A Workable Farm Policy
Born and reared on a farm in Idaho, EZRA TAFT BENSON is a farmers’ Secretaryof Agriculture who has shown unlimited courage in urging farm policy back toward more self-reliance and less subsidy. He attended Utah State Agricultural College and Brigham Young University, earned a degree in agricultural economics at Iowa State College. and did further graduate work at the University of California. For many years he carried on successful farming operations, and served as a county agricultural agent and specialist in service marketing. In 1939 he was appointed executive secretary of the National Council of Farmer Coöperatives.
bv EZRA TAFT BENSON
1
THE strength of a nation, to a large degree, rests in its ability to meet successfully the never-ending succession of problems that arise. This is true in agriculture just as in other phases of our national life. The problems of today are the successes of tomorrow. They are, when rightly viewed, steppingstones along the road to progress rather than stumbling blocks to compound our complexities.
Occasionally there are people who look wistfully for a solution to what is called the “farm problem.” Actually there is no single over-all problem. Neither is there a single solution.
The problems of agriculture are changing ones. They are numerous. They vary from year to year in complexity and severity. In meet ing t hese problems it is important that we keep our eye at all times on the goal of a stronger and better America. Solutions must strengthen the cause of freedom. They must deal fairly with farmers and other economic groups of our society. Our efforts must result inconsistent progress toward the betterment of mankind.
I realize that farm problems can mean different things to different people. The farmer whose principal income is derived from wheat may see his problem largely as a matter of increased profitable exports. The rancher may view his in terms of improved cattle prices. A member of Congress may look at things from an entirely different point of view. And so may the Secretary of Agriculture.
This was brought home to me rather forcefully during a recent meeting with a Congressman from one of the dairy states. He was greatly disturbed, as I am, over the declining per capita consumption of butter and the piling up of huge quantities of dairy products in government hands. We discussed the problem at some length from the viewpoint of farmers, consumers, and the government.
“Here are the facts,” I said. “Here is what we have done, Given the same facts, what would you have done? ”
The Congressman’s response was quick. He asked, “Do you mean if I were Secretary of Agriculture or if I were running for re-election?”
In approaching farm problems, we are dealing with something that affects not only the welfare of all farmers, but that of all business, of all working people, of all consumers, of all taxpayers, of all citizens.
It is one thing to evaluate situations objectively; it is quite another to criticize with a complete lack of reasoning. I am just old-fashioned enough to believe that the American people — particularly our farmers —admire and respect their political representatives when t heir actions denote wise statesmanship. On the other hand, they are pained when such representatives betray unreasoning partisanship or ulterior motives which require the sacrificing of sound principles for momentary expediency. What is right for all the people, in my judgment, makes good political sense of the statesmanship variety.
I continue to believe that honesty is the only sound policy. Through experience I have learned the invaluable lesson that when I am at peace with God and can approach Him with a clear conscience regarding my activities, I have no need to fear the criticism of any man. I have been proceeding upon the belief that as the people fully understand the causes of our current agricultural problems, they will logically turn toward the best solutions and accept them. The Department has sought to lay the whole picture before them in open discussions.
Our problems today center in the necessity of shifting from an agricultural economy of practically unlimited wartime demands to the more moderate demands of peacetime, while providing reasonable protection for farm income. The present farm program employing emergency, wartime, rigid price supports for a few important commodities is impeding such a transition. To a marked degree it is making an orderly transition impossible.
The present program has a number of flaws:
It results in unbalanced production through rigid supports on some commodities for which demands are decreasing.
It encourages a build-up of surpluses which in turn depress prices.
It discourages sound soil conservation practices by maintaining artificial demands for some soildepleting crops.
It tends to price certain commodities out of both domestic and foreign markets and thus stimulates use of less expensive substitutes.
It destroys the function of price as a brake on overproduction.
It fails to provide reasonable protection for 60 per cent of our annual farm marketings which are not under price supports.
It provides the greatest help to those who need it least — the low-cost, big-volume producers — the least help to small marginal producers.
It creates the complex problem of what to do with land taken out of production because of severe
acreage controls.
It provides for such drastic production restrictions that even with high price supports income is seriously jeopardized.
On top of all these disadvantages, the present program has not prevented a decline in net farm income for five out of the past six years. Under this program the government now has between 6 and 7 billion dollars invested in commodities whose prices are being supported. More than 2.5 billion of this amount is represented by commodities actually held in government storage. The balance has been loaned on commodities a large part oF which will eventually wind up in government hands. These surpluses hang over the market. Thev depress prices. They drain off taxpayers’ dollars day in and day out. The cost of storage alone, is running more than half a million dollars a day.
Let us visualize for a moment what this means. If we were to load on a single train all oF the wheat which the government has under loan and in storage, such a train would extend from San Francisco to New York and then back To St. Louis, a total of 4222 miles. If we loaded all of the corn tied up in price-Support operations on a single train, the caboose would be in Los Angeles and the locomotive in Newark, N.J. This train would be 3052 miles long.
Other major commodities either under loan or in government storage include more than 8 million bales of cotton, nearly 1.5 billion pounds of dairy products, and almost a billion pounds of vegetable oils.
I believe in an agricultural economy of abundance, but this does not represent the kind of abundance America needs. True abundance must be used; otherwise it is not abundance at all. It is waste. It is bad management. It is almost a crime that cries to Heaven for correction.
Altogether, four commodities — wheat, corn, dairy products, and cotton and cottonseed oil, which comprise only 23 per cent of farm marketings — account for roughly nine tenths of our investments in all price-support operations. More than hall of the nation’s 5.5 million farmers either do not produce these four commodities or market such small amounts that they derive little in the way of pricesupport benefits.
To show in the extreme the consequences of high price supports, a caller at my office recently suggested that if this principle had been applied to the harness industry a number of years ago we still might have a thriving harness business in this country, That might be true, but it is certain our storehouses would be filled with harnesses.
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IN VIEW of the surpluses, it may sometimes seem odd that the Department of Agriculture has one agency working to dispose of huge stocks of wheat and another agency seeking to increase the yield of an acre of wheat. Or one group of men struggling with what might be done with stored dairy products and at the same time a group of scientists doing its best to raise the production of milk per cow through improved breeding and feeding. It has even been suggested that perhaps our left hand doesn’t know what our right hand is doing. Nothing could be much farther from the truth.
Most of the permanent progress of agriculture has stemmed from research, education, scientific development, improved marketing, and better production methods. Through these processes we have produced food and fiber when they have been needed. With these same processes we can achieve permanent gains through the use and adjustment of an abundant production.
We are looking to science to play a major role in cushioning the impact of our present agricultural shift. Let’s look at some examples of what can be accomplished. At the end of World War II the citrus industry was faced with a serious orange surplus. Then frozen concentrated orange juice was developed, and prevented the surplus problem from arising. New fermentation methods for producing vitamin B12 and antibiotics in poultry feeds have led to the consumption of an additional 100 million bushels of corn a year.
An annual market for about 40 million pounds of inedible fats and oils was developed through use in an improved grade of oleic acid, epoxidized plasticizers, and hot-dip tinning of steel. Some 25 million pounds of tallow are now being used successfully in the manufacture of synthetic rubber as a result of research. These markets have helped absorb the loss in use of inedible fats and oils due to a sizable switch from soaps to detergents.
The per capita consumption of wheat has been declining for a number of years. The baking industry has frequently claimed that the last half of a loaf of bread is eaten slower than the first half, because of aging or staling. Scientists are now working to prevent this to increase the use of bread. It is estimated that if consumption of bread increased one slice a day for every person, an addilional market for 100 million bushels of wheat a year would be created. Scientists are finding valuable new uses for other farm products. But science cannot carry the entire load of changing to a peacetime agriculture. Nor can it do the job fast enough.
To assist in this shift, the Administration early this year presented a new farm program to Congress. It is designed to bring about orderly adjustments before production distortions of a few commodities demoralize our markets, further overtax our storage facilities, and threaten a breakdown of our entire farm price-support system.
This program centers on the following five interrelated points:—
Greater flexibility. This would be achieved through adoption of flexible price supports and a modernized parity formula applicable to all commodities. These flexible supports would help bring about shifts to keep production more in line with consumer needs.
Increased domestic consumption. To accomplish this, we are placing greater emphasis on agricultural marketing services, assisting the food industry with promotion programs and fostering more intensive research.
Increased foreign consumption. To achieve this goal and reverse the recent downswing in exports, we sent foreign trade missions to Europe, Latin America, and the Far East. We also are improving our service to foreign exporters, finding markets outside the normal trade channels through barter and acceptance of local currencies, seeking authority to dispose of a billion dollars’ worth of surpluses over three years to help carry out the objectives of American foreign policy.
Insulated emergency reserves. We are proposing to set aside up to 2.5 billion dollars’ worth of surplus commodities to implement the adjustment from the old program to the new. These reserves would be removed from regular market channels and held for emergency and relief purposes at home and abroad.
Wisely used diverted acreage. We are working on plans to see that acreage not needed for major crop production is transferred into new soil-building crops. At present about 25 million acres are being taken out of production of wheat, corn, and cotton.
The government will give financial assistance in putting at least a portion of these acres to different uses.
The heart of this five-point program is the flexibility of price supports and adoption of modernized parity for wheat, cotton, corn, and peanuts— the only commodities still on an old parity basis. Unfortunately, these features are also the most controversial.
Modernized parity takes into account increased production efficiency and changes in consumer demand in calculating the cost-price position of the farmer. For wheat, old parity is about 15 points higher than modernized parity. This is because significant changes have occurred in the demand for wheat and in the cost of wheat production during the past forty years.
Our people now consume about 130 pounds of wheat a year per capita. Four decades ago they consumed 200 pounds. In 1910-1914, the base period on which old parity is figured, it took an average of 106 man-hours to produce 100 bushels of wheat. In 1950 it took 26 man-hours. The result of these changes is that when wheat is supported by the government at price relationships which were appropriate forty years ago, overproduction is encouraged in all other areas as well as in the wheat belt. To calculate prices of some items on the old basis and the remainder on the now creates serious disparities and maladjustments. Under existing law, modernized parity is scheduled to go into effect on January 1, 1956.
3
FLEXIBLE price supports are also part of existing law, but so far Congress has not permitted them to go into operation. They are now scheduled to be effective on January 1, 1955. This is in line with the Administration’s proposal. There is a move in Congress, however, to maintain the old and new parity formulas and to continue rigid supports on some of the commodities now causing most of the trouble. This move fails to take into account some compelling arguments on behalf of flexible supports.
Flexible supports provide for some price fluctuation to keep supply and demand in better balance, while at the same time placing a strong floor ranging between 75 and 90 per cent of parity under the prices of basic commodities.
They produce greater stability in farming operations and in farm markets.
They encourage sound farm management practices.
They create better price equality in relation to other commodities.
They assure abundant food supplies for consumers at reasonable prices.
They stimulate expansion of market outlets at home and abroad.
They hold production controls to a minimum.
They give added incentive for conservation and soil improvement.
They encourage efficient use of agricultural resources.
Flexible price supports will promote these goals with a maximum of reliance on the coöperative and competitive efforts of free men and a minimum of dependence on government control.
A number of commodities are now being supported on a flexible basis. A highly publicized example of flexibles was this spring’s reduction in the support level on dairy products from 90 to 75 per cent. This was an unusual situation and the full cut was required by law.
Nonetheless, it serves to demonstrate the soundness of the flexible principle. The dairy industry was suffering from serious production and marketing dislocations, these were the result of a rather sharp decline in consumption in the face of increasing production and declining exports. At the time that I announced the decision lowering support prices, the government held the equivalent of more than 8 billion pounds of whole milk in storage. Production, even in a seasonally slack period, was running well ahead of consumption. The domestic per capita consumption of fluid milk and cream had declined 12 per cent, or 47 pounds, since 1945. For the same period, consumption of butler had declined the equivalent of 45 pounds of whole milk.
The job was clearly one of putting the dairy industry back on its own feet, building strong markets and getting rid of the surplus through increased consumption. A continuation of the existing distortions might needlessly have condemned ihe industry to a long period of government subsidizat ion and eventual permanent loss of markets for some dairy products.
The cut in price supports brought a lowering of retail prices which already is spurring consumption. This, coupled with a vigorous educational and promotional program stressing the value of dairy produets, should go a long way toward restoring some traditional markets and re-establishing the industry on a firm and profitable basis. Our people need to consume more dairy products. Milk is good. It is inexpensive. It is the most nearly perfect food for children, young people, and adults. If the full dietary needs of the nation for dairy products were being met. there would actually be a shortage. An industry with such a potential must not become apathetic toward vigorous, effective selling; it must not become a victim of government subsidy.
To help the industry make the necessary adjustments, the Department of Agriculture is assisting in a promotional campaign, is speeding disposal of government-held stocks, and is encouraging greater efficiency through the culling of low-producing dairy cattle. Additional steps will be taken as found necessary.
The decision on the dairy issue was made in the long-range interest of the industry itself. In spite of this, it has occasioned considerable opposition. Of one thing I am certain, however. The decisions that made this country great were characterized by neither timidity nor shortsightedness. American agriculture did not reach its present eminence because of any farm price-support formula—either rigid or flexible.
As agriculture continues to make great forward strides, it will not be because of mere legislation. It will be because the people on the farms—together with our scientists — all push forward the march of progress in an atmosphere of freedom that has made our agricultural plant one of the modern wonders of the world.
