SOUTHERN JOURNAL OF AGRICULTURAL ECONOMICS DECEMBER, 1987 THE RESPONSIVENESS OF U.S. CORN AND SOYBEAN ACREAGES TO CONDITIONAL PRICE EXPECTATIONS: AN APPLICATION TO THE 1985 FARM BILL

Abstract models are closely related, it is important to Naive and adaptive schemes have been used develop variables that contain relevant infor-as proxies for price expectations in previous mation and at the same time avoid multicolli-studies of supply response. Those studies con- nearity problems. Particular attention must tain mixed formulas of futures, support, and be focused on how price expectations, impor-lagged prices as alternative formulations for tant determinants of farmers ' production deci-price expectations. This study uses a condi- sions, are formed in an environment of tional expected price which combines both government programs. market and support prices into one price ex- The objective of this study is to investigate pectations measure. It defines the total effect the role of conditional price expectations in of available information on supply response. acreage responses of corn and soybeans. This The results indicate the potential usefulness study analyzes the effects of farm programs of formulating expected prices as conditional on farmers ' price expectations under the price expectations in supply response assumption that the price expectations of ra-analysis, with support prices being the condi- tional producers are formed conditional o