The thesis of this article is that food and agricultural policy in the 1980s will be shaped by emerging economic, social, and political realities that are different from the realities which gave rise to policies and programs of the 1920s, 1930s, and 1940s and which, modified, continued through the 1970s. The characteristics of this new policy environment include:

1. – A changed economic structure and character of United States agriculture, and thus a changed constituency with changed policy needs.

2. – The internationalization of U.S. agriculture with its favorable and unfavorable implications, but which imposes certain constraints and disciplines on domestic agricultural and food policy.

3. – The prospect of a new supply and demand “equilibrium” and the end of 60 years of adjustment to supply growing faster than demand.

4. – The new, broadened context within which agricultural policies and programs must be considered.

On March 12, 1979, Secretary of Agriculture Bob Bergland issued a call for a full-scale national dialogue on the structure of American agriculture. According to USDA, “Reaction to the speech has been widespread and, in the main, highly positive.” The main factor contributing to this “widespread highly positive” response has been the ambiguity of the subject matter. Farmers, along with special interest groups of all types and persuasions, have eagerly jumped on the structures bandwagon to blame/praise one or more particular aspects of agricultural structure for all the evils/blessings currently within their fields of vision. This broad range of comments and opinions on structure can be attributed to the extreme extent to which the structure of agriculture pervades and is interwoven with the national economy and society in general. Unfortunately, some unreasonable expectations apparently have also emerged concerning which of agriculture's ills can be alleviated via a structures policy. The aim of this article is to attempt to give some perspective to the structures issue.

National food, agriculture, and trade policies operate in part through commodities. In our view, commodity policy encompasses the actions policymakers direct toward individual commodities in their attempt to influence supply, demand, price, farm income, and resource use. The instruments or provisions Executive branch policymakers use are granted by Congress through legislation. In this article we consider commodity-related developments that could occur in the 1980s and relate those developments to issues that policymakers will confront. We examine the economic pressures likely to affect producers, the instruments that policymakers may seek, and the legislative response.

Criticism of current agricultural programs is coming from within and outside agriculture. Secretary Bergland in recent “grassroots hearings” has called for new approaches in agricultural policy in which recipient benefits do not hinge on size of farming operation. Hjort suggests that despite widespread agreement on the objective of encouraging the family farm, “the cumulative effect of our farm programs may well have been to hasten the concentration of the farm sector….” (Hjort, p. 748). Producers of flue-cured tobacco voted overwhelmingly in December 1979 to continue a program but are upset about high quota rental prices. Outside agriculture, consumers are unhappy about the effects of farm programs on prices of milk, sugar, and other products. Students of the political process are concerned about the effects of the use of state power by small, politically powerful groups to secure economic gains.

The title assigned for this article suggests that a group of bureaucrats can accurately predict the actions of both the legislative and executive branches of government. Though the compliment is appreciated, it must be recognized that both the legislative and executive branches of government are subject not only to periodic changes in personnel, but also to abrupt changes in the attitudes exhibited by given personnel. Probably the most dramatic recent example of abrupt change in legislative and executive attitude in the area of agricultural policy is the series of events that occurred immediately before, during and subsequent to the January 4, 1980, announcement of the suspension of trade with the Soviet Union. Thus, it is unlikely that any analyst — be he bureaucrat, academic, or businessman — can accurately predict either legislative or executive decisions over the next 30 days, let alone over the next 30 years. Therefore, in analyzing the future of federal programs for Southern commodities, one is to some extent limited to an examination of whether such programs have in fact accomplished their stated purpose, and secondarily to an examination of whether the conditions and circumstances that originally created the need for these programs persist to a degree that justifies their continuation with or without any necessary modifications.

Though agriculture in the United States has been looked upon as being technically efficient in terms of output per unit of labor, it is not nearly as efficient in terms of output per unit of liquid fuels consumed (Debertin, Pagoulatos, and Boadu; Pagoulatos and Timmons). In this article, we examine the potential for substituting other inputs for liquid fuels in the agricultural production process. Studies of elasticities of substitution between energy and other inputs are reviewed. On the basis of these studies, we suggest possibilities for using other inputs instead of liquid fuels in agriculture. We present recent research results relating fuel use to tractor prices and horsepower. We compare Kentucky counties in terms of their energy use in relation to their mix of agricultural enterprises and mechanization levels. Finally, we speculate on the potential impacts of significant increases in real fuel prices on the major agricultural enterprises in the South.

Several factors arose during the post-World War II era and particularly the 1970-1980 decade which had a great impact on the U.S. food and agriculture system—including forestry, fiber, and related activities. They include (1) the increasing interdependence among the basic industries of agriculture and forestry and other sectors of the domestic and world economies, (2) the emergence of a technology highly dependent on petroleum and petrochemicals accompanied by increasing dependence of the U.S. on foreign sources of petroleum, the cartelization of major foreign crude oil suppliers under OPEC, and an increased vulnerability to worldwide political unrest, (3) the rapidly expanding export market for farm food and feed commodities and the reliance on farm commodity exports to help offset a growing deficit in international trade, (4) the rapid commercialization and industrialization of the food and agriculture sector, and (5) the increasing social awareness and demands for improved environmental quality and human health that led to public regulations affecting the food and agriculture system.

Approaches to the formulation of optimal beef cattle management programs have changed significantly since they were first examined in a linear programming context in the 1950s. Models were originally designed to identify feed rations which minimize the cost of providing minimum levels of energy and selected nutrients. Subsequent efforts sought to maximize overall farm or feedlot profits, including identification of optimal feeding weights, daily gains, and ration formulations (Kearl, Harris, and Fonnesbeck; Ladd and Williams). The studies varied in attention to such details as number of head fed, variety of alternative feeds, seasonality factors, animal characteristics, and the manner in which energy requirements and appetite are modeled Wilson, and others cast the California net.

Knowledge of the lead-lag relationships among the retail, wholesale, and farm level prices of a livestock commodity is of obvious importance both in econometric model building and in evaluation of packers' and retailers' margins for that commodity. Though the lead-lag relationships for beef prices have been investigated in several previous studies (Barksdale et al.; Franzmann and Walker; King; Miller; National Commission on Food Marketing), the only known previous study of the lead-lag relationships for pork is that made by the National Commission on Food Marketing (hereafter abbreviated NCFM). As that study used data for 1962-1965, changes in the pork marketing system in subsequent years may have in turn occassioned changes in the lead-lag relationships. The changes in the pork marketing system include changes in market structure at the farm, packer, and retail levels, increased use of formula pricing, and the demise of terminal markets, among others. Also, as discussed hereafter, the statistical method used in the NCFM analysis of lead-lag relationships involved certain problems which may invalidate the conclusions drawn in that study.

Increased attention is being directed to electronic markets in the major agricultural commodities. Electronic markets are characterized by a trading arena that has been centralized via some electronic medium. The medium used may be a conference telephone, teletype, computer system, or some combination of these or other mechanisms. All make possible the sale of a commodity by description without requiring the physical proximity of buyer, seller, and product. In theory, this capability can eliminate or reduce the spatial imperfections and pricing problems now present in many “thin” markets, a topic of increasing concern throughout the food industry (Hayenga).

Price risk has been a major problem for cattle feeders during the 1970s. Since 1972, variability in cash cattle prices has increased dramatically as a result of volatility in the feed grain sector, the cyclical liquidation of cattle numbers which began in late 1973, and cyclical moves in hog prices. The increased levels of price risk have prompted increased interest in hedging.

The literature on hedging strategies for cattle feeding operations continues to grow. Results of early studies show hedging has the capacity to reduce risk in cattle feeding as measured by the variance of per head profits (Heifner; Holland, Purcell and Hague). More recent studies have developed and tested strategies which have the potential both to reduce price risk and increase profits. Selective hedging is typically employed. A mathematical model to predict cash price, sell-buy signals based on some technical trading system, or some other approach is used to select when the cash position should be hedged.

Concern has been expressed by many people, from producers to consumers, regarding the adequacy and accuracy of reported wholesale carcass beef prices and their use in pricing slaughter cattle and beef. The controversy has generated numerous government investigations and lawsuits beginning at least as early as the mid-1960s (General Accounting Office, 1977, 1978; National Commission on Food Marketing). Despite the decade and a half of criticisms about cattle and beef pricing and price reporting, and the importance of the carcass beef market to the cattle and beef subsector, agricultural economists have devoted surprisingly few resources to analyzing carcass beef market performance.

Historically, the manufacturing milk sector has been treated as the residual segment of the dairy industry. Milk for fluid consumption has always had first claim on Grade A milk production and any excess milk has been available for manufactured products. The pricing system for milk reflects the dependence on manufactured products as the residual outlet for excess milk. On-farm quality standards for production are lower for manufacturing milk and thus the farm price is lower. The proportion of whole milk produced as manufacturing grade milk is declining as producers shift to Grade A production. The decline in supply has been accelerated to some extent also by the upgrading of on-farm quality standards in recent years. Many small producers left the industry rather than make the necessary expenditures to upgrade on-farm facilities. In addition, the movement of Grade A milk into the expanding fluid milk markets in the South has resulted in a declining quantity of excess Grade A milk. Consequently, there is excess processing capacity in the manufacturing milk sector.

South Carolina producers supply tomatoes on a national scale during an approximately five-week market window centered in June. This market window follows a six-month period dominated by Florida production and to a lesser extent Mexican exports. Even though South Carolina is the major East Coast supplier of tomatoes during its market window, the success or failure of South Carolina marketings depends on the stage set by Florida and Mexico. That is, the price level obtained by South Carolina producers for their tomatoes tends to be influenced by the volume of tomatoes delivered to market prior to South Carolina's harvest. South Carolina, Florida, and Mexico serve many of the same markets (i.e., Northeast terminal markets). As a result, the influence of the volume prior to South Carolina's harvest on the state's average tomato price can be used to provide farmers with a price estimate before planting. Specifically, a model is constructed to forecast the average spring tomato price received by South Carolina producers. This forecast must be available to producers by mid-February if it is to serve as a decision-making tool.

Considerable attention has recently been paid (Rhodes, Tomek and Robinson) to the various alternative mechanisms for discovering prices of agricultural products. Alternative mechanisms include organized markets and auctions, individual price negotiations, group bargaining, supply-demand estimation pricing, and formula pricing. One such price discovery mechanism is currently employed by the Florida Celery Exchange, a voluntary marketing cooperative which represents all major Florida celery producers in setting prices. The role and performance of the Exchange in influencing weekly Florida celery harvesting and pricing decisions are of particular interest because the Exchange's price-fixing activities represent, at least a priori, a departure from the traditional competitive price determination process.

In an effort to circumvent the multicollinearity problems associated with direct estimation of the aggregate agricultural production function, many economists have used indirect estimation procedures. Because in equilibrium the partial production elasticities of an industry composed of perfectly competitive firms are equal to their respective factor shares, the latter have been used as a means of estimating production elasticities. Most researchers have simply assumed that actual factor shares are equilibrium values (e.g., Griliches; Rosine and Helmberger). Substantive contributions recently have been made in explaining the process of factor share adjustment by changes in prices and technology over time (Binswanger; Lianos). However, except for the work nearly 15 years ago by Tyner and Tweeten (1965), agricultural economics literature is largely silent on the measurement of differences between actual and equilibrium factor shares. It is this issue with which we are primarily concerned in this article. Therefore, our point of departure is the work by Tyner and Tweeten.

Farm planning in developed economies has reached the sophistication level of involving static and dynamic annual or polyperiod decision models. These models or frameworks range from unadorned linear programming to dynamic systems utilizing interdependence among time spans. Goal or criterion decisions range from unrestricted global profit maxamization to local profit comparisons restricted by risk and other considerations.

Systematic farm planning from the micro to the macro level is common in developed economies because of widespread knowledge of the planning tools and the availability of low-cost computational facilities. The potential increase in profits on large commercial farms makes the use of these planning tools profitable whether the farm unit bears the total cost or Extension Services or lending institutions subsidize their use.

The culture of marine invertebrates, collectively termed mariculture, has received much attention as a new and potentially lucrative industry. Much research has been devoted to molluscs (oysters, clams, and mussels) and crustaceans (shrimp, crawfish, crabs, and lobsters) (Bardach, Ryther, and McLarney). In particular, effort has been directed to the development of a technologically and commercially feasible penaeid shrimp mariculture scheme (Broom; Mock and Murphy; Neal and Latapie; Parker and Conte; Wheeler). Results of extensive research efforts show promise that the technological feasibility of penaeid shrimp farming in Gulf coastal regions of the United States is near to being a reality.

Since the mid-1940s, interest in the interrelationships of subnational economies has been growing. Part of this interest flows from a realization of the need to manage regional growth and mitigate the effects of economically unstable components of regional economies on the welfare of the people within the region. Aggregated macroeconomic models applied at the national level commonly provide insufficient information about their components, the regional economies. This lack has led to the development of state and regional macro models which can provide specific information relevant to state or local decision makers. Such information includes the availability of regional resources necessary to support and expand regional production and the impacts of changes in demand on the welfare of local inhabitants. These models are also useful in estimating the impacts of national policy on regional economies. The development of regional input-output models is an example of the trend toward fuller understanding of regional economies. State or regional input-output models can be constructed either by survey or by estimation from the national input-output model. Time and money constraints have increased the popularity of the latter approach among regional economists.