leading commercial farmers at the level of manage- 

 ment that tends to produce the highest economic 

 returns per acre. This level of management involves 

 using the best varieties; balancing plant populations 

 and fertilizers to the potential of the soil; control- 

 ling erosion, weeds, insects, and diseases; and 

 maintaining optimum soil tilth and adequate 

 drainage (49). Some soils have no estimated yields, 

 or no yields estimated for certain crops, because 

 crop production was not judged feasible on these 

 soils given existing technology and economics. 

 Costs of production by crop and by State are 

 estimated in crop budgets developed by Economic 

 Research Service (ERS) as part of the firm enter- 

 prise data system (FEDS). FEDS budgets are based 

 on data from periodic farm production expenditure 

 surveys and are processed using a version of the 

 Oklahoma State University budget generator [20). 

 Variable costs include annual costs of seed, fer- 

 tilizer, and chemicals, interest on operating capital, 

 and costs of machinery fuel, repairs, and labor 

 needed to plant and harvest a crop. They exclude 

 fixed costs such as capital replacement, taxes, in- 

 terest, and insurance on machinery and buildings, 

 land charges, and general farm overhead. Budgets 

 for nonirrigated and irrigated production of eight 

 farm program crops (corn, soybeans, wheat, cotton, 

 oats, barley, sorghum, and rice) at the technology 

 and price levels of 1982 are used in this analysis. 



We divided variable production costs by estimated 

 yields to get the cost per unit of production. This 

 cost represents the minimum price at which pro- 

 ducing the particular crop just covers variable costs 

 of the enterprise in the short run. Our analysis was 

 limited to privately owned palustrine wetlands 

 since these are the principal remaining wetlands 

 vulnerable to farm conversion. 



Program Crops and Prices. It is difficult to predict 

 what prices farm operators with wetlands that 

 might be cropped will face. Depending on loan 

 rates in effect, commodity loan programs adminis- 

 tered by the Commodity Credit Corporation (CCC) 

 can establish a floor price well above market clear- 

 ing levels. Under the Food Security Act of 1985, 

 loan rates are 75-85 percent of average market 

 prices over the previous 5 years (discarding high 

 and low years) and deficiency payments will be 

 used to supplement farm income (40], This should 

 result in: (a) lower season-average prices than those 

 received under the 1981 price-support programs, 

 but (b) target prices nearly equal to earlier levels, at 

 least in the first years of the program. 



This analysis assumes that farmers contemplating 

 conversion of wetlands would base their decision 

 on an expected price that weighted near-term price 

 projections higher than prices projected for the 

 more distant future. A simple sum-of-years digits 

 weighting scheme was used to calculate an ex- 

 pected price for the 1986-91 period (table 8). 



Of 59.9 million acres of private palustrine wetlands 

 inventoried in 1982, about 72 percent are suited to 

 at least one of the eight farm program crops. SCS 

 has estimated yields on 42.9 million acres (table 9). 

 Accumulating the acres of private palustrine wet- 

 lands at each break-even unit cost of production for 

 each crop and arraying them in ascending order re- 

 sults in supply curves for wetland conversion, such 

 as the one for soybeans shown in figure 5. This 

 curve shows, for example, that almost all 24 million 

 acres with potential for soybean production would 

 cover variable costs at a soybean price higher than 

 $4 per bushel. Soybeans have the greatest potential 

 for production on private palustrine wetlands, 

 followed by corn, oats, and wheat. 



Table 8 — Historical and expected prices for Farm program crops 



'AgriculturoJ Statistics, 1985. 'Weighted averages of market and target prices implied by 1985 legislation using year number divided 

 by sum of the years (for example, 6/21 for first year, 5/21 for second year). 'Expected loan price for soybeans. 



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