Structural Changes in United States Cotton Supply

Agricultural supply represents the quantity supplied for a given price of a commodity. The supply function is an algebraic representation that shows, in this case, how much yield and acreage output changes from variations in prices and various inputs. Estimating supply functions is an important economic research topic. However, publications on this topic involving applications to agricultural crops are not plentiful, particularly for cotton. This paper focuses on the estimation of cotton supply functions and elasticities within the United States cotton industry. U.S. cotton yields appear to have been dramatically increased in recent years from newer varieties, boll weevil eradication, weather, and other technological improvements. Changes in both productivity and input cost suggest likely changes in supply relationships. Seventeen cotton producing states were divided into homogenous regions. A two equation model was used to estimate the supply functions and elasticities for each region. The results were mixed, depending on the region. There was difficulty in finding good model fits likely due to complexities of biological responses as well as policy distortions. The parameter results suggest that the major determinates of yield were weather and technology. The major determinates of estimating acreage was production in the previous year and policy variables. The overall purpose of this paper was to estimate cotton supply elasticities, which tended to be inelastic across the United States.