Analysis of a General Cropland Retirement Program

Report Introduction: A general cropland retirement program has been suggested frequently as the most efficient method of reducing agricultural production to a level where market demand will take all of the production at prices fair to farmers. The advantages cited for the method include the following: (1) Farmers would be free to shift production among crops and among areas in response to economic and technological developments; (2) production would be more responsive to price changes and farmers would have no incentive to produce to protect allotments or bases; and (3) total production costs would be lower. Often overlooked are the effects such a program would have on production and prices of major commodities and on the incentives for bringing new land into production. A general cropland retirement program is defined as one in which cropland would be retired from production in return for a payment from the Government. Production would not be restricted by allotments or quotas nor would price supports be offered on any commodities. Retirement of cropland could be for 1 year at a time, for a longer term, or for some combination of annual and longer term retirement. A longer term program would be less costly, but annual decisions would allow more flexibility to meet unforeseen situations. This analysis is limited to an examination of the following aspects of a general land retirement program: (1) Minimum cost for retiring 50 million and 70 million acres of cropland; (2) Location of the acreage retired; (3) Location of the acreage remaining in production; (4) Quantity of major crops that would be produced; (5) Effects on incentives to develop new land; (6) Effects on land values; and (7) Effects on farm people. Estimates of costs, acreage retired, and remaining production are made with the simplifying assumption that new land would not be brought into production.