Structural Changes in U.S. Cotton Supply

Structural Changes in US Cotton Supply

 

Objectives

The objective of this paper is to develop regional cotton supply functions by econometrically estimating yield and acreage equations. The results will be tested for structural changes in U.S. cotton supply relationships, and comparisons will be made to more commonly used elasticities used for policy analysis, e.g., by FAPRI, aggregate supply/demand estimates.

 

Data Methods

This paper will define five cotton producing regions for the United States very similar to the USDA Farm Resource Regions (USDA ERS, 2000).  Regional specifications were chosen for this paper to better delineate different cotton production systems. Regional cotton yield will be estimated as a function of a lagged price of cotton, lagged yield, and weather variables.  Rainfall and temperature data from weather stations will be used to represent the wider region.  We will also approximate regional weather effects by simply indicating the occurrence of El Nino/La Nina phenomenon.  Harvested acres will be estimated as a function of lagged price of cotton, lagged acres, policy variables, lagged prices of competing crops and net expenses. 

Expected Results       

The results of this study will include a yield and acreage equation for five regions across the United States. This study will identify what impact various variables have on cotton production across the United States. Tests will be performed to determine if any structural changes exist.

This research will help to identify key variables in cotton supply and elasticity results will be very important to decision makers.