Adjustments in a farm business in response to an energy crisis
Comparing farms using different corn tillage methods, farms using reduced corn tillage had higher returns to fixed resources than farms using conventional corn tillage in all cases, except when energy prices were increased by 50, 75, and 100 percent. At these higher energy price increases, since conventional corn tillage had lower energy costs per unit of feed produced, conventional corn tillage was more profitable. Quantities and costs of energy used to produce the feed for the cow herd were directly related to what crops were produced and what quantities of feed were purchased. Farms using reduced corn tillage were consistently the higher energy users compared with farms using conventional corn tillage, except when 75 and 100 percent energy price increases occurred; but this result might have been different if energy used to produce the purchased feed had been considered.
Reductions in returns to fixed resources, when energy quantities are restricted, are much more severe than reductions in returns to fixed resources with energy price increases.l1 This result indicates that if government were faced w~th the choice of an energy conservation policy based on large energy price increases, or an energy conservation policy based on a strict rationing of energy inputs, the strict rationing policy would probably cause greater reductions in livestock farmer's income.