Extending the Farm Folly

March 26, 1956

Any farm legislation likely to emerge from the present Congress gives no promise of solving the farm problem. Its most probable result will be to make the problem much worse.

The Administration won a victory when the Senate voted to retain flexible price supports of 75 to 90 percent on most “basic” commodities, and defeated the effort to restore rigid 90 percent supports. But the Administration paid an excessive price for this “flexibility” by offering all sorts of concessions and new subsidies in order to win it. And it suffered a stunning setback in the discriminatory “two-price” vote for wheat.

In his farm message of Jan. 9 President Eisenhower correctly pointed out that “mountainous surpluses overshadow everything else. . . . Were it not for the government’s bulging stocks, farmers would be getting far more for their product today. . . . Even [acreage] controls have been self-defeating.” He therefore proposed that, in addition to continuing to offer a subsidy to the farmer to overproduce, the government should try to offset this by offering him still another (“soil bank”) subsidy for not producing. “I do not propose this program,” he said, “as a device to empty government warehouses so that they may be filled again. There is, therefore, a basic corollary to the acreage reserve program: In future years we must avoid, as a plague, farm programs that would encourage the building up of new price-depressing surpluses.”

There is every reason to suppose, however, that the new price-support legislation would continue to encourage the building up of price-depressing surpluses and would keep the government warehouses filled. It seems likely to prolong the burden on the country’s food consumers and taxpayers, lead toward increased regimentation of farming, and create further ill will by threatening the price stability of foreign-grown farm products. In brief, this country would be better off without these proposed changes in farm legislation.

There is only one certain way to stop the building up of demoralizing surpluses. This is to halt the price supports that encourage the production of such surpluses. If even “moderate” price supports are continued, they should in no case apply to any new crop as long as the government still holds a surplus of any past year’s crop. If the government were to support wheat (or any other crop) even at 76 percent of “parity,” for example, it should be free to resell its holdings in the open market at, say, 77 percent of parity (plus storage and handling costs). Whenever the 76 percent “floor” was reached, farmers would be automatically put on notice that no price supports would apply to any new plantings of wheat until the government had got rid of accumulated surpluses. The farmer would have to plant and dispose of any new crop entirely at his own price risk. This is the only type of price-support program that would not risk foreign resentment or the accumulation of mounting surpluses from year to year.

It is probable that only a drastic program could extricate farmers and the government from their present predicament. The surpluses of each crop could either be given away to the individual farm unit in proportion to its “historic” annual production, or sold to it at a price substantially below the world price. Each farmer could then make his own decision whether to resell his allotted share of the surplus immediately, or hold it for a rise at his own cost and risk. Any new market price so established would doubtless discourage new production for a year or so; but the farmer would be compensated financially by the share of the crop surplus either given to him, or sold to him, below world prices.

The farm problem has become so grave as a result of the high government price supports of the last seven years that nothing short of some such bold slashing of the Gordian knot could restore orderly, balanced production and free markets. But instead of arranging to terminate government price supports and surpluses, both parties have been competing with each other to pile up new subsidies.