Wood, G. Burton

English

Research Papers in Economics

FARM  PRICE  AND  INCOME  ISSUES,  1965
G. B.  Wood, Head
Department of Agricultural Economics
Oregon State University
There  are  three  broad  concerns  in  national  agricultural  policy
that  I  would  like  to share  with  you.  The  first  broad  concern  that  I
think  we  must recognize  for  this  next  year  is  the  cost  of  price  and
income  stabilization  programs.  Secondly,  the  level  of  farm  income
for  1965  is emerging  as  a question  of  very real  concern.  Finally,  the
broad area  of decision making  in agriculture  and  the extent  to  which
it can be kept in farmer  hands  is also beginning to emerge  as  a matter
of real  concern.  Within the  context  of  this background  I  would  like
to  suggest  some  price  and  income  policy  issues  about  which  I  feel
we  should  be  concerned  in  planning  our  educational  programs  for
1965.
1. Supply  Management
The  need  for  supply  management  is  not  far  from  being  a  dead
policy  issue.  How  we  accomplish  supply  management  is  a  very  live
issue,  and it  appears  to  me that we will  move more  and  more  toward
voluntary  types  of  management  programs.  More  stress  will  be  given
to the use of economic power rather than police power.
I  agree  with  Professor  Bishop  that  one  of  the  major  policy
variables  in  1965  will  be  the  future  of  retirement  programs.  The
question  of land  retirement  is not ancient  history.  This program  most
likely will emerge  in  1965  and beyond  as  one  of the very real  contro-
versial issues with which we will have to cope.
Senator  Bayh  of  Indiana  has  drafted  a  bill  on  land  retirement.
If  he gets  the  support  that is  currently  indicated  in  the  Congress,  we
may  see  legislation  emerging  for  1965  that  would  retire  35  to  50
million  acres  plus  the  sustaining  of  the  land  that  is  already  in  the
conservation  reserve  program.  If retirement  of  50 million  additional
acres  were  to  cost  $20  per  acre,  this  would  amount  to  a  billion
dollars.  This  would  be  a  voluntary  type  of  program.  The  decision
making  would  be  in  the  hands  of  farmers.  The  odds  are  that  this
will  be  an  issue  in  1965,  and  I  am  sure  those  at  this  conference  do
not agree  on this  issue.  Our feed grain  program last year  is  estimated
to have  cost  2.5  billion dollars.  If we can  retire  enough  land to effec-
tively reduce  output, the total  cost should  be  much  less than  the  cost
of present feed grain programs.
1032.  Flexibility vs.  Simplicity
Farmers  and  administrators  desire  more  flexibility  in  farm  pro-
grams,  hoping  at the  same  time  to  achieve  more  simplicity  in  their
operation.  The  decision-making  complex  that  surrounds  current  pro-
grams  is  confusing  to  the  farmer  as  well  as  to the  agricultural  eco-
nomics profession.  This  is  an emerging issue.  How  are we  to develop
the information,  the strategy,  and the tactics  for conducting  an  effec-
tive  educational  effort  as  programs  become  more  complex?  This  is
one  of the  reasons  why  I  think  that  a land  retirement  program  may
become  more  attractive  to the  U.  S. Department  of  Agriculture.
3.  Should Domestic Prices Move  Toward World Price Levels?
One  of the  issues  we  must  face  in  1965  is  to  what  extent  farm
programs should  let domestic  farm prices approach  the level  of world
farm  prices.  We  are  already  moving  in  this  direction.  For  the  first
time in  a long period  the  domestic price of wheat  to growers  is  below
the  world price  of wheat.  This  is  a matter of grave  concern  to wheat
growers. What  are the implications  for policy  education  in developing
understanding  of price  and  income  programs?  The  general  principle
seems  to make  sense  that  the  domestic  price  of a  commodity  should
approximate  world  prices  when  we  are  an exporting  nation.  If  farm
income  does  decline  as  domestic  price  levels  approach  world  price
levels,  should  we  come  in  through  the  back  door  and  support  this
sagging income  with  direct  payments?  What  is  the  implication,  then,
to the  taxpayer  who  sees  farm  prices  approaching  the  world  level  at
the same time that he is asked  to contribute  more tax money  to bolster
farm  incomes?
Some  people  refer  to  the  current  wheat  program  as  imposing  a
bread  tax on consumers.  Some  farm and city  people in  a  neighboring
state see the  wheat program  as  imposing  an  export  tax  on  producers.
Are  we  prepared  with  facts,  strategy,  and  the  necessary  educational
horsepower to improve their understanding  of this issue?
Professor  George  Brandow  suggests  that  to  maintain  an  11
billion  dollar  income  in  agriculture  through  direct  payments  would
cost  5 billion dollars in five  years  and that we  still would  maintain  no
more  than  11  billion  dollars  of  farm  income!  How  do  we  interpret
this to both farm and city people?
4.  The Structure  of Agriculture
One  of  the  emerging  issues  is  what  will  be  the  future  structure
of U.  S. agriculture?  What is the future of the family farm?  Too many
of us are doing our educational  work today  as  if nothing  has changed
104in  agriculture  during  the  last  decade  or  two.  To  be  sure,  we  have
made  a few  changes in our  program  approach.  As  agricultural  econ-
omists  we  seem  to  be  abdicating  our  responsibility  to  successfully
communicate  to our farm  people  and  others  what really  is  occurring
in agriculture  and what the future  structure  most  likely  will  be.
We need to decide whether or not we are farming  for profit  in the
commercial  sector  of agriculture.  If not this,  then  what  are  we  really
trying  to  do?  What  kind  of  an  agricultural  structure  is  required  to
bring  about what  we want?  We have  done poorly  here,  and  this con-
troversial issue will be with us in 1965.
5.  Group Action Activities
This morning's program  was  of interest  because  increasing  atten-
tion  will  be  given  to  group  action  programs  in  the  coming  year.
Should  we give more aid or less aid to co-ops?  What choices  and con-
sequences  are  we prepared  to  present  to our  people?  We  talk  about
bargaining  associations  and market  power.  What state  enabling  legis-
lation  do  bargaining  associations  need  to  achieve  a  certain  level  of
market  power?  What  national  legislation  should  local  people  seek to
attain a certain level of market power?
I  submit  to  you that these  are  highly  controversial  issues.  Some
people  feel  bargaining  associations  should  have  national  enabling
legislation  similar  to  that  supporting  the  organization  of  marketing
orders.
Do we really understand  group action  activities?  Do  we have the
facts? Are  we sufficiently  informed that we can discuss  this issue intel-
ligently?  How  do  we  communicate  to  get  the  story  across  so  that
issues and  the  choices  can  be  clear?  What  do  we  really  know  about
the National Farmers  Organization?
6. International  Marketing Programs
What  we  should  do  with  respect  to  our  international  marketing
programs will be a much debated issue  in the year  to come.  I submit
to you  that we know  too little about  the  facts,  the  figures,  the  princi-
ples,  and  the  relationships  involved  in  international  marketing.  As
Assistant  Secretary  Jacobson  mentioned,  market  development  pro-
grams  are  already  under  way  in  67  nations.  This  of  itself  is  a  very
impressive effort.
What  should  be  our  attitude  toward  international  commodity
agreements-for  example,  the international wheat  agreement which  is
up for reconsideration in 1965? Most wheat farmers do not understand
the international  wheat  agreement.  I  do  not  know  how  many  of  us
105here understand  it as  well as  we should.  How  international  marketing
arrangements  may influence farm  prices  and  incomes  in  this country
will constitute an important issue for  1965. Now is the time to get our
educational houses in order.
7.  Domestic  Demand Expansion
A  perennial  question  is  what  can  be  done  to  expand  domestic
demand.  Should we or should we not support  an expanded  food stamp
program?  What  should  be  our  attitude  toward  import  quotas  in  at-
tempting  to maintain  the domestic  market  for the domestic  producer?
What should be done with respect to the complex  of opportunities  and
problems  of  advertising  and  promotion  assistance  from  which  our
farmers  seem  to expect  a  great  deal'?  This  is  a very  real  issue  in  the
year ahead.
8. Market Power
Market  power  is  an  issue  with  respect  to  both  private  marketing
arrangements  and  governmental  arrangements.  How  much  authority
should the Secretary of Agriculture  have to influence  the price level of
farm  commodities?  We  may  not  be  aware  of  it,  but  it  appears  to
some  of  us  that  the  Secretary  now  has  the  necessary  gimmicks  by
which  he  can determine  the  price  of wheat;  the  differentials  between
the  grade  and  classes  of  wheat;  where  the  wheat  shall  be  used;  how
it  shall  be  used;  and  in  what  area  perhaps  it  may  be  produced.  He
has this authority now.
Is  this  the  kind  of power  concentration  at the  national  level  that
our  farmers  wish  to  see  developed?  Do  they,  as  well  as  ourselves,
understand the issue? What do we need to know about it?
We talked  about the Board  of Trade  this morning.  What  does  the
Board of Trade use as its principal determinants  of price expectations?
Some  of us  suspect  that they  base  their  expectations  on  the  market
power  of government  agencies  as  much  or  more  than they  rely upon
private  trading.  The  Secretary  has  the  power  now  to  lower  the  price
of  soft  white  wheat  by  as  much  as  13  cents  a  bushel.  This  would
punish the noncomplier.  The Secretary can change the export differen-
tial  today  and  determine  how  much  wheat  moves  through  the  port
of Portland;  he can  set the  price of corn in  the Midwest  to  within one
quarter  of a cent  a bushel.  I am  not  arguing  that this  is  good  or bad.
Are farm  people  aware of  this market  power  concentration?
What  facts  do  we  need  to  be  fully  informed  on  these  issues?  I
am  not  trying  to  draw  any  conclusions  that  this  situation  is  good
or  that this  situation  is  bad.  Within  the  spectrum  of the  three  broad
106concerns  that  I  outlined earlier-the  cost  of  programs,  the  level  of
income,  and  keeping  of decision  making  in  farmer hands-these  be-
come very important farm price and income issues in  1965.  How well
we  deal with  these issues  will  affect  the future  of many  people.
107

FARM PRICE AND INCOME ISSUES, 1965

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