LINCOLN--You can count on it. One of the more contentious items in the upcoming farm bill debate will be whether we should return to production controls in a new law.

Set-asides and other land-idling schemes were a part of most every farm bill from 1933 through 1990. But passage of the Federal Agriculture Improvement and Reform Act in 1996 broke the mold. Under current law, farmers are not required to take land out of production as a precondition to receiving supports from the federal government.

Critics say that the lack of a supply-adjustment mechanism in the 1996 act is a serious flaw. Prices for all the major crops grown in Nebraska have been lackluster since mid-1998. Why not spur prices higher by restricting bushels offered to the marketplace? It seems like a logical question that deserves an answer.

Supporters of the current system respond that commodities are produced and marketed around the world. Any attempt to reduce U.S. production might be met by increased production elsewhere. Some livestock feeders also wouldn't be happy with the prospect of higher feed costs. Then there's the matter of how agribusinesses feel about it. Many survive on the basis of volume; the more acres in production, the better it is for farm-related businesses.

Recently, formal studies by agricultural economists at the University of Maryland and Iowa State University examined the land-idling question in greater depth.

In the first study, the focus was on inefficiencies caused by taking land out of production. That is, not only may land be taken out of its highest and best use, but other inputs, such as machinery and equipment, may be underused as well. The estimated cost to producers and consumers of a modest land retirement scheme is $2 billion to $4 billion a year, the study found.

The Iowa State study assumed that land planted to all major crops in the United States was reduced by 10 percent. Moreover, that reduction remained in place for eight years. At the end of the period, prices for corn and soybeans would be 13 percent higher and 6 percent higher, respectively, than if the idling had not occurred. So far, so good.

However, the authors of the latter study point out two big caveats. First, with 10 percent fewer acres, total revenue declines by whatever the revenue would have been on acres taken out of production. More importantly, if producers do what they've done in the past, they will attempt to increase production on the remaining 90 percent of land left in production. To the extent they are successful, price increases of the magnitude suggested above may not be realized. The authors conclude that the price impact of a 10 percent reduction in planted acreage is probably overstated.

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