Nice article on the Conservation Reserve Program

I suppose few people are regular readers of Wheat Life.

If not, and you have any interest in the Conservation Reserve Program, I think this article is unusually good.  And I don't say that just because the Jim Putnam quotes me.  He quotes almost all the leading authorities on the subject.  He covers many key aspects of the program, albeit predominantly from a  Pacific Northwest viewpoint.

Thin posting in general these days because I've got higher priorities. I do hope to pick things up on a semi-regular basis by the middle of March.

Comments

  1. joeMarch 13, 2012 at 10:44 AM

    What impact do you think CRP has on crop prices? 30M acres is significant, but less so when considering the productivity of the average acre in the program.

    If we flipped a switch tomorrow, and all CRP acres were available to farm, would production increase 1%? 5%? And what's a reasonable range for the price elasticity of supply?

    I'd assume the impact on the wheat and hay markets would be biggest (or maybe "more direct" would be a better way to say it). I understand that just because the marginal acre isn't next-best suitable for corn doesn't mean it won't hit corn prices.

    ReplyDelete
  2. Michael RobertsMarch 14, 2012 at 10:55 PM

    Joe
    Sorry for my late reply. I've been neglecting this blog due to a docs on other priorities.

    Yes, I think CRP makes a significant difference, even though it's low quality land. Demand is very inelastic. A small revision in USDA harvest forecast can really move prices, even though such shocks are mostly buffered by inventories. So, long-term retirement of 30+ million acres of low quality land could make a big difference.

    I'll note that I haven't always held this view. But that was before I had an appreciation for how inelastic demand for agricultural commodities must be.

    ReplyDelete

Post a Comment

Popular posts from this blog

Nonlinear Temperature Effects Indicate Severe Damages to U.S. Crop Yields Under Climate Change

Image
It's been a long haul, but my coauthor Wolfram Schlenker and I have finally published our article with the title of this blog post in the Proceedings of the National Academy of Sciences . We've been told that it would show up on the early-edition website this week. It hasn't shown up there yet so I guess it will come out tomorrow [Friday 8/28], probably late afternoon EST. UPDATE: You can find the article here . We set out to develop a better statistical model linking weather and U.S. crop yields for corn, soybeans and cotton, the largest three crops in the U.S. in production value. Our major new finding is that (by far) the best predictor of yield is a measure of extreme heat: how much temperatures exceed about 29C (84F) during the growing season. The threshold varies somewhat by crop--29C is the threshold for corn. Below this threshold, warmer temperatures are more beneficial for yields, but the damaging effects of temperatures much above 29C are staggeringly large. A
Read more

Commodity Prices and the Fed

I think Mark Thoma nails this .  What he describes is exactly the way I think about the issue but have been unable to articulate. To answer the question in the title of this post, it's useful to think of an island with only two goods. One of the goods is non-renewable, but highly desirable. The other good is less preferred, but it is renewable (thinking of renewable and non-renewable energy resources, for example). The key is to distinguish between changes in prices that reflect changes in the relative scarcity of the two goods, and changes driven by increases in the money supply. Over time, as the stock of the more desired good falls due to consumption, the price of this good will rise relative to the renewable good. Consumers will be hit by increases in the cost of living -- the same basket of the two goods purchased last year now costs more. But is this the kind of increase in prices the Fed should respond to? No, the price increase -- and the increase in the c
Read more