Shifting Supply

Another possible way of dealing with the excess supply would be to somehow induce farmers to reduce their supply. This is shown by the following figure:

Figure 7: Supply Restriction

• In the early days of farm regulation, acreage quotas were imposed on some crops. An acreage quota is a legal limit to the number of acres a farmer can plant in a particular crop, such as cotton. Usually the limit was stated as a proportion of the number of acres the farmer had planted in some earlier year. However, this approach was not very effective. Farmers would choose their best land for the controlled crop, and concentrate their fertilizer and work on the reduced acreage, so that the acreage quotas didn't reduce supply proportionately -- and so, while the excess supplies were reduced, they were not eliminated. Also, of course, simple evasion was common enough. In the late 1930's, my father (then a young man) was employed by the federal agriculture department as an inspector. In one case, he insisted in walking through a densely planted field of corn. After a few yards of corn, he found the center of the field planted in illegal cotton! Such evasion is a predictable result of quota regulations.
• Since quotas are coercive and create incentives to evasion, the U. S. government in the 1950's tried a different approach to bringing land out of production: the Soil Bank. In this program, farmers were paid to retire land from cultivation. Since -- again -- the farmers could retire the least productive land and concentrate their other inputs on the remainder, this program, too, had a less than proportionate impact on the excess supply -- but it probably reduced the incentive to cheat.

The remaining possibility is not to try to remove the excess supply, but instead to support the price by means of subsidy.

Subsidy