America's farmers: theirs is a growing business if $40 billion worth of exports are any measure
Chicago — In more ways than one, the farmers of America are in a growing business. And these days, whether they raise corn in Illinois, wheat in Kansas, cotton in Louisiana, citrus fruit in California, or even barley in Alaska, growth for them is measured in terms of exports.
The harvest from these exports -- $40.5 billion in foreign exchange earnings this past year, with a 20 percent increase predicted for the year ahead -- adds one positive note to an otherwise dismal US economic picture.
Today more than one-third of the 301 million acres of US cropland is used to raise agricultural products for export. Economic forecasts point to a continued dramatic rise in these farm exports. The figures show that this blue-ribbon export performance is paying important dividends to the American public as a whole.
The farmer's interest in growth begins with his wheat yield per acre or how fast he can bring his cattle and hogs up to market weight. But farm horizons are far wider today than even a decade ago.
A unique combination of ingredients has gone into the current success of US agriculture. But this combination did not happen by accident and -- agricultural economists warn --
When farm earnings were low, the American taxpayer was paying farmers to plow crops back under the soil and leave good cropland idle. This left the impression that, for sentimental or humanitarian reasons, taxpayers were subsidizing a lame-duck industry.
The truer picture, agricultural experts argue, is that hard-working farmers taking advantage of the latest technology were increasing their productivity far faster than was the economy as a whole. The result: Farmers produced far more than consumers wanted, so the prices for farm products dropped below the cost of production.
Government intervention took a variety of forms designed to cut back US production but had a hard time keeping up with the farmers' ability each year to produce more.
One government response was Public Law 480, enacted by Congress in 1954. It established a program for distributing surplus food to needy countries overseas, and the United States in the 1960s supplied 90 percent of the world's food aid.
Currently, PL 480 aid is declining in line with the disappearance of US food surpluses --food aid can undermine a developing nation's ability to feed itself. Instead, the US is leading research efforts aimed at improving agricultural productivity in needy countries.
But the US itself drew direct benefits from its food-aid programs. Giving away $25.5 billion in food from 1955 to 1976 helped US farming survive a tough period and also helped open the export markets that have become so important to the US balance of payments.
Because farm income has increased in recent years, today the "average" farmer is backed up by $70,000 worth of equipment, more than double the figure for blue-collar production workers, according to the US Department of Agriculture's (USDA) annual Outlook Conference in Washington last month.
Also coming from that conference were these statistics:
1. Whereas one in eight jobs in US industry depends on foreign trade, the figure is one in five for agriculture.
2. While productivity has increased at 0.5 percent annually in other sectors over the past 10 years, agricultural productivity has shot up by 5.5 percent each year.
These differences explain why American agriculture has grown into an industry with $1 trillion in assets, turning out more than $120 billion in products each year. US consumption alone could not make full use of this vast agricultural machine. The slow-growing US economy could not provide the expanding market needed by such a lively growth industry. So American agriculture, with a little initial help from the government, has proved itself willing and able to supply a rapidly expanding overseas market.
The world market gobbles up half or more of US soybeans, rice, wheat, and cotton, along with more than 30 percent of US feed grains for livestock. American farmers produce one-fifth of the world's grain and more than one-third of its commercial oil seed production.
Deputy US Secretary of Agriculture Jim Williams calls the US export performance remarkable, noting that while America's share of world steel and oil production has dropped, its share of grain production has climbed steadily. The answer to balance-of-payments problems, he insists, is to open up new markets.
"Today, we must look at developing countries in the same context that we saw nations like Japan and Germany 30 years ago," he says. "The developing countries represent vast potential markets for American goods and services."
Yet US planners also recognize the challenges associated with expanding overseas markets. Government officials point out that stabilizing prices was a relatively simple matter when there was a food surplus that would be reduced by production cutbacks and food aid programs. By comparison, current shortages pose far more difficult problems.
J. Dawson Ahalt, chairman of the USDA's World Food and Agricultural Outlook and Sittuation Board, sums up the precariousness of a short supply situation: "With stocks generally depleted, the danger looms that disappointing harvests worldwide again next year would lead to widely fluctuating prices and perhaps serious food shortages in some areas of the world. The fact that we face such a prospect just two years after accumulating our largest global stocks of grains in over a decade underscores the continued fragility of the world food situation -- that the balance between too much and too little food can tilt easily, and rapidly, from one direction to the other."
To maintain a balance, says Pillsbury vice-president and corporate economist Richard Crowder, "Government policymakers must put a lot more emphasis on making the system more productive rather than making it more restrictive."
The government is trying to do just that, according to USDA economist J. B. Penn. He sees a complete switch from the old concerns over food surpluses to "allocation of available supplies between domestic and foreign consumers, encouraging production, wise use of production resources, and economic stability."
Other government and private experts gathered in Washington for the USDA's annual outlook conference in November agreed with Mr. Penn. On the basis of US agriculture's past performance, they are confident that government and farmers together will make a successful switch from living with surpluses to cashing in on the new situation of escalating world demand.
Their chief reason for expecting US agriculture to prosper: America's vast stretches of rich, flat cropland. Adding to the US advantage is a climate with an ideal growing season backed up by winters severe enough to control many insect, weed, and disease problems. Also at its disposal is a natural river transportation system supplemented by railroad and port facilities, which, despite such recent problems as backlogs and boxcar shortages -- now largely overcome -- are generally considered the finest in the world.
USDA Grains and Feeds Division director Donald Novotny admits that the country was unprepared for the rapidity of farm export growth. Yet America met the challenge by increasing productivity, he says, "and our capacity is continually being expanded because we have a system which provides for this."
The US free market system is the key to this responsiveness, says Thomas Saylor, associate administrator of the USDA's Foreign Agricultural Service. "Agriculture has grown here because of the freedom to invest," he says, so that "if prices have risen, our production has risen."
"The United States has developed the most efficient food and fiber system in the world," Mr. Saylor says. There's no mystery, he adds: "It is efficient for one reason -- because investment in agriculture and its marketing systems has been economically attractive.
"Contrast that with the pattern of resource constraints in those systems where agricultural investments are controlled primarily by the government or a quasi-governmental agency. What would happen, for example, if investment in a grain terminal had to be weighed against investment in a missile silo, a child-care program, or a new government office building? Or what would be the effect on our agricultural productivity if commodity prices were restrained at a level determined by short-term political expedience?"
USDA officials also give a great measure of credit to research efforts. Past advances must be topped, says USDA agricultural research administrator Terry Kinney, because "if we continue with conventional agriculture, we are going to lose our soils, our water supply, our resource base." He is confident research will meet the challenges. He points to such technical advances as a new air blower that cuts down on grain lost in combine harvesting and computer-controlled irrigation systems that reduce water and energy use.
The major breakthroughs are expected in genetic engineering. "We feel that within the next few years, we are going to be able to transfer genetic information from some of our nonindustrial crops, such as grasses that have high resistance to drought," Mr. Kinney says, explaining that genetic transfer promises far quicker results than breeding for special characteristics such as drought or insect resistance.
Such advances are vital to meet growing world demand for US farm products.
"Overall, world demand for agricultural products is likely to expand at a near-record rate of 2.5 to 2.7 percent annually," reports Howard Hjort, USDA director of economics, policy analysis, and budget.If current trends continue, he says, "By 1985, the world outside the United States would be dependent on the US for 15 percent of its agricultural supplies --and 11 percent in the late 1970 s. US exports of agricultural products would have to expand 6 to 8 percent per year."
With domestic demand boosted by gasohol production and overseas demand pushed up by population growth and improved diets, says Mr. Hjort, "demand for US farm products could grow as much as 2.8 to 3 percent per year."
Farmers can count on bipartisan support in Congress for meeting this demand -- and for increasing it through aggressive marketing.
US Rep. Thomas Foley (D) of Washington, chairman of the House Agriculture Committee, explains that "there has been an evolutionary continuity" in farm policy. "The Carter policy has been market-oriented, no different in substance from that under the Nixon and Ford administrations," he says, adding that he anticipates no major changes under the Reagan administration.
US Sen. Roger Jepsen (R) of Iowa, a member of the Senate Agriculture Committee, agrees that agricultural policy is based on bipartisan consensus. But he says the "mandate" of the Nov. 4 election provides an opportunity to reduce government "tinkering" with farming. "The future of our agriculture depends on getting the government off our backs, getting rid of the nonproductive layers of government that are nothing but a burden loaded onto the farmer," he asserts.
America's investment in agriculture has paid many direct dividends. The growth in farm production supported by the export trade has brought efficiencies and variety that enable Americans to eat better food at lower prices than people anywhere else in the world. And the impact of farm exports on the balance of payments has at least slowed the erosion of the buying power of Americans.
USDA Undersecretary for International Affairs Dale Hathaway points to political bonuses from America's worldwide agricultural ties: "all of the developed economies, particularly the United States, have much to gain politically and economically from trade with centrally planned and developing economies. Exposure to the West has allowed East European countries to move marginally from the Soviet line. Trade with the developing nations provides us with access to badly needed raw materials. We keep the lines of communication open and both sides benefit economically."
Clayton Yeutter, the president of the Chicago Mercantile Exchange, who was an early favorite to become Ronald Reagan's secretary of agriculture, also sees political gains from the US ability to dominate world agricultural trade. In a recent interview he said that greater dependence on US grain supplies might have prevented Soviet aggression in Afghanistan.
"So," Mr. Yeutter said, "there's some political leverage involved in just having larger quantities of American production being purchased around the world. For example, the Japanese are not going to cross us to any significant degree on foreign policy because they are to a very substantial extent dependent upon us for food."