The Sprouting Farm Issue

Trying to fix the blame for the high price of food has become a national preoccupation--a noisy adult version of pin the tail on the donkey, played by politicians, supermarketeers, farmers and consumers. Yet one thing is clear: despite a recent leveling, supermarket prices will climb further during 1972. That message came out of the Price Commission's hearings on food costs last week. As Assistant Agriculture Secretary Richard Lyng said: "Increases in retail food prices will, overall, be modest. There will, however, be sizable price swings in individual commodities."

Shortages account for the immediate jump in farm goods. Agriculture Secretary, Earl Butz and other farm spokesmen, argue that America's increasing appetite for meat and other farm products has kicked up prices. On the other hand, many economists contend that the Government's elaborate price-support policies have contributed substantially to high food costs. Thus, the controversy over food prices, which will be a prime campaign issue, is also likely to bring into question the whole program of subsidies to agriculture.

Peanuts and Corn. Basically, the Government tries to restrict production by paying farmers to reduce the amount of land that they cultivate. It also seeks to prop up the market for crops like wheat, corn, rice and peanuts by guaranteeing a minimum price. Farmers can collect money for taking land out of production, then increase the yield on the acreage they do use, and collect at least the support price on all that they raise. A study last year by former Budget Director, Charles Schultze, estimated that consumers pay an extra $4.5 billion a year for food because of price supports. Indeed, consumers are clobbered twice, because they have to pay out additional billions in taxes to finance supports--a massive transfer of national income from consumers' pockets to farmers' pockets. The farm bloc rightly contends that U.S. agricultural products are a bargain when compared with those of some European countries. But this does not justify the inequities and inefficiences that have grown up around the subsidy program.

In this political year, the Administration will spend a record $4.3 billion or more for farm subsidies, up from $3.3 billion last year. Just to get corn production down, the Government will hand out a record $1.9 billion for feed grains this year. Moreover, price supports for corn raise the costs of feed for ranchers, who in turn produce less livestock and thus cause the price of meat to rise. In 1970, Congress limited each farm to a subsidy of $55,000 per crop. Some big farmers divided their large holdings into smaller units, each eligible for a separate subsidy.

The subsidies, together with the higher prices that farmers are getting for their goods, especially meat, will lift farm income this year by 10% to 15%. Farmers argue that these increases are justified by their rising expenses for labor, machinery, fertilizer and taxes. Yet, as Price Commission Chairman C. Jackson Grayson observes, inflation also burdens other segments of society; if inflation is to be checked, farmers, too, must sacrifice.

Farm lobbyists in Washington tirelessly raise the old issue of parity, a concept born in the Depression and based on the price relationship between what farmers pay for their goods and services and what they get for their crops. The optimum ratio of 100 was tied to conditions in 1909-14, a golden age for agriculture. Parity is now running at about 75. Yet despite lower parity, the farmer's real income has risen over the years. Reason: technology has increased productivity and crop yields, so that he can produce much more on his land with less effort. Sixty years ago, it took one man 106 hours to produce a bushel of wheat; now he can raise the same amount with eleven hours of work.

Enter the Giants. Subsidies have nourished a new giantism on the farm, which has created some unwholesome social effects. Large farmers collect an ever greater share of the subsidies. There are 2,900,000 farms in the nation; roughly 20% of them are big ones that collect about 60% of the subsidies. Many small farmers do not get any subsidy at all. They often cannot get credit to expand and compete because their income is so low; in 1970 about two-thirds of all farmers had annual sales of less than $10,000. As the big farmers grow richer, they buy up more and more small operators. Since 1950, the number of U.S. farms has been cut in half, and the farm work force has declined by 60%. Millions of displaced farm workers have drifted to the city, often winding up in ghettos, where they subsist on welfare--and push up taxes.

Lately this trend has been speeded up with the growth in farming of huge corporations, including Tenneco, Purex, Getty Oil and Monsanto. In California, the nation's leading farm producing state, 45 corporations own or lease almost 3,700,000 acres. These firms can overpower small farms by writing off losses in their agricultural ventures against taxes due from other more profitable enterprises. They have sufficient capital reserves to put off selling livestock long enough to qualify for the lower capital-gains taxes; the small farmer usually cannot do this because he needs a fairly steady income in order to survive. Tenneco and some other large firms control every aspect of food producing, from planting to retail sales. Huge "agribusiness" firms absolutely dominate the poultry business. With their great size and resources, the large companies can often dictate terms to individual farmers on leasing land or contracting for crops.

For all the disruption that it has caused, the rapid growth in farm size has not brought appreciably lower prices. Indeed, it has contributed to a decline in quality of some items. Since corporate farming is most profitable if crops can be machine-harvested, plant geneticists have developed tomatoes, berries and other fruits that have thicker skins and, in the opinion of many consumers, less taste.

To eliminate the waste and inequities in U.S. farm policies would require a complete restructuring of the system. That would include a root-and-branch revamping of the subsidy program, a revision of the capital-gains tax as it applies to agriculture, and a law requiring big companies to bargain collectively with farmers instead of grinding them down one by one in some parts of the country. Powerful lobbies will battle bitterly against such moves, and it seems politically impossible to substantially lower subsidies in the near future. But with food prices a hot issue in the presidential race, the time is at hand for a thorough national debate that could lead to future reforms.

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