ABSTRACT
Economists have found flaws in its formulation and application so that it is discredited for helping to measure effectively the economic health or financial position of farming, let alone the general welfare of farmers and the agricultural sector. The cost of production numbers should give an indication about the appropriateness of a new or old farm program-from the standpoint of resource use, returns or subsidies to the agricultural sector, and distribution within the agricultural sector. Cost of production was borne on a political wind that stressed equity and fairness in the late 1970s to become part of the formula for setting target prices under the 1977 act. The public resolution of the debate was that the cost of land would be included in the setting of the initial target prices, but that only nonland costs of production would be used in subsequent years to adjust target prices.
