Bottum, J. Carroll

Dunbar, John O.

English

Research Papers in Economics

Adjusting  Farm Production
Through  a Grass  and  Livestock  Program
A  New  Look  at  Agricultural  Programs
By J.  Carroll Bottum and John 0. Dunbar
Since it appears that we are going to have some kind of farm program,
we  are  presenting  a  proposal  for  adjusting  production  with  demand
through  grass  and  livestock.
Scientists  say that  we  could  feed  over  twice  as  many  people  in  this
country  if we were  willing to  change to  a diet consisting  largely  of vege-
tables  and  grains,  properly  fortified.  They  also  say  that  we  would  fall
far  short  of  feeding  our  present  population  if  we  were  to  depend  com-
pletely  on  a grazing-animal  agriculture.  Studies  show  that the  output  of
meat-measured in calories-from  beef cattle on grass  is only about  one-
fourth what corn and hogs would produce  on the same acreage.
Therefore,  why  not balance  agricultural  production  with  demand-
at  acceptable  prices  to farmers  and  consumers-by  making  adjustments
in  the  amount  and  type  of  livestock  we  produce?  When  surpluses  ac-
cumulate, we could shift to more grazing  animals. This would mean more
beef  to  eat and  milk to  drink,  which  is  in line  with  good  nutrition  and
would  upgrade  diets.
Most  analyses  indicate  that  if  we  increase  the  total  supply  of  food
1  percent,  the  price  will  decline  more  than  this  amount;  some  studies
show up to 4 percent  decline.  Therefore,  it would  seem reasonable  to be-
lieve that  a 5  percent  increase in  supplies would  decrease  prices  as much
as  10  percent.  Consequently,  when the  supply  of  farm  products  exceeds
normal requirements,  farmers are  severely penalized  in the market by the
extra supply  of food.  A reduction  in the total  output  of food  by shifting
to  more  roughage-consuming  livestock  and  livestock  products  can  help
bring farm prices to a more normal relationship with prices  of other com-
modities  and  services  in  the  economy.
Under the program we  propose, the consumer would  make his  choice
in  the  market,  where  prices  would  be permitted  to  seek  their own  level.
The  farmer,  except  for  a  "grass  adjustment"  payment,  would  get  his
price  in  the  market  place.  No  controls,  allotments,  or quotas  would  be
required  on  the individual  farm.  It would  make  it easier  for farmers  to
increase  soil  conservation.  It  creates  an  "ever-normal  granary"  in  the
form  of  soil fertility  and  live  animals.
65This program  would  operate  only in  periods  when farm incomes  are
below a predetermined  level.  It would be built around  large enough  pay-
ments for grass, legumes,  and fallow to get farmers to put more than their
normal acreage  to these  uses.  This  would  reduce  acres in grain  and pre-
vent  surpluses.  Additional  beef  and  milk  production  from  more  grass
would  cause  prices  of  these  products to  rise  less  or fall  more than  other
products. Therefore,  payments would be made for land already in grass-
as well  as land shifted  to grass  and fallow-as  a means  of compensating
beef  and  dairy producers  for  this price  disadvantage.
In the absence of any farm program, this is the adjustment which would
tend to take place. But the low prices of farm products that would precede
such  an  adjustment  would  be  exceedingly  painful  to  farmers.  Govern-
mental  action  can  be taken  to  speed  up  this  adjustment  and  to  protect
farm income  by payments  for  grass  and fallow.
Under  this  program  "grass  adjustment"  payments  would  be  made
for  30  percent  of the  carrying  capacity  of  the nation's  565  million  acres
of  farm  land  in  permanent  pasture  and  hay.  Payments  would  also  be
made  on  30  percent  of  the  carrying  capacity  of  the  150  million  acres
of  rotation  pasture,  hay,  and  fallow.  The  estimated  45  million  acres  of
rotation  land which  needs  to be shifted  from  grain to  pasture,  hay, and
fallow would  receive  100 percent  payment for its carrying capacity.
The carrying capacity of this acreage,  based on an average  of 22 acres
of  permanent  grass  per  cow  and  3  acres  of  rotation  pasture  per  cow,
would  be  36 million  cow  units.  (This includes an  allowance  for govern-
ment  land leased  for grazing.)  Now  assume  that  Congress  appropriates
750  million  dollars  for  this  program.  Divide  this  by  36  million  and the
result  is a payment of $21  for each cow unit.
To arrive at the payment per acre this cow-unit payment  is divided by
the acres  required to carry a cow one year, and the result is then multiplied
by the percent of  carrying capacity  which is  allowed for the kind of grass
in  question.  Thus,  payment  for an  acre  of permanent  grass  is  found  by
dividing $21  by 22  (carrying capacity),  which equals  95  cents.  Multiply-
ing this by  30 percent  (carrying  capacity for  which payment  is  made on
permanent  grass),  we  get  about  30  cents.  Payment  for  an  acre  shifted
from  grain  to  rotation  hay  or  pasture  is  found  by  dividing  $21  by  3
(carrying  capacity),  which  gives  $7.00.  An  acre  already  in rotation  hay
or  pasture  gets  only  30  percent,  or  $2.10.
These  are  average  payments.  Actual  payments  for  each  farm  would
be  determined  by cow-carrying  capacity  of the  land  in  that part of  the
66country.  If Congress  appropriated  more  or less  than 750  million  dollars,
payments  would  be adjusted accordingly.
Payments  for  different  types  of farms  can be  explained  by  referring
to the  following  tables.  To  figure  payment for  a  cattle  ranch  entirely  in
permanent  grass,  determine  the  average  cow-unit  carrying  capacity  for
your  region.  Next  multiply  by 30  percent  to get the  cow units on  which
payment will be made.  Then multiply by the average national payment  of
$21  per cow  unit.
Payment  for  permanent  grass  on  a  dairy  or  hog farm is  determined
in  the  same  manner.  If  the  proportion  of  your  acreage  in  rotation  hay
and  pasture is  equal  to the  average  for the  land use  area in  which  your
farm  is  located,  you  get  a  payment  of  30  percent  of  carrying  capacity
figured at  $21  per cow  unit.  All rotation  hay  and pasture acreage  above
the  average  for your  land  use  area  gets  a  payment  at  the  rate  of  100
percent  of  the  cow-unit  carrying  capacity.
Your  farm  would  have  to  have  at  least  70  percent  as  much  of  its
rotation  land in  pasture  and hay  as  the  average  for  your land  use  area
before  you  could  start  receiving  payment.  By  increasing  acreage  up  to
the average,  you would get  the 30 percent  payment.  For each  acre above
the  average  you  would  receive  100  percent  payment.
ESTIMATED  PAYMENT  FOR 2,000-ACRE  CATTLE  RANCH
(All in permanent grass)
Average carrying capacity of ranch.  ..............  ....  ...  .100  cows
Payment  (30%  of  100 cow units x $21)..................  $630.00
ESTIMATED  PAYMENT  FOR  A  200-ACRE  DAIRY  FARM
Acreages After  Units Carrying
Land  Use  Adjustment  Capacity
Buildings and lots  .....................  10  None
Permanent pasture and hay ..............  70  8
Rotation pasture and hay. ...............  60  20
Increased  rotation pasture  and hay........  18  6
Harvested  grain  crops  .................  42  None
Basis of Payment  Payments
Permanent pasture  (30/  x 8 x $21)  ....................  $  50.40
Rotation pasture  (30%  x 20 x $21) .....................  126.00
Increased  rotation grass  (100%  x 6 x $21)................  126.00
Total  payment  ..................... $302.40
67ESTIMATED  PAYMENT  FOR  A  200-ACRE  CENTRAL-WEST  HOG  FARM
Acreages After
Land Use  Adjustment
Building  and  lots......................  10
Permanent pasture and hay ..............  30
Rotation  pasture  and hay ...............  40
Increased rotation pasture and hay........  12
Harvested  grain  crops ..................  108
I
Basis of Payment
Permanent  grass  (30%/ x 5 x $21)......................
Rotation  grass  (30%c  x  17  x $21)......................
Increased  rotation  grass  (100%  x  5 x  $21)  ..............
Total payment  ...............................
Jnits Carrying
Capacity
None
5
17
5
None
Payments
. $  31.50
107.10
105.00
. $243.60
It  should  be  remembered  that this  is  an  aggregate  approach  to  the
solution  of  the  farm  price  and  income  problem.  It  would  adjust  the
total  supply  of food  to the demand  and thereby raise  total farm income.
It would  allow  for free  adjustment  of production  and prices between  the
various individual  commodities.  It could be operated in conjunction with
the present  farm program to solve the diverted  acres problem.
Payments  distributed  as  set forth in  this program would  bring  about
adjustments  based  upon  the economic  value  of  grass  in relation to  other
crops. The greatest  adjustment would take place in the high-cost, marginal
crop  areas.  If  it were  desirable  to  make  the  adjustments  and  distribute
payments more  to the intensive, low-cost  crop  areas, the payments  among
the states could be made  according to the relative  total value of the farm
production  in  each  state.  This  would  give  relatively  greater  payment  to
the  more  intensive  farming  areas  and  bring  larger  adjustments  there.
The amount of the appropriation and its distribution between the acreage
currently  in  grass  and acres  shifted  to  grass  may be  varied  according  to
circumstances  and  experience  with the  program.
68

ADJUSTING FARM PRODUCTION THROUGH A GRASS AND LIVESTOCK PROGRAM: A NEW LOOK AT AGRICULTURAL PROGRAMS

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Research Papers in Economics