An Economic Analysis Of The Sale Of Cotton Allotment Across County Lines In 1966

The sale of cotton allotments among producers has been of minor importance relative to programs allowing leasing, release and reapportionment and voluntary diversion under the domestic allotment program. Allotment sale is, however, a potentially important device in the reorganization of cotton allotment among producers and regions. This reorganization is important if farms are to grow to efficient sizes and if areas which have experienced the greatest growth in productivity are to increase acreage produced. The sale of cotton allotment among all producers within the state is of interest to owners of other allotments because this is the first time permanent transfer has been allowed and because allotment can be transferred across county lines. The sale of cotton allotment was authorized in the Food and. Agriculture Act of 1965. In 1966, slightly more than 4,700 acres of allotment were transferred across county lines. The sample obtained for this study included 578 contracts representing a little more than 4,000 acres of transferred allotment. Most of the transfer was from counties located in the Piedmont. The major receiving area was in the South Central portion of the state. Farmers in the Lower Coastal Plain area of the state sold some allotment but leased even greater quantities. Similarly, some allotment was purchased by farmers in the Northeast area but leasing was of greater importance in increasing allotment acreage. This pattern of transfer suggests that exchange of allotment tends to be concentrated in relatively nearby areas. The mean sales price reported by transferring farms was 13.8 cents per pound of projected yield. The mean reported by receiving farms was 12.7 cents per pound. The average reported price varied among four areas within the state, but the differences were not substantial. The mean prices per acre were $51.44 and $57.04 for transferring and receiving farms, respectively. The difference is due to higher projected yields on receiving farms. There was little systematic variation in prices. A small time trend in prices was found to be statistically significant. Prices were a little higher late in the trading season. Farmers who purchased large quantities of allotment paid slightly more than farmers purchasing small amounts of allotment. This finding runs counter to the generally held notion that large farmers have more market information and consequently "take advantage" of small farmers. Receiving farms were five to six times as large as transferring farms on the average. There was great variation in size among the receiving farms. Information on a portion of the sample receiving farms indicates that farms with more than 100 acres of 1966 effective allotment were responsible for two-thirds of the total purchase of allotments across county lines in 1966. This suggests that purchase of allotment may be playing an important role in the increase of the number of efficientsized farms. On the other hand, the proportion of effective allotment that was purchased declined as size of farm increased. Other allotment transfer programs are also important in aiding farms to grow. Variation in the price paid per pound is an indication that the transfer market did not work perfectly. As the density of transfer increased, the variance in prices paid decreased. This result suggests that the performance of this market could be improved if central trading of allotment could be organized. The current system of contracting between producers in widely separated areas is time consuming and expensive. The development of a central allotment transfer market would probably require some enabling legislation but the amount and efficiency of transfer might be greatly increased.