ACREAGE RESPONSE TO THE TARGET PRICE AND SET-ASIDE PROVISIONS OF THE FOOD AND AGRICULTURE ACT OF 1977

The Food and Agriculture Act of 1977 increased the influence of target prices on acreage allocation decisions Differences between target and market prices were highly correlated with rates of participation in recent grain set-aside programs But, target prices also encourage set-aside participants to increase acreage of the set-aside crop The net effect of a set-aside on acreage of a specific crop may, thus, be positive or negative. Deficiencies in the target price formula magnify the potential for target prices to disrupt the allocative function of market prices.