How now, farm policy?
Consumers, take heed. Last fall corn sold wholesale for around $2.15 a bushel; today it's $3.50. This increase was aggravated not only by this summer's severe drought but also by the Reagan administration's new 1983 Payment in Kind (PIK) Program, a program designed to induce farmers to remove substantial acreage from production by paying them off in government-owned farm commodities. The inducement has worked in a big way, and it portends trouble.Skip to next paragraph
Subscribe Today to the Monitor
For, apart from effects of the drought, PIK casts a pall on the outlook for inflation - and also on the outlook for exports of our food and fiber. In recent years one-quarter or more of US agricultural production has been shipped abroad, greatly aiding our trade balance. But these exports are quite price-elastic. In other words, experience shows that a relatively small rise in the price of, say, corn results in a large drop in corn tonnage shipped overseas.
Thus some PIK critics in and out of the Reagan administration are already pronouncing PIK a disaster. They bemoan million-dollar-bonanza payments, in some instances, to participating farmers. They worry about the huge overall farm-subsidy payout this year of some $22 billion, thereby adding to the deficit problem and inflicting a double whammy on consumers, who get socked with higher prices at the supermarket and steeper taxes on their IRS 1040 returns. These critics also hold that the program flies in the face of the White House's beloved supply-side economics, encouraging production rather than discouraging it.
But perhaps the biggest point critics register is that decade after decade of farm tinkering a la PIK (Presidents Franklin D. Roosevelt and John F. Kennedy had similar unsuccessful plans) has come to naught. The farmer to be saved wasn't despite more than a half-century of bipartisan farm experimentation and literally hundreds of billions of dollars of subsidies dating back to 1929 and President Hoover's soon-defunct Federal Farm Marketing Board, ranging through FDR's programs of plowing under cotton and killing little pigs through postwar program after program of price supports, soil banks, deficiency payments, crop insurance, marketing agreements, acreage controls, and so forth. And through program after program and decade after decade of just what to do with unintended but practically inevitable government-acquired mountains of surplus food and fiber - from massive surplus-cheese distributions at home to PL 480 ''Food for Peace'' surplus-food distributions abroad.
Wrongheadedly, all these programs have in effect told the farmer: ''Hold fast , we'll make life easier for you. You're entitled to it.''
But the steady drift of population from agriculture has persevered through good times and bad, through Democratic and Republican administrations, as a glance at data in the 1982-83 Statistical Abstract of the United States confirms:
Farm population Percent of (millions) total population 1930 30.5 24.9 1940 30.5 23.2 1950 23.0 15.3 1960 15.6 8.7 1970 9.7 4.8 1980 7.2 3.3
Along with this massive deruralization shift of population, American agriculture has long cut back on means of livelihood, as farmer-entrepreneurs automated and boosted food and fiber production. From the 1950-54 period to the 1975-79 period, for example, the average annual yield of corn surged from 39.4 to 95.2 bushels an acre and milk from 5,400 to 11,000 pounds per cow. Note how the number of farm jobs, including those of farm operators, their family members doing farm work, and farm employees plummeted over a half century:
Farm employment Percent civilian (millions) labor force 1930 12.5 25.8 1940 11.0 19.8 1950 9.9 15.9 1960 7.1 10.2 1970 4.5 5.4 1980 3.7 3.5
While farm employment and the number of farms dropped, observe how the size of farms has nearly tripled, reflecting economies of scale and entrepreneurial incentives over a half century:
Farms Average farm (millions) size (acres) 1930 6.5 151 1940 6.4 167 1950 5.6 213 1960 4.0 297 1970 2.9 374 1980 2.4 429
This half-century march to fewer farms and bigger farms seems inexorable, notwithstanding the vain and very costly attempt of farm interventionists to halt it. Hence history and logic strongly suggest that the agricultural market should be left alone.