Cabbages and Cash

Measured by the city slicker yardstick, farmers' Cadillacs are getting longer each year. No doubt a number of men in farming, as in all industries, prospered in the years following the war. But sobering statistics show that even in good times the average farmer earns less than a dollar an hour, including the food he grows for his family. Even so, farmers are concerned not so much with increasing their slice of the economic pie as insuring that they get it every year.

Agriculture does not obey traditional laws of supply and demand. Drouth can suddenly shut the valve in the supply pipe; military crises and fluctuating foreign markets unsettle the demand. Because framers may be caught in a severe depression while the rest of the economy prospers, Democrats and Republicans alike have regarded farm price supports as essential disaster insurance.

During years when crops are poor or demand runs high--as in 1946 or 1947--prices naturally stay well above "parity" (the calculated fair price for a commodity). A support program needs only to buoy up farm income during unfavorable years when farm prices drop in comparison with the rest of the economy, so that farmers can earn enough to pay for supplies and labor.

Two methods may be used for supporting farm incomes. Either the government can raise prices by purchasing part of a crop, thus reducing the supply that hits the market or it can allow the entire crop to find its price on the open market, and subsidize the farmer sufficiently to bring his crop receipts up to standard.

Under the support plan suggested by former Secretary of Agriculture Brannan in 1949 the second method would have been used. But to prevent farmers from flooding the market, raising the cost of the support program prohibitively, the Brannan Plan included a quota system to restrict crop production. The response of Mid-Western farmers and conservative farm organizations was prompt and negative. The alleged "regimentation" and dependence on a yearly Congressional appropriation were so repulsive that the proposal had to be shelved.

High Grocery Prices

To escape the quotas of the Brannan Plan, Congress approved a program authorizing the Secretary of Agriculture to purchase enough of certain non-perishable crops to boost their price to 90 percent of parity. During the past two years, when foreign demand for agricultural products dipped drastically, the current price support program prevented what could have been a severe farm crisis. In this respect the plan has worked well.

Yet the present program, which keeps grocery prices high, suffers from several undeniable weaknesses. Because the government must store the food it purchases, the plan is only feasible for non-perishable commodities; livestock raisers, fruit and vegetable growers get uncertain protection. The Secretary of Agriculture may use any extra funds available to buy perishables, but the surpluses disappear during general farm declines.

The program, by pegging market prices artificially high, also interferes with a "trade not aid" foreign policy. Large imports would so lower retail prices, that the U.S. must set up barriers against certain crops. American foodstuffs, in turn cannot find large foreign markets because of the pegged prices.

Overflowing Larder

Discrimination against farmers producing perishable crops, and interference with foreign trade are long-range problems in the food-storage farm policy, but disposition of tons of potatoes and last year's butter is certainly the current headache. If the Secretary of Agriculture unloaded much food on school lunch program, state hospitals, and foreign countries, as has often been suggested, it would compete with crops in free trade, damaging the support policy.

Instead, Secretary Benson hopes to cut down stockpiles with a flexible price-support formula, to go into effect at the end of 1954. It will automatically cut support levels from 90 percent of parity for crops in normal supply to 75 percent for greatly overproduced products. In times when only a few crops are flooding the markets, the flexible formula will not only cut government purchases; it will encourage better distribution of farm production.

But in periods of depression, when supply exceeds demand, the formula would defeat the purpose of price supports: it would reduce supports just when increased payments are need to produce inflation. Flexibility, therefore, cannot be tied to a formula if it decreases depression insurance.

If British experiments with a federal commission adjusting support rates as necessary prove successful, perhaps Benson's principle of flexibility can be combined with subsidy payments to give protection to the perishable crops. In such a program economic problems in government purchases and the free-enterprise objections to imposed quotas might be avoided.