Cotton Acreage Response to Price Signals Due to Agricultural Policy and Market Conditions

Legislation in the 2002 Farm Bill provided for a common commodity policy of income support among field crops consisting of direct payments, counter-cyclical payments, and marketing loans. Price elasticities developed for short time periods lead to acreage response estimates that are due to a single policy for a common time period. Results for cotton acreage allocations with own-price and cross price elasticities demonstrate it is possible to alter markets without creating distortions that cause producers to ignore price signals.