The Federal Water Pollution Control Act of 1972, PL92-500, established the goals of making the nation's streams and lakes swimmable and fishable by 1983 and eliminating both point and non-point pollution discharge by 1985. Implementation of this act, even if carried out uniformly and on the basis of scientifically determined information, could have far-reaching impacts on the agricultural sector.

The purpose of this article is to:

1. 1. Review the requirements of the legislation.

2. 2. Review selected research.

3. 3. Estimate the potential economic impact of proposed regulations on agriculture in Mississippi.

4. 4. Identify research needed to minimize the adverse economic impact of attaining the objectives of the regulations.

One of the fundamental problems in applied econometric work is the choice of functional form. Economic theory is insufficient in suggesting the functional forms appropriate to the specification of economic relationships. Conventionally, the functional form of the regression equation is assumed a priori and parameter estimates are obtained according to certain desirable criteria, such as least squares. A wide variety of functional forms have been investigated empirically with respect to the demand function for food, yet no single functional form has been generally accepted among economists [2, 6, 7].

Currently the United States consumes an estimated 39 to 45 percent of its beef in the “ground” form [3, 7, 8]. As recently as 1972 the estimated percentage of beef consumed as ground was only 33 [3] and some industry leaders have estimated the proportion by 1985 to be from 50 to 65 percent [5, 8, 11, 12]. This increasing trend in the percentage of beef consumed in the ground form is often attributed to several factors including (1) an increase in the percentage of wives working away from home which results in more “eating out” and less home preparation of “traditional” meat dishes for those meals consumed at home, and (2) the continuing growth of the fast-food restaurants and their popular “hamburger” meals [5, 8, 11, 12].

The economic theory to be applied in optimizing feeding periods for finishing slaughter cattle is well developed both for cases in which only one group of cattle is finished and for cases in which each group of finished animals sold is replaced in the feedlot by another group of feeder animals [3, pp. 71–76; 4]. According to received theory the operator who plans to replace the finished animal with another feeder should feed to the point in time at which marginal net revenue equals average net revenue (maximizes returns to time). The operator who does not intend to replace the finished animal with another should continue feeding until marginal net revenue is zero (maximizes returns to the animal).

Cost and volume data used in long-run cost studies often are observations from a single cross-section on firms or the average of multiple observations for each firm [1, 3, 5]. Averaging costs and volume over a time series is designed to eliminate the effect of short-run disturbances on the estimated long-run cost function. This practice results in a loss of information on the cost effects of short-run disturbances and significantly reduces the potential degrees of freedom that could result from pooling cross-sectional time-series data. In order to pool data, binary variables for each firm previously have been used to account for short-run fixed firm effects [4].

Periods of reduced supplies due to exogenous shocks and subsequent high price levels have occurred for many agricultural commodities in the past decade. Consumers' adjustments to these events depend on the magnitude of the shocks and characteristics of the commodity. Understanding consumers' responses to these events requires recognition of rigidities that result in delays in consumer responses to prices.

Recognition of rigidities in consumption relationships by using dynamic stock and flow adjustment models was popularized by Houthakker and Taylor [2]. The models recognize the role of inventories and habits resulting from previous purchase patterns in determining current consumption decisions.

Commodity Credit Corporation (CCC) price support loan activity has important implications for U.S. Treasury outlays. In 1977, CCC purchases of agricultural commodities (the vast majority of which were in the form of support loans) amounted to $3.9 billion. In other words, roughly 25 percent of federal purchases of nondurable goods, or 2.7 percent of all federal purchases, arose from CCC commodity transactions. In 1976, CCC purchases were $900 million, only about 9.5 percent of federal purchases of nondurables and 0.7 percent of total federal purchases of goods and services. Furthermore, the quarterly pattern of the series is extremely volatile, with swings often exceeding $500 million in a single quarter. In the six years between 1972 and 1977, nominal CCC purchases were negative in each of the first three years and positive in the last three.

Although American agriculture has been adopting new technology for more than 100 years, the rate of adoption has greatly accelerated in recent decades. This technological revolution has resulted in important changes in rural America. Mesthene [12] points out the impact of technological change on society; Donaldson and Mclnerney [6] examine the impact of machinery technology on agricultural adjustment.

When farms increase in size and decrease in number, employment opportunities in agriculture are reduced [1]. This change, in turn, affects the viability of towns in farming areas, as shown by Heady and Sonka [8] and by Hamilton, Peterson, and Reid [7]. Changes in agricultural technology, in farm size, and in farm-oriented towns have major economic and social effects on rural communities. Beale [2] documents recent demographic changes and Brinkman [3] discusses the impact on the rural sector of transition to an urban society.

Modeling local and regional manufacturing activity is an important component of economic research. Models that explain the levels of local aggregates, such as employment, aid the efforts of state and local governments to influence the future course of economic activity. Such models also aid private decision makers in their efforts to develop feasibility studies of projects representing different investment alternatives. Input-output and economic base studies are the most common means of modeling local economic activity. These studies, though useful in assessing the multiplier effects of changes in local manufacturing activity, do not capture the temporal influence of national economic trends or the specific community characteristics responsible for varying levels of manufacturing activity. Econometric models, being more flexible and less expensive, may better serve the latter purposes.

The study reported was motivated by a USDA study to develop complete quarterly models of supply and demand for a selected set of fresh salad vegetables. The acreage planted component enters recursively into both the acreage harvested and yield relations used in many of these models. Consequently, predictions of acreage planted are instrumental in predicting total supply and resulting market equilibrium solutions.

In modeling acreage planted over relevant seasons within four regions, various sources of information can be brought to bear. Obviously, data series on past plantings, costs, and prices provide the foundation of statistical estimation of an acreage response model. However, additional information from previous studies, economic theory, and subjective judgment on the part of the researcher also can be incorporated into the model through the use of the mixed estimation technique developed by Theil and Goldberger [8].

Excessive soil acidity has long been recognized as one reason soils become unproductive, and liming to neutralize excess acidity has been practiced at least since the second century B.C. [5, p. 125]. Although liming has become a common practice, some researchers contend that farmers use too little lime [e.g., 5, p. 125].

Although lime is sometimes used to supply calcium or magnesium, it is principally used to neutralize soil acidity [3, p. 178], commonly measured by soil pH. Many agronomists agree that most crops require some lime if pH falls below 5.0 and that most require no lime if pH is 7.0 or higher [17, pp. 221–222]. When legumes supplied nitrogen for other crops in rotation, most lime recommendations were designed to raise soil pH to 6.5 or higher to accommodate the legumes. Now, however, nitrogen requirements for most crops are supplied from fertilizer, and some lime recommendations aim for pH levels somewhat below 6.5, at least for non-legumes such as corn and cotton.

Machinery costs are affected by inflation which, if not correctly considered, will bias cost estimates. Accurate estimates of machinery costs are essential in budgeting costs of crop production in farm policy programs, crop hedging decisions, and general cost of production research. Machinery decisions relating to replacement, size, and custom or leasing alternatives are also improved by realistic budgeting techniques.

The objective of this article is to examine appropriate adjustments for inflation in developing machinery costs through budgeting techniques. The authors attempt to demonstrate the adjustments necessary in both capital and traditional budgeting models to place cost estimates on a real basis. Capital budgeting is first compared with traditional budgeting. Next, by the use of a simple machinery example, the necessary adjustments to account for inflation are shown for a capital budgeting model that does not include income tax considerations. Similarly, the inflation adjustments are demonstrated for a traditional budgeting model that does not include income tax considerations. Finally, a capital budgeting model including income tax aspects is examined in reference to real and nominal after-tax cost estimates.

Crossbreeding in commercial hog operations is widely practiced and has increased substantially in recent years. Perhaps the most important positive feature of crossbreeding is heterosis, i.e., the performance of crossbred progeny is superior to the average performance of the parents. In addition, producers have much wider options in breeding for desired carcass traits and sire and dam characteristics when blending breeds than when making genetic selection within any single breed. The costs to the firm are primarily managerial because of the necessity of buying replacements, frequently rotating boar breed, or maintaining miniherds to produce replacements for the breeding herd. Over the long run there is also a potential cost to the industry of reducing the number of purebred lines from which the crossbreds are derived and thus slowing genetic improvements within breeds.

Achieving optimal use of wildlife resources is a classic problem in natural resource economics. Ciriacy-Wantrup argued that wildlife resources are a case of a fugitive resource for which private property rights cannot easily be defined and therefore government policy may be necessary to obtain optimal use [5, pp. 141–145]. Land use planning is one area of government policy in which limited attention has been given to management of wildlife resources. One reason for the neglect may be the lack of emphasis on estimating the value of wildlife recreation experiences associated with particular land uses. An exception is the work of Martin, Tinney, and Gum [16] who did not look at marginal land use changes but did consider the termination of all cattle ranching in Arizona and its effect on recreational and agricultural economic surpluses.

Government control of tobacco production through output restrictions and price supports began with the Agricultural Adjustment Act of 1933. The primary goals of the program through the years have been to stabilize tobacco prices and to improve farm income. The tobacco program came under public scrutiny after the U. S. Surgeon General's Report on Smoking and Health in 1964 [11] and the report this year [12]. Critics charge that tobacco production policies of the U. S. Department of Health, Education, and Welfare are inconsistent or even in direct opposition. These issues present a policy dilemma. A theoretical framework is devised for analyzing social costs of the tobacco program and application of the framework to current policy issues is examined.

The interregional transfer of agricultural research results has long been recognized by sociologists and economists [10, pp. 524–526]. The first major economic study in this area was reported in 1957 by Griliches [7]. However, many economists have failed to account for this type of transfer in estimating rates of return for agricultural research investment at the state level. A possible explanation for the failure to account for this transfer is that many analyses at the state level are modeled after national studies. Though researchers estimating a national rate of return may not feel a need to account for interregional transfers, these transfers clearly cannot be ignored at the state or regional levels. Latimer and Paarlberg [9] and Bauer and Hancock [2] estimated aggregate production functions for states and had difficulty finding a statistically significant relationship between research expenditures within the state and agricultural output. Bauer and Hancock finally estimated a lagged relationship that is in conflict with other conceptual and empirical models. Latimer and Paarlberg concluded that research is so pervasive that there are no measurable differences in levels of farm income attributable to differences in research inputs by states [9, p. 239]. More recently, Bredahl and Peterson [3] examined the differences in rates of return to cash crops, dairy, poultry, and livestock research among states. These estimates are appropriate if agricultural research results are limited by state boundaries. The interregional transfer of agricultural research results needs to be taken into account in estimating the returns to agricultural research at a regional level.

The food stamp program, as enacted into law in 1964, was intended to improve the diet of low income households, but whether the program resulted in a nutritional improvement remains a controversial question. Several studies have evaluated the nutritional impact of the food stamp program on participant households. In general, the study findings do not conclusively resolve the question of nutritional improvement for participant families. Studies of California families showed some nutritional improvements among food stamp recipients in comparison with nonrecipients [7, 8]. A study in Pennsylvania showed no nutritional improvements, except in temporary periods of cash shortage [9].

Few researchers have attempted to assess the impact of the Food Stamp Program (FSP) on both food expenditures and nutritional status [1, 3, 6]. Even fewer have evaluated the joint impact of income supplement programs, such as the FSP, and nutrition education programs, such as the Expanded Food and Nutrition Education Program (EFNEP), on the nutritional status of participating households [4, 10]. The purpose of this article is to (1) identify selected food group and corresponding nutrient intake responses associated with participation in the FSP and EFNEP, (2) simulate the nutritional impact of alternative policy mechanisms with joint FSP and EFNEP participation, and (3) explore policy implications for food and nutrition program planning.

In an article titled, “Application of Price Elasticities to Farm Policy Analysis,” Bateman and Stennis [1] present an intriguing analysis of the use of demand elasticities for U.S. farm policy in the world market perspective. They present two different approaches to demonstrate the importance of the world market to U.S. agriculture and conclude that unilateral reduction in production of U.S. farm products is not likely to enhance and to maintain farm income unless the farm commodities under consideration are almost perfectly inelastic in the world market and/or the U.S. is the only or dominant source of supply. The analyses are based on the estimated elasticities and the logic of economic deduction.