SOIL TEST DEMAND - THE CASE OF THE UNIVERSITY-OF-TENNESSEE SOIL TESTING LABORATORY

Soil testing labs provide an important service that helps farmers hone their fertilizer decisions. This service also benefits society by sim ultaneously addressing the growing demand for food and the environment al concerns associated with over fertilization. This study was motivat ed by the hypothesis that economics plays a role in determining the am ount of soil test information farmers use. Economic theory suggests th e per-acre quantity of soil tests demanded by a farmer from a particul ar soil testing lab is a function of the price of a soil test performe d by that lab, the prices of soil tests performed by alternative labs, the price of fertilizer, and the prices received for crops. Other fac tors include the amount of precipitation during key soil testing month s and efforts to promote soil testing. Annual times series data for 19 61 to 1992 were used to estimate the per-acre demand relationship for soil tests provided by the University of Tennessee Soil Testing Lab (U T Lab), Nashville. All hypothesized variables, except the price of fer tilizer and a dummy variable for operation of an alternative commercia l lab, are significant determinants of soil test demand in this case. Soil test demand at the UT Lab is price inelastic, suggesting that a s ubsidy that reduced the price of a soil test would be a costly method of promoting an increase in the quantity of soil tests demanded. Alter natively, if the lab increased the price of a soil test to cover risin g costs or to upgrade services to its clientele, the price rise would increase total revenue without causing a serious reduction in soil tes ts demanded. However, a subsidy may be beneficial or a price rise may be detrimental to society if marginal users of soil test information a re those who cause the most environmental problems.