Why farmers may have an extra-long wait for recovery
America as a whole may be ''on the mend,'' as President Reagan maintained in his State of the Union address this week. But the battered farm sector could have another few years to wait before joining the economic recovery.Skip to next paragraph
Subscribe Today to the Monitor
Some signs of continuing farm-belt troubles:
* US farm income dropped to about $19 billion for 1982 - $6 billion below 1981, $13 billion below 1979, and $14 billion below 1973's record $33 billion in net farm income.
* The Reagan administration has revived a depression-era ''payment-in-kind'' (PIK) program using surplus government grain and cotton to reimburse farmers who agree to plant fewer acres this year.
* The Department of Agriculture is forecasting that demand for US farm products will remain limited by record world food production. A department statement tied slack demand to ''weak economic conditions in the US and throughout the rest of the world, financial instability in a number of countries , the strong US dollar, losses related to the Soviet embargo, continued East-West tensions, unfair trade practices by some of our export competitors, and restrictive market actions by some foreign buyers.''
Agriculture Secretary John Block agrees that farmers are in trouble. With little prospect of increased demand, he expects farm prices and incomes to remain depressed. But in a telephone interview with five journalists following the President's State of the Union address, he said that the administration's success in reducing inflation has helped farmers significantly. He insisted that the proposed freeze on federal spending will aid, not hurt, the capital-intensive farm sector by helping to clamp a lid on both inflation and interest rates.
Concerning the PIK program, Mr. Block says ''It's almost a sacrifice of our manhood to decide we're not going to farm all this land the best we can and raise all we can.'' But unless US farmers cut back grain, rice, and cotton production this year, he warns, ''the price is not going to recover, it is going to get worse.''
House Agriculture Committee chairman E. (Kika) de la Garza (D) of Texas is equally concerned. ''American farmers are facing critical strains this year,'' he said recently. ''Market prices may continue low even if the new payment-in-kind program works as well as the administration hopes it will. We still face problems, including the continuing need to expand exports and to help producers who face critical credit troubles.''
Robbin S. Johnson, vice-president for public affairs for Cargill, Inc., the Minneapolis-based international grain trading company, does not expect any short-term recovery for the farm sector. Instead, he sees a recovery over the next two or three years, if US farm policy changes now under way succeed in ''making US commodity prices more competitive'' on the world market. He warns that recovery could be blocked if the United States slips into overly aggressive export-promotion policies and ''across the board export subsidies.''
Using export subsidies - such as the extra US government grain used to sweeten last week's wheat flour sale to Egypt - ''will not eliminate the competitive supplies that are out there already,'' Mr. Johnson warns. ''It will probably just depress prices further, and the United States, as the largest grain exporter, would suffer the most, so that while selectively we may need to demonstrate a new firmness in our attitude, we can't abandon the notion that these problems have to be solved in negotiations with our trading partners rather than in unilateral action.''
A congressional aide dealing with agricultural policy adds that many congressmen feel that ''the real economic crunch is still in front of us as far as agriculture is concerned.'' He says few experts expect the PIK program to boost farm prices and incomes. The problem, he explains, is that the program provides less support now, when the situation has deteriorated, than Congress asked for a year ago.
This aide describes PIK simply as ''the best damage-control vehicle that we have available.'' A solution depends, he says, on long-term domestic policies and international agreements to adjust world production to world demand. Otherwise, he explains, ''the US and other producers will continue spending a lot of money storing surplus commodities, or waste a lot of money competing with each other to buy a larger share of the world market.''