Changing Farm Policy to Cut Food Prices

IT was a triumph for what might be called Housewives' Lib--the most successful boycott by women since Lysistrata. Fed up with rising food prices, outraged by advice from various Washington officials to eat fish, eat cheese, or just eat less, thousands of women took to the streets in protest. In scores of cities and towns, they demonstrated, paraded, picketed, pamphleteered and badgered politicians. They cut down their purchases of meat, pledged meatless Tuesdays and Thursdays and, in an all-out boycott planned for this week, threatened to buy no steaks, chops, roasts or hamburger at all. In riposte, some farm leaders said that they would hold their animals off the market, thus creating an artificial shortage to keep prices propped up.

In an audacious assault on the family pocketbook, U.S. food prices have been rising steeply. Consumer prices for food rose 2.3% in January and 2.4% in February--the fastest rate of gain since the Korean War. Even the most optimistic prognosticators in Washington conceded that, if nothing were done to stop the fast climb, it would continue at least until July and perhaps longer. For consumers, the problem of high and rising food prices is literally a gut issue, and they have been demanding with ever greater insistence that President Nixon clamp on controls.

Nixon finally took action last week. Only two months after he had loosened wage and price controls in Phase III, only two weeks after he had publicly expressed his distaste for controls on food, the President made still another of his celebrated turnabouts. Appearing on nationwide television, he announced that ceilings were being imposed on prices of beef, pork and lamb.

Retailers will not be able to sell those meats for more than the highest prices that they had collected in the past 30 days. There will be no controls at all on the prices of animals on the hoof because the President did not want to offend farmers more than he had to and/or dry up supplies. But the hope is that, because retailers will not be able to charge more, they also will not be able to pay more--and that they will soon force prices down at the wholesale and farm levels. Later, going even further than he had in Phase II, the President also put all wages for food-industry workers under control of the Cost of Living Council. The COLC will have to approve all increases for supermarket clerks, packinghouse workers, and meatcutters in the nation. To expand supplies, the President will ask Congress for authority to suspend tariffs on imports of those commodities--like meat--that are rising fast in price.

Shortage. "The major weak spot in our fight against inflation is in the area of meat," said the President. He vowed that the price ceiling will be maintained "as long as is necessary to do the job." Housewives immediately questioned whether the ceiling would work; they urged a rollback of prices as well. Farmers thought that they were being victimized. Iowa Farmer Donald Gerhardt echoed the common sentiment: "The farmer is being singled out to fight inflation and take the whole loss."

The President was forced to act because he had made an economic miscalculation in the pursuit of a political goal. Looking ahead to the 1972 election, he made sure that the income of farmers rose at the expense of other consumers and taxpayers, and now he is paying for it. Eager to corral as much of the farm vote as possible, he outdid any Plains State politician in pouring on subsidies and paying farmers to keep land out of production under the so-called set-aside program last year. Federal payments to farmers soared to $4.1 billion from $3.1 billion the year before, and food production dropped by more than 2%. Nixon's chosen executor of this policy, Agriculture Secretary Earl Butz, performed zealously. "You won't get me to apologize for high meat prices," Butz told North Dakota wheat growers last year. "I'm spending money like a drunken sailor."

Grateful farmers, who had been in revolt against the Republicans a year earlier because of a sag in commodity prices, voted overwhelmingly for Nixon. But the victory was scarcely celebrated before prices took off. It was not all Nixon's doing. A corn blight had reduced the supply of feed for livestock. By coincidence, the complex cycles for raising cattle and hogs also reached their low points simultaneously. At this rather inopportune time, the U.S. economy started booming, and demand for meat picked up. On top of that, a bad crop in the Soviet Union caused Moscow to turn to the U.S. for grain. The Soviets bought $1.2 billion worth, biting into U.S. domestic supplies.

With a domestic grain shortage staring them in the face, and consumers complaining about rising food prices, Nixon and Butz quickly reversed farm policy. Prodded by Treasury Secretary George Shultz, an ardent free marketeer, they proposed a new laissez-faire farm policy that would abandon some price supports and reduce other subsidies. They returned as much acreage as possible to production, dropped export subsidies and prepared to "empty" the Government storage bins. Though they forecast that such moves would cause food prices to level off after midyear, that was not soon enough for irate consumers.

The new ceiling on meat may keep the overall food-price index from rising as much as it otherwise would have for the next few months, but many politicians and labor leaders argue that more extensive controls will be necessary. Texas Democrat Wright Patman, chairman of the House Banking Committee, has offered a bill that would place a freeze on all retail prices and interest rates and roll back some rents as well. Even Republicans feel that further action should be taken on the Hill. Says Representative Garry Brown of Michigan: "I worry whether people will be content with just a ceiling on meat prices. I believe a lot of consumers are thinking about price rollbacks."

Meat Lust. More ominously, George Meany said after the ceiling was announced that unless there is a general rollback on prices, labor will consider Phase III "inequitable." That was a blunt warning that unions, angered by price rises, may well be encouraged to make excessive demands in the contract negotiations that get under way in the next few months in the rubber, trucking, electrical and auto industries. If labor wins big wage boosts, Nixon will be confronted again with the specter of inflation. He would have to make an unhappy choice: either he would have to impose a wage freeze and forfeit labor support that he has so assiduously cultivated, or the Federal Reserve Board would constrict the supply of money for loans, thus slowing down the economy and risking another recession.

Meanwhile, the consumer revolt goes on, unchecked by the ceiling on meat prices. Groups throughout the U.S. continue to protest. FIT (Fight Inflation Together), a nationwide organization of housewives, plans to push forward with its meat boycott this week. Among local anti-meat campaigns launched recently are STOP (Stop These Outrageous Prices) in northern New Jersey, WASP (Women Against Soaring Prices) in Delaware, SCRIMP (Save Cash, Reduce Immediately Meat Prices) in Boston and LAMP (Ladies Against Meat Prices) in several states. UPD (Until Prices Drop) is collecting grocery receipts to mail to the President. Governor Reagan of California, the nation's most productive farm state, was so alarmed by the consumer revolt that he reminded people that meat shortages are largely due to God's will. "And I'm not in favor of boycotting him."

Meat may soon be rivaling sex as a source of jokes. Samples: "Where can I rent a steak?" Or: "I would like to invest in a piece of meat." Vice President Agnew offered his contribution last week: "Two Swiss steaks opened a bank account in Zurich." Housewives have taken to following meatless recipes. If their husbands remain meat chauvinists and insist on steak, they are served smaller portions--and sometimes they get something else when they think that they are eating beef. A housewife in Portland, Ore., revealed in a newspaper interview that she had been feeding her husband horsemeat for three years. Had he known it was horse? He had not, but having tried it, he liked it. Reading of this, people raced to the J & H Horsemeat Market, where they stood in line for as long as three hours. The owner, Ed Carroll, sold more than 6,400 lbs. in one day and had to hire extra help. He worries whether his supply of horses will last. He also fears that the price of horsemeat (95-c- a pound for tenderloin, 65-c- a pound for sirloin tip) may soon catch up with beef.

Meat lust has made the West wild again. Rustlers prowl the prairies in pickup trucks, absconding with unbranded cattle, which they then sell for $100 to $500 a head. Sometimes they kill and dress steers on the spot; at least three of the animals have been slain by bow and arrow. Says California Rancher Gordon Garland: "Cattle theft in the foothills has increased so much in recent months that ranchers are now forced to carry guns to protect their own physical well-being." Another leathery son of the soil advises: "When you catch some slob stealing, shoot him."

Bad Rap. Other species are also being endangered by the meat shortage. The California fish and game department reports many more cases of deer poaching this year than last. "Poaching generally involved hippies trying to live off the land, but now we are getting older people trying to combat the rising cost of meat," says a park warden. Last week 100 pheasants were filched from their pens at the Quemahoning Trap and Field Club at Laurel Mountain, Pa. Even hijackings have been reported. Burglars looted 420 canned hams from a tractor truck parked off Interstate 70 near Pittsburgh.

What is the main cause for the sharp rise in meat and other food prices, and who benefits most from it? Consumers often complain that big business is the culprit, but that, in fact, is a bad rap. Supermarkets operate on profit margins as thin as wrapping paper; .9% on sales is the current average margin. The Great Atlantic & Pacific Tea Co. lost $55 million last year largely because of its "WHO" discounting drive. The so-called middlemen are also largely blameless, though President Nixon last year fingered them as the main perpetrators of the food price jump. The meat-packing companies commonly earn about 1% on sales, and both Swift and Armour reported lower profits in booming 1972 than in the previous year.

Says Walter Heller, a member of TIME's Board of Economists: "As I look at the various pieces of food-processing business, whether it is flour milling or cheese manufacturing, the profit margins are absolutely miserable all down the line."

Normally, there would be ample opportunity for all the people involved in the long food-production and marketing process to reap a reasonable profit. In the normal chain of events for beef, for example, the farmer sells his calf to a feedlot operator, who is one of the middlemen. He in turn fattens the animal and often sells it to a meatpacker for a few cents less per pound than he bought it. The feedlot operator hopes to profit by adding considerable weight to the animal in a relatively short time, but his problem lately has been that feed costs have risen sharply. The packer who slaughters the calf adds a markup, but his margins have been pared by increasing labor and transportation costs. The retailer, who often dresses a 600-pound carcass into a variety of table meats, adds still another markup, but his own profits have been crimped by rising costs of everything from labor to fuel.

The farmer, on the other hand, has been enjoying considerable prosperity--helped in large part by Government policy, only recently revised, of pumping up subsidies and holding down production in order to buttress prices. Last year the nation's 9.5 million farm population had a record total net income of $19.2 billion, a 19% jump over the year before. Agriculture Department experts report that it will be even higher this year. In 1972, the average cost of food per household rose $60, to $1,311. Of the increase, the farmer received $42, while the remaining $18 was divided up among retail grocers and butchers, wholesalers, packers and other middlemen. Farmers paid 7% more for the goods that they bought last year, but they also received a walloping 17% more for the products they sold. "There is no mystery whatsoever as to why retail food prices have risen in the past year," says Arthur Okun, another member of TIME's Board of Economists. "The answer lies almost entirely in the rise of wholesale farm prices. If there is any mystery, it is why retail prices have not risen more than they have."

Good Deal. The farmer does not consider himself the culprit but a scapegoat--and he resents it. If he gets one or two banner years, he reasons, he is expected to do penance for them. Says Harold Steele, an Illinois hog farmer and President of the Illinois Agricultural Association: "People forget that prices were so low two years ago that the farmer was taking a huge loss. Often he had to mortgage 75% of his equity to stay in business." But the farmer does not forget. Living with precarious weather and price cycles, he develops a certain resignation. He complains in bad years, yet is too insecure to do much boasting in good ones. Says John J. Kovacevich, a California fruit farmer: "Farming is a bigger gamble than Las Vegas."

Farmers contend that consumers do not realize what a good deal they have. Though food prices have undeniably risen, they have not kept pace over the past five years or so with the jump in the cost of health care or housing or a variety of other goods and services that

Americans take for granted. In fact, Americans today pay a smaller percentage of their income for food than ever before. In 1950, a full 24% of disposable personal income went for food; last year, it was down to 15.7%. In no other industrial country is the percentage so low. Germans pay 22.5%, Italians 31.9%, the Japanese 33.2%.

Americans are also making increasingly costly demands on the food industry. They buy more and more frozen foods and TV dinners, which add 25% to food costs (but really amount to built-in maid service). Restrictive labor union practices contribute to boosting costs. For example, Iowa Beef Processers, Inc. would like to ship all of its meat butchered and boxed; since heavy fat and bones have already been removed, transportation costs are dramatically reduced. In some major urban centers, however, butchers refuse to handle precut meat. They insist on keeping the jobs for themselves, despite higher costs for consumers.

The farmer feels put on the defensive by criticism from his fellow countrymen. He believes that he works harder than most other Americans, who undervalue his moral and economic contributions to the nation. He resents being stereotyped as a gothic rustic from the paintings of Grant Wood. He watches the same TV programs and reads much the same books and magazines as his city cousins; he sends his children off to college and on tours of Europe. Yet each farmer's life differs in terms of comfort and hardship, ease and anxiety. All of them are part of a way of living to which a common dollar value cannot be applied.

In Illinois, 55-year-old Paul Ives, who raises soybeans, corn and hogs on 470 acres, has two major concerns. One is environmentalists: "If they got everything that they now ask for in regulating pesticides, herbicides, hormones and waste management," he says, "my costs of hog production would increase 50%, and my soybean yield could drop 75%."

His other worry is financing and coping with the vagaries of the market. Just like other farmers, Ives has to know when to borrow, how to maximize depreciation write-offs, whether his tax situation warrants buying a new piece of equipment in December or in January, and when to hedge on the commodities futures market. He realizes that with the farmer's typically high level of indebtedness, any major error--or bad luck--could plow him under. Farm prices are booming now, but Ives has lost money, or come close to losing, in two of the past five years.

In California's Sacramento Valley, Les Heringer, 54, works from 5 a.m. to sunset as part owner and manager of a 6,300-acre spread that produces diversified crops--pears, peaches, walnuts, alfalfa, corn, tomatoes, wheat, sugar beets. Like Ives, he deals as much with balance sheets as with tractors, and he has to have a grasp of cash flow, accounting and amortization tables, but he never lets a day pass without inspecting the fields. Last year he made $24,000. "The routine is the same every year," he says. "In January, we borrow money to operate on for the year. Then we pray for good weather and hope that we can pay it back. We know the risks, and we accept them."

Typically, Heringer never wanted to be anything but a farmer. While other kids played football, he left school in the afternoon to harvest wheat. He married a farm girl, and together they worked the fields. Holding his own against nature has made him a humble and occasionally philosophical man. There is the problem, for instance, of floods from winter rains. "In the winter," he says, "the only way to keep from drowning is to pump the water into the river like mad. In the summer, we have to siphon it back into the fields." He is keenly disappointed that none of his seven children want to stay on the farm. "Farming is a religious experience for me. For younger men, it has become a matter of economics. It is not a way of life any more. Kids today want a 40-hour week with Saturday and Sunday off. That's not farming."

Psychic Rewards. In the rolling hills of southeast Georgia, Robert Nash, 49, takes pride in running a family farm. His wife and three children have worked alongside him; all have won cattle trophies, which line Nash's office. He likes to show off a snapshot of his daughter Cindy with John Wayne at a cattleman's convention last January. He has two full-time hands on his farm. As the cost of labor rises, a family is more than comforting to have around; it is an economic necessity. "We couldn't get anybody to pick pecans at 50-c- a pound," says Nash. "My wife and little girl picked all the pecans that were harvested. I honestly don't know what to say to my men. I am ashamed to ask them to work the hours that we do. We're feeding the cattle early in the morning, and by the time we finish doctoring and other things, it's night. You have to love the farm to stay on it."

For all his drudgery, the farmer enjoys certain psychic rewards. He lives and works in the open, in the fresh air, far away from the grime, crime and tension that beset some big cities. As often as not, he still leaves his door unlocked at night. Faith and convictions remain more intact in the countryside, where they are closely linked to soil and season. Many of today's city dwellers yearn to live on the farm, to recover the roots pulled up elsewhere and plant them once again in solid soil.

The whole nation has more than a purely economic interest in helping the farm population do well on the land. Yet to ask the city dweller to heavily subsidize today's farmer is to ask for a great deal. In effect, the non-farm citizen pays twice for farm subsidies: once in the form of higher prices, once again in taxes that go into subsidies. Most federal payments go to larger producers who have no real need of them. In 1971, farmers with gross sales of $40,000 or more received roughly one-eighth of their income from Government payments. Thus some non-farmers are helping support farmers with higher incomes--a clear injustice.

President Nixon now aims to cut these subsidies. He has not offered a detailed bill to Congress because that would present too tempting a target to supporters of traditional farm programs. Instead, he plans to work out agreements in congressional committees and then, if necessary, on the House floor. There the farm bloc has been weakening as urban areas have gained more representation.

The Administration does not plan to scrap all the tools that it needs to manage farm supplies. Though it has recently reduced the set-aside by 53.5 million acres in order to stimulate food supply, it intends to keep this program in reserve in case demand slackens. But crop subsidies for wheat, feed grains and cotton will be phased out over a three-year period. The President also proposes to take the Government out of the food-storage business now that increased demand has caused inventory to decline from a scandalous high of $6 billion in 1960 to $200 million today.

The White House is quite cold-bloodedly clear about its plans for the farm of the future. It emphatically does not subscribe to the notion that inefficient farmers must be kept on the land for the sake of tradition. Not for Nixon or Butz or Shultz the sentiment of the English poet Oliver Goldsmith: "But a bold peasantry, their country's pride/ When once destroyed can never be supplied." "Farming isn't a way of life," says Butz. "It's a way to make a living." He regards as inevitable the growing consolidation of farms, while marginal ones close down at the rate of 865 a week.

Consolidation, however, has not led to the demise of the family farm, as people once feared it might. If anything, the family farm has been strengthened. Income may not rise much, but real estate values often do. Quips one small farmer in Iowa: "Well, one thing about us folks out here--we may live poor, but we die rich."

The family farm was supposed to be endangered by the corporations that invaded agriculture a few years back. But they turned out to be helpless on a land they could not really understand, clumsy brontosauruses bogged down in rigid procedures. Relying on a labor force that lacked the farmer's single-minded devotion to the soil, they could not make a profit. One after another, United Brands, Tenneco, S.S. Pierce and other companies have retreated from the fields, abandoning some or all of their farm ventures.

But consolidations claim many victims, poor farmers who are forced off the land and often into city slums. Of the 2,800,000 farms still existing in the U.S., the Agriculture Department considers that as many as 1,200,000 may be too poor to survive. In a sense, they have already succumbed. In most cases, their owners earn their living away from the farm--picking up seasonal jobs as highway workers, construction hands or teachers, while scratching out a pittance from some crops and animals on a small plot out back. The agricultural programs enacted since the 1930s have not materially changed their lives. Says a top official at the Agriculture Department: "We are breaking the old myth that the commodity program is helpful to the fellow on the lower end of the ladder. The little guy's future is not in agriculture."

Boldness. If it is not in agriculture, then where? The Administration as yet has no alternative. The Rural Development Act provides loans for industries that will create jobs in the countryside. But the fiscal 1974 budget includes a mere $200 million for the program. The Family Assistance Program, which would have offered a minimum annual income, has been shelved by the White House. Clearly, poor farmers driven from their land deserve financial aid from a government that is encouraging them to leave.

In many other aspects of farm policy, however, the Administration has displayed boldness and imagination. While on his celebrated trips abroad, the President has actively sought out overseas markets for American agriculture. He has a twin purpose: helping U.S. farmers and improving the U.S. balance of payments. Of all American enterprises, none is more efficient than agriculture or more vigorously competitive overseas. Farm products are by far the biggest U.S. export, having increased from $5.7 billion in 1969 to $9 billion in 1972. The Administration expects them to reach $15 billion well before 1980.

The U.S. farmers' ace is the soybean, which has become the nation's No. 1 cash crop, an upstart commoner displacing king cotton. Unlike cotton, which requires intensive labor, the soy-bean can be grown by one man with a machine or two. Its high protein content is sought in countries that do not raise much meat; it is used for margarine in Western Europe. Moreover, the soybean grows best in the U.S.'s soil and climate conditions. As Walter Heller puts it: "Soybean is happiness."

Some agriculture experts doubt that the overseas market will prove to be quite the bonanza the White House envisions. Though the U.S. currently enjoys brisk farm sales in Western Europe, Common Market tariff walls may rise higher to protect further the member nations' well-coddled farmers. Nixon is determined to lower those walls in international trade negotiations, probably later this year. Other foreign markets, particularly the Soviet Union's, offer huge promise. A series of disastrous crops forced Moscow to buy out U.S. granaries last year; the Soviet Union will probably do so again this year because a bad winter has again damaged the Soviet crop.

More Demand. Many agriculture spokesmen are wary of depending too heavily on long-term sales to the Soviet Union, which normally has a grain surplus. They note that if the U.S. takes all of its constraints off planting and grazing, the production of grain, meat and other farm products will soar and prices could plunge--unless exports quickly took up the slack. Says Senator Hubert Humphrey of Minnesota: "In 1963, we thought that the Russians would buy big, but they slaughtered their cattle instead. Meanwhile, we planted, and prices went down the drain. The same thing happened a few years later. It could happen again."

Yet the evidence is ample that a profound change has overtaken world agriculture--a change that will make overproduction an idle fear of a bygone age. The world is rapidly becoming increasingly populous, affluent and industrialized. More people need to be fed and, as their incomes go up, they are demanding more protein--notably meat. Farm land is diminishing as cities encroach. In many areas, farm productivity is reaching the upper limits. More and more countries are yearning for food, and nobody produces it in greater quantities or with greater efficiency than the highly mechanized U.S. farmer. Japan bought more than $1 billion worth of farm products last year. Eastern European countries could well become major customers and, over the longer haul, so could China. The Soviet Union has vast supplies of oil, natural gas, metals and other resources that the U.S. needs (see THE WORLD), and a major long-term exchange for U.S. farm goods looms as a possibility.

In this kind of world, the U.S. farmer could do what pleases him most: produce and produce and produce without worrying as much as before about price supports or acreage controls. A sensible policy aimed at increasing production, while providing help for those who have to leave the land, would benefit the whole nation. Farmers would prosper as never before, and consumers would not have to demonstrate, picket and boycott in protest against the high cost of eating.

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