The Heavy Overhang

Not for two decades had there been so much furor about the economic situation of U.S. farmers. There were recurring rumors that Secretary of Agriculture Ezra Taft Benson might be forced out of the Cabinet; there were shouts for a return to the old, rigid, farm-price supports at 90% of parity. Some pundits even began to write about general "poverty" on U.S. farms.

In the midst of it all, Secretary Benson last week flew into the plains country, stopped to speak at a Farmers' Day program in Moorhead, Minn. (pop. 14,870), and then flew on to Denver. When he came out of President Eisenhower's hospital room after a 30-minute conference, reporters were ready to ask a pointed question: "Are you or are you not Mr. Secretary?"

They never got to ask it. Presidential Press Secretary James Hagerty began the proceedings by reading a statement that placed Dwight Eisenhower squarely behind Benson. Said Ike: "No problem on the domestic front is more demanding of our understanding and best ideas. Still caught under the grinding pressure of price-depressing surpluses, farmers today are not getting a return for their work in line with that enjoyed by other segments of our population. The Secretary and I reviewed what has been done in the past three years. That has been sound. But farm policy is never a completed task . . . I was greatly encouraged to learn from the Secretary the several new steps he is exploring for strengthening and broadening the present program . . . I shall submit my farm recommendations to the Congress in a special message early in January."

Sliding from the Peak. Behind the swirling clouds of political dust that surrounded the farm situation, it was possible to locate and nail down some solid economic facts. Pieced together, they produced a picture of U.S. agriculture that bore little resemblance to the scene of despair conjured up amid cries of havoc.

Although national farm income has been dropping, U.S. farmers--as of fall. 1955--are still generally prosperous. Farmland values have increased 5% in the past year and show no signs of slump. Farm debts are at record-low levels; seven out of ten farms are free of mortgage; the ratio of debts to assets is only 11%, compared to 19% in 1940. Viewing that part of the picture last week, Ezra Benson could say with a clear Mormon conscience: "The facts are that American agriculture is in sound financial condition."

What has been happening to the farmer is a painful but not yet critical adjustment from a decade in which a voracious, war-stimulated world appetite demanded all the food that the U.S. could produce at whatever price the buyer had to pay. Since 1951, when war demand pushed farm income close to its alltime peak, gross farm income in the U.S. has dropped 11%. Because the cost of what the farmers buy has gone up in that period, they have been caught in a squeeze that has pushed net farm income down 27%. But another factor has tended to ease the blow. As a result of technological improvements on the farms and increased job opportunities in cities, farm population has decreased. Consequently, the per capita net income on the farm has been held to a 7% drop since 1951. It is actually 11% higher today than the average of 1947 through 1950.

As they slid from the 1951 peak, farmers have fared much better than they did after World War I. In the two years after the farm peak of that war, gross farm income dropped 41% and the net fell 60%. More than four years after the war-induced peak of the World War II-Korean War era, farmers are still better off than they were in the late 19303. In 1940, with a gross income of $11 billion and a net of $4.3 billion, the farm-parity ratio (balancing what the farmer sells against what he buys) was 81, and his share of the consumer dollar was 40-c-. In the first ten months of 1955, with gross income of $32.6 billion and a net of $10.6 billion, the farmers had a parity ratio of 85 and 41-c- of the consumer dollar.

Too High & Too Long. While the farm situation does not add up to distress, hardly anyone is satisfied with it. The leading Democratic contenders for the presidency, Adlai Stevenson and Averell Harriman, have come out for a return to the old program of rigid price supports for basic farm products at 90% of parity. But few serious students of farm economics, ex politics, would accept that solution.

New Mexico's Democratic Senator Clinton Anderson, onetime (1945-48) U.S. Secretary of Agriculture, rejects high rigid supports completely, blames them for much of the current trouble, and thinks that the Eisenhower Administration's flexible (75% to 90%) support program "should have a longer trial." Louisiana Democrat Allen J. Ellender, chairman of the Senate Agriculture Committee, says that a return to 90% supports "would not stand a ghost of a chance to pass the Senate." Ezra Benson has a label for the old 90% plan: "a bankrupt program."

The policy of supporting farm prices at 90% of parity was inaugurated in 1942 to encourage maximum production of food to fill the wartime demand. In the present situation, the logical aim is exactly the opposite--to encourage less, not more production. The greatest drag on the farm economy in 1955 was created by 90% of parity, which encouraged too much production after war demand ended. The result was a $7 billion glut of farm products hanging over the market. When it was encouraging the building of these burdensome surpluses, the 90% parity plan did not keep prices up. All but 3% of the farm-income decline since 1951 occurred before January 1, 1955, while the high rigid supports were still in effect.

Today the real farm problem is over-storage, not overproduction. Despite a huge surplus-disposal program, the U.S. Government still holds 6,327,000 bales (a year's supply) of cotton, 913,000,000 bushels (a year's crop) of wheat, 657,703,000 bushels (three months' supply) of corn, and hoards of butter, cheese, dried milk, barley, beans, flaxseed, sorghum, oats, rice, rye, soybeans, honey, peanuts, tobacco, wool, winter cover crops, linseed oil, olive oil, tung-nut oil and whey. Except for these market-depressing surpluses, the consumption of U.S. farm products in 1955 would be only 1% less than production. Obviously, the real key to the farm trouble is to find more, better and faster methods of unloading the surpluses, not building more and more of them by going back to 90% of parity.

Ham & Eggs. The aspect of the farm problem that has been getting the most headlines in recent weeks has little direct relationship to the long-term basic trouble. The hog-price crisis is one of current supply and demand that may very well work its way to solution in less than a year. Last year hog prices were high (96% of parity) and feed prices were low, making hog-feeding attractive. Reacting to supply and demand at work, farmers increased hog production and sent to market a record-breaking run that pushed prices down 20%.

To ease the hog producers' pain, Secretary Benson last week began an $85 million Government pork-buying program. He will buy only high-grade pork, thereby hoping to encourage production of better quality; he will dispose of the pork into school lunches and other current Government food programs, to avoid adding to the glut of stored surpluses. Benson thinks that his plan will stop the drop in hog prices, but he does not believe that it will cause an increase. He expects the current price situation to encourage a reduction in farrowing, thereby cutting the supply of hogs and pulling prices back up by next fall.

Ezra Benson likes to work out farm problems by depending heavily on the farmers and the laws of supply and demand. He points to a recent experience in the poultry market as a good example. A year ago poultry production was high and prices were weak. The industry considered asking for Government intervention, but decided against it. Instead, producers voluntarily reduced their flocks. Result: poultry prices have improved substantially. In September poultry prices were 79% of parity v. 66% a year ago, eggs were up to 87% from 64%.

Because he thinks the laws of supply and demand can have a similar impact on all farm crops, Benson has an almost religious fervor for flexible price supports--higher supports when demand is near to supply, lower supports when there is a surplus. He has no intention of abandoning his plan, but last week, outside the Denver hospital room, he announced six proposed improvements he had outlined to the President earlier. Items: P:An expanded program of cash payments to farmers to take land out of production of surplus crops and turn it to grass or to other conservation crops. This would have the triple effect of reducing acreage of surplus crops, improving the soil and putting some politically palliative money into farmers' not-so-fat purses. P:A stepped-up program of surplus disposal, including expansion of exports, which might call for disregarding some State Department fears that unloading U.S. surplus crops abroad would disturb world markets.

P:Vigorous purchase programs to remove temporary market gluts wherever they occur, e.g., current pork-buying plan, thereby assisting farmers in adjusting to market demands.

P:Expansion of the rural redevelopment program for low-income farm families, including efforts to educate them for other occupations or to find ways in which they can supplement their income (farmers already get 30% of their income from nonfarm sources, e.g., industrial jobs or investments).

P:An increased research program aimed toward lower production costs, new crops, new markets and new uses for farm products.

P:New efforts to promote more diversified farming and better land use in the onetime prairie fields of the Great Plains.

From Bonanza to Reality. Ezra Benson, no politician, knows as well as the politicians in the Eisenhower Administration that the political clamor about the farm situation is dangerous. The farm belt, which could swing the 1956 Presidential election one way or the other, is uneasy. Democrats have been making and will make a lot of political hay out of this uneasiness in some farm areas, e.g., Ohio, Michigan, Iowa, Illinois, and Indiana. But Ezra Benson will not be stampeded. After his conference with the President last week he said firmly: "This Administration, according to the President . . . will not attempt to outpromise or to out-appropriate some who would put politics above needs and lead farmers backwards rather than forward."

When the political shot and shell have cleared away, the U.S. may be grateful that a hard-nosed, unpolitic man of principle was in charge of its farm economy during the painful transition from wartime bonanza to peacetime reality.

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