Will success spoil largest US industry?

The largest industry in the United States, farming, is also among this country's most successful and most promising. Yet without proper care and watering, the industry that has led the nation in productivity increases for 20 years could turn into a neglected and misused sector of the economy -- because of its own remarkable success.

Each of today's superefficient American farmers feeds 75 fellow countrymen along with 25 people overseas. This achievement has brought with it a decline in the farm community to less than 3 percent of the US population.

The sharply reduced number of farm-based votes has steadily whittled away at what used to be the extremely powerful, and persuasive "farm bloc" in Washington.

Thus, many farmers are trying to make their voices heard through other channels. This shift has given new life to the conservative American Farm Bureau Federation and has encouraged the growth of more radical groups such as the American Agricultural Movement. But for the moment, farmers feel that vital farming interests are being ignored -- a a cost that farmers insist the nation cannot afford.

Based on productivity, farmers appear to have a good case -- and good cause for concern.

This year, red meat and poultry production is expected to reach 52 billion pounds, up 2 percent over 1979. This output represents a steady advance in the efficient raising of cattle, hogs, and poultry.

Tremendous leaps forward have taken place in the dairy industry as well. Milk output per cow has increased 60 percent over the past 20 years. One prize Holstein, named Beecher Arlinda Ellen, has been officially credited with giving 55,600 pounds of milk in one year. Genetic and feed research projects are continuing, aimed at achieving still more remarkable milk yields.

Cotton is another dramatic success story. New machinery and advanced techniques have raised yields to 14.6 million bales a year.

But each new record yield seems to bring record problems.

in the case of cotton, aggressive marketing secured overseas markets for 9 million bales, or 60 percent of last year's crop.

No such new markets have been found or are expected to be found for the record numbers of cattle, hogs, and poultry. The result is that meat prices are down and will stay down until a way is found to cut the oversupply.

J. Dawson Ahalt, chairman of the World Food and Agricultural Outlook and Situation Board at the US Department of Agriculture (USDA), says prices and returns vary tremendously from year to year because of "the tremendous inherent instability characterizing the agricultural system." Basic to the problem, he says, is that there is "a very inelastic demand for agricultural products. The human stomach can absorb only so much food."

Mr. Ahalt explains that "small changes in supplies cause disproportionately larger swings in prices." Farmers see prices plummet when there is an oversupply -- because people eat only so much meat no matter now cheap it becomes. Yet when there is a shortage, prices don't climb at an equal rate because consumers have shown they will switch to substitutes to avoid paying higher meat prices.

The same problems do not affect the international market for grain to the same extent. As with cotton, the overseas market in feed grains for livestock has been expanding steadily and has produced relatively stable prices.

Encouraged by export grain markets, US farmers now harvest 60 percent of the world's soybeans, 50 percent of the world's corn, and 15 percent of the world's wheat. This harvest means theat US farmers produce 12 billion bushels of these three basic crops, today being equated with oil as a key factor in global power politics.

Last year, US farm production earned $41 billion for its three major crops, $ 21 billion for other crops, and $67 billion for livestock. Of the $129 billion in total earnings, over $34 billion came from export sales. After expenses, however, farmers had a net income of $33 billion.

That bottom-line $33 billion represents, to farmers, a basic problem. After hitting a low point of $20 billion in 1977, farm income last year climbed back to the peak reached in 1973. But the Agriculture Department estimates that net farm income this year could plunge back nearly to that $20 billion trough.

A big reason is rising costs. Largely because of high interest rates and agriculture's heavy dependence on oil for tractor fuel, fertilizers, and chemicals, farm production costs rose 16 percent last year. The USDA predicts another 10- to 14-percent rise this year. This squeeze helps explain why net farm incomes may drop in 1980 by one-third, compared with last year, even though overall income and export sales both continue to rise.

Farm reaction to this sudden income cut varies as widely as the varieties of grain. Some farmers demand a large-scale government rescue operation. Those at the opposite extreme reject government intervention totally.

Ron Gaches, a Kansas Farm Bureau official, spoke for many farmers when he explained patiently: "The Farm Bureau has consistently taken a stong position in favor of the free market economy. But we don't have a free market company.We have restrictions, and in response to these, then, the Farm Bureau says the government has to make certain adjustments in order o compensate for the government's interference."

The adjustments called for relate to te complex system of government price supports. There is a tendency now for these to be temporary repayable loans rather than outright payments. Accordingly the old image of taxpayers subsidizing farmers is being turned around. Out of the current USDA budget of $ 49 billion, less than $9 billion is spent on direct farm aid. The rest goes into a variety of programs such as food stamps, community development, and forestry programs aimed at the nonfarm population.

Some critics say that all the remaining farm programs could be more than paid for from increased earnings if only the United States would increase its grain prices the way the Arab nations have increased their oil prices.

But America's grain embargoes in 1974, 1975, and 1980 seem only to have driven customers to seek other sources of supply.

When President Carter embargoed new grain sales to the Soviet Union in January, he said it would not only upset Soviet agriculture, but correct resulting imbalances affecting US farmers.

Seven months later, the Soviet Union appears to have found alternative suppliers of grain. Gene Moos, senior staff analyst for the House Agriculture Committee, comments that "the lesson we have learned is that despite the illusion that the US was dominant in the world food supply situation, we have found that, even with the cooperation of our allies, we were not able to limit the supply to the Soviets anywhere near to the extent that we thought we could."

A second lesson from the embargo, Mr. Moos told the Monitor, is that "despite the action of the US government [in purchasing grain originally intended for the Soviets] with massive spending, the government's action didn't really protect farmers' incomes or protect the government from the farmers' wrath."

Winston Wilson, USDA deputy undersecretary for international affairs and commodity programs, agrees that farmers are caught in a drastic cost-price squeeze. He is confident that government policies will secure price adjustments in the farmers' favor.

Yet Mr. Wilson points out that even when farmers earn less than the cost of producing their crops, as today, they go on producing.

"What are your alternatives when you have a very large investment in equipment and lands?" Mr. Wilson asks. "There is not a lot else you can do except farm, so as long as there is some chance of recovering your fixed costs, you are going to continue production."

Right now, wheat farmer Ken Jorns is busy getting every bit of grain he can out of his 1,100 acres in Hutchinson, kan. -- even though he knows this hurts the industry as a whole.

"We seem to be like our own worst enemy," he said as he steered hig huge John Deere combine harvester around a mudhole in his otherwise parched field. "It would be good to decrease production to force the prices up, but that would be detrimental to the individual producer."