The Surplus Problem

It became apparent last week that the farming situation is going to play a major part in Congress and in politics generally during the coming season, and that the focus of attention is going to be the "surplus problem."

The Legislative Situation. The Administration has introduced in Congress its farm relief program. The principle of this program is to grant every facility and provide all necessary information to farmers in forming and operating cooperative marketing association. The theory is that the farmers will get better returns if their products are sold in quantity by businesslike organizations. The theory is sound. There is practically no opposition to the bill.

But there are other bills in Congress, or soon to be in Congress, which have not administrative backing. There is the McNary-Haugen bill revived from the last Congress, which would create a great Government export corporation. Other plans call for similar private corporations with more or less Government support. Still others propose an export bounty on agricultural produce. They all have one purpose: to keep up prices in this country. This involves 1) increasing the domestic price of such produce; 2) either raising foreign prices or standing the loss which is the difference between the domestic price paid to farmers and the lower price received from foreign buyers. Since it is impossible to control foreign markets completely, all of these plans practically involve the question of who shall stand the loss on the export surplus.

The Political Background. On Dec. 7 President Coolidge made a speech to the American Farm Bureau Federation in Chicago. He outlined the Administration's plan for aiding co-operative marketing societies. That pleased the Federation. He declared that he was opposed to plans for price fixing (i.e., for an export corporation or something of the kind). There was a mild amount of applause. Later Senator Capper addressed the meeting. He favored, in general, some sort of price-fixing arrangement. The applause was uproarious. Toward the close of the meeting, when the Federation elected officers, Oscar E. Bradfute, its President, who was largely in accord with the Administration's policies, was defeated. In his place S. H. Thompson of Illinois, a strong exponent of the price-fixing theory, was elected.

Gradually during the past few weeks the significance of these events began to dawn on Congress. The Farm Federation, a strong and representative group of farmers, had turned from conservative to radical--wanted something entirely beyond the Administration's program. Other farm bodies spoke in similar fashion. Supporters of the Administration coming up for re-election next year began to have fears. Senator Cummins, veteran regular, was represented as going to the White House with the declaration that unless something were done about the farm surplus (i.e., farm prices) he might well be defeated.

The President, backed chiefly by Secretary Hoover and Secretary Jardine (who is rated as an adherent to the Hoover viewpoint), has stood against price fixing. The group for price fixing is divided roughly into two parties: 1) those who want price fixing at Government cost (they are the radicals) and 2) those who wish the price fixing at the cost of the farmers themselves (the moderates). In this latter group it appears that Frank O. Lowden, onetime (1917-21) Governor of Illinois, who has become a leader of the agrarian interests, is to be included--possibly also Vice President Dawes. Between these two parties a distinct line has not yet been drawn, and a great many politicians would like to belong to both parties at once.

The pressure of the price-fixing group--both parties--began last week to tell on the Administration, with the prospect that its farm plans might be modified. Secretary Jardine announced that he was considering the problem of the surplus, that he had decided to call a number of "leaders" to Washington from time to time to confer on a "sound and effective" plan. So the Administration began to turn in its tracks.

The Theory of Price Fixing. About 15% of farm produce is sold abroad. This is the surplus of production over domestic consumption in various commodities. To sell the entire crop, prices have to go down to the foreign level, and this level of late has frequently been below the cost of production. Hence the farmers have suffered. As long as foreign prices remain below our cost of production, the only way farming can be made profitable is to sell no farm produce abroad. This means curtailed production for the time being. The unfortunate fact is that apparently the only way to curtail production is to make it unprofitable. Allow the farmer to make money on his produce by Government price fixing and he will naturally (unless some direct effort is made to prevent him) increase his production. This would only make the problem of the surplus worse and worse. This is the reason why Secretary Hoover has led the Administration to oppose price fixing as unsound.

The moderate group of price fixers--the Lowden group they may be called--propose an alternative. They suggest that the domestic price be fixed by a sort of gigantic co-operative marketing association, which will then sell its surplus abroad at a loss, this loss instead of being taken by the Government as price fixer to be prorated among the producers. In this way, they contend, the loss on the surplus prorated among the producers, would tend to act as a deterrent to overproduction.

The Farmer's Pocketbook. The farmer wants to make a living. For him this is the basic fact. He sees the rest of the community benefited by the tariff, but the tariff does him no good because he has a surplus to sell abroad. What is he going to do about it? He asks in a louder and louder voice for price fixing--and Congress takes up the cry.

The Economic Setting. The curious thing in the farmer's situation is that he is suffering when the general trend of the economic situation is all working in his favor. Ever since 1898 the consumption of food products in the U. S. has been increasing much more rapidly than the production of foodstuffs. Only last week the Department of Agriculture made public a study confirming this fact. Of sugar, fruits, nuts and vegetables we import more than we export. We still export more grain, grain products, and animal products than we import, but the net exportation of animal products has fallen off 41% in 25 years or so, and grain and grain products have fallen off 22% in approximately the same period. On the other hand our sugar imports have increased 111% and imports of fruit, nuts and vegetables have increased 367% over what they were 25 years ago. We are fast tending to become a food importing country. There is every indication that to the next generation the problem of an export, surplus will be a ridiculous absurdity, and that their great outcry will be to keep down the high cost of agricultural products.