Input Allocation in Multicrop Systems

Using data only on aggregate variable input use and land allocation, this paper suggests a methodology for allocating variable input use among crops and improvement of regional crop budget information. Two approaches for estimation of variable input allocations among production activities are examined. One relies on behavioral rules whereby input allocations follow accepted rules of thumb. The alternative approach is derived from profit maximization where input use responds instantaneously to changes in input and output prices. The behavioral rules dominate instantaneous response to prices in explaining the data analyzed in this paper and suggest the validity of a simple behavioral approach for developing enterprise budgets and cost of production estimates. Key words: behavioral rules, enterprise budgets, profit maximization, variable input allocation. A major responsibility of farm management economists is to develop reliable crop budgets. Too often crop budgets are developed by gues-stimates based on only a handful of informal in-terviews rather than formal statistical analysis. 1 Also, since 1973 the U.S. Secretary of Agri-culture has been legislatively mandated to con-duct national cost of production studies for se-lected crops. Because most farms produce several crops and do not record input use by crop, pro-ducing reliable crop budgets and enterprise cost of production estimates requires sound estima-tion of variable input allocations among crops (Hornbaker, Dixon, and Sonka). One approach is to survey farmers, asking them to estimate the amounts of each input they al-locate to each crop. Because of survey cost con-siderations, this approach has been feasible only Richard E. Just is a professor of agricultural and resource econom