U.S. Statues at

Large 99 (1985): 1354.

Key, Nigel, Ruben Lubowski, and Michael J. Roberts. 2004.

“The 1996 Federal Agriculture Improvement and Reform Act:

Correcting a Distortion?” Selected Paper for 2004 AAEA

Annual Meeting.

Thompson, Troy N., Thomas O. Knight, and Billy D. Boren.

1990. “Estimating The Value of the 0/92 Reduced Planting

Alternatives of the 1985 farm bill For Farm Program

Participants.” Southern Journal of Agricultural Economics

22:87-97.

USDA National Agricultural Statistics Service. 13 January

2006. http://www.nass.usda.gov/index.asp.

Westcott, Paul C., C. Edwin Young, and J. Michael Price. 2002.

“The 2002 Farm Act: Provisions for Commodity Markets.”

USDA-Agriculture Information Bulletin Number 778.

Wu, Shunxiang, David J. Walker, and Merlyn A. Brusven. 1997.

“Economic and Environmental Impacts of Planting Flexibility

and Conservation Compliance: Lessons from the 1985 and 1990

farm bills for Future Farm Legislation.” Agricultural and

Resource Economics Review 26:216-228.

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Figure 1. Locations of seven multi-county regions of Texas

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Table 1. Average planted acres of government program crops for seven regions of Texas, 1985-2004

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Table 1. Cont’d.

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Table 2. Summary of significant changes in planted acres of government program crops for seven regions of Texas,

1985-2004

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Table 3. State average market prices for program crops grown in Texas, 1985-2004