G. E. Brandow

A Note on the Nerlove Estimate of Supply Elasticity

72 equals 1 P, xT1 equals ai, and 7:0 equals ao,. All variables of (4) are observable. 72 and xri can be statistically estimated, and they lead to an estimate of a,. Using this approach, Nerlove computed supply elasticities for cotton, wheat and corn over the period 1909-32. The approach assumes that acreage in any year represents the influence of past market prices, a smooth trend, and random factors. Intuitively, one

Market Power and Its Sources in the Food Industry

Market power is defined in terms of a firms ability to affect directly other participants in the market or such market variables as prices and promotion practices. The article distinguishes between short-run and long-run power and between offensive and defensive power. More than a dozen sources of power are identified in the food industry. Some of the things commonly regarded as manifestations of market power are unreliable indicators of it. In particular, higher-than-average profits and market power do not necessarily go together.

American Agriculture's Capacity to Meet Future Demands

N EMBARKING upon a topic that is full of uncertainties, the only thing I am sure of is that agricultures capacity to produce is an important subject to many people. Consumers, shell-shocked by the rise of food prices of the past two years and facing the consequences of a bad drought, would like to know if relief is ever in sight. Concern about inflation of prices in general-not just food-is high; stability of food prices seems a necessary if far from sufficient condition for getting it under control. Faced by prospects of heavy outlays for imports, especially for oil, the nation hopes that high exports of farm products will help to balance its international account. Persons and agencies concerned about sources of food for hungry people in poor countries turn inevitably to the United States, already by far the leading net exporter of food and one of the most promising sources of export expansion. Farmers would like to know future output in order to form better judgments about prospective economic conditions in their industry. Production or capacity figures by themselves are not very meaningful. What one wants to know is how potential production compares with amounts likely to be demanded at specified prices. Consideration of possible demands, however, makes an already complex problem especially difficult, for great uncertainty attaches to demands to be made on American agriculture as well as to agricultures capacity to produce. Especially for a paper that must be listened to rather than read, it seems necessary to simplify the analysis rather severely. One way to simplify is to focus upon a date sufficiently far in the future so that agricultures production could be markedly different from its present level. The date should not be so remote, however, that we have no useful ideas about demands to be made on agriculture or about the determinants of farm output. I have chosen 1985 as a convenient target date. Another way to simplify is to choose two contrasting situations that seem enlightening about the many outcomes that might possibly develop. I shall try now to be explicit about the two benchmark situations to which I intend to give special attention.

Space-Product Equilibrium in the Dairy Industry of the Northeastern and North Central Regions

The broad impact of the removal of all institutional barriers to the production and movement of fluid milk on the dairy industry of the Northeastern and North Central regions is examined. Competitive equilibrium patterns of milk production, utilization, prices, and shipments are obtained by estimating supply and demand functions for various areas of the nation and relating prices in the areas by transfer costs for fluid and manufactured milk. The effects of alternative estimates of some key variables are studied. All equilibrium solutions show a decline in Class I prices in the Northeast, a general increase in manufacturing milk prices, and some shift of production from the Northeast to the Lake States. These results are modified only a little by introducing a hypothetical fresh milk concentrate. Some implications for price policy are discussed.

The Food Price Problem

has serious implications for national economic policy, traditional agricultural policy, and the agricultural economics profession. Because of the importance and timeliness of the food price problem and related public policy issues, the editors have broken a long established tradition and solicited the following three papers. These were written as a critique and broadly based discussion of the 1973 Economic Report of the President and the Annual Report of the Council of Economic Advisers.

Conflicts and Consistencies in the Agricultural Policies of the United States and Canada

WE TAKE UP the subject of agricultural policy at a time of great uncertainty as to what the future may hold. For two decades excess production capacity in agriculture has existed in both the United States and Canada. Programs to support farm prices and incomes and to limit marketings of some farm products have been in operation. Competition for export sales has been keen. As the 1970s began, Canada was struggling with surpluses of grains and dairy products. The United States in 1972 was paying farmers for withholding about 60 million acres from crop production. The past year, however, has been so dramatic an exception to the usual situation that many observers do not expect chronic surpluses to reappear. Under the impact of poor crops in Russia and some other countries, exceptionally strong demand for meats, poor planting weather in the United States this spring, inflation throughout the world, and still other factors, surpluses have disappeared and prices have soared.