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The Impact of Cereal Prices and Policy on Crop Rotations and Supply Response

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  • Paul Wilson
  • James Gibbons
  • Stephen Ramsden

Abstract

The impact of cereal prices on rotational decisions and farm‐level and industry cereal supply is considered. It is argued that with the voluntary 50 per cent set‐aside option for cereal producers, there is a large financial incentive to adopt a 50 per cent set‐aside cropping plan as cereal prices fall below an individual producer's ‘indifference’price. For a typical 210‐hectare UK combinable crop farm, adopting a 50 per cent set‐aside cropping plan is optimal when the price of cereals is below £62/tonne (98.50/tonne). If widely adopted, 50 per cent set‐aside will lead to a substantial fall in the supply of cereals and would lead the industry supply curve for cereals to move leftward and become more elastic over a certain price range. The level of reduced cereal supply will be greater than would be predicted from an estimate of industry level supply response that ignored rotational and farm‐level financial incentives.

Suggested Citation

  • Paul Wilson & James Gibbons & Stephen Ramsden, 2003. "The Impact of Cereal Prices and Policy on Crop Rotations and Supply Response," Journal of Agricultural Economics, Wiley Blackwell, vol. 54(2), pages 313-323, July.
    • Handle: RePEc:bla:jageco:v:54:y:2003:i:2:p:313-323
    DOI: 10.1111/j.1477-9552.2003.tb00065.x
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    Cited by:

    1. Iain Fraser & Robert Waschik, 2005. "Agricultural Land Retirement and Slippage: Lessons from an Australian Case Study," Land Economics, University of Wisconsin Press, vol. 81(2).

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