Acreage allocation in the presence of various commodity and conservation programs: The case of conservation reserve program and crop production in the Midwest

A multinomial fractional logit model is developed in this article to examine the effects of various market variables, commodity and conservation program payments and county physical attributes on crop acreage allocation and CRP enrollment simultaneously in the Midwest region of the United States. Nine states and eleven years county level panel data are employed to estimate the acreage allocation among corn, soybeans, wheat, hay, and CRP participation simultaneously. The estimation results suggest that crop profits, CRP rental payment, and physical characteristics of cropland together determine the acreage allocation among alternative crops and CRP. Crop profits have significant, negative impacts on CRP enrollment, while current year CRP rental rate plays only a limited role. Total commodity program payment received in a county is positively related with program crop acreage and negatively related with non-program crop and CRP acreage. No statistical evidence is found that EQIP has an adverse impact on CRP participation.