Farmers Are Taking Their PIK

By Susan Tifft

Mixed results from a plan to aid growers who don't grow

Across America last week, the nation's farm land had a bizarre new look. In Kansas, large brown patches of stubble-studded earth interrupt shimmering golden carpets of ripening winter wheat. In Nebraska, idle center-pivot sprinklers stand like outsize scarecrows over many once verdant cornfields. In California, more than half of the acreage normally devoted to rice lies uncultivated. The cause of the crop cutback is not drought or disaster but a new federal program that rewards farmers, partly in cash and partly in grain and cotton, for taking large tracts of land out of production. Called payment in kind (PIK), the program aims to invigorate the wilted farm economy by reducing bin-busting surpluses, driving up depressed prices, cutting Government costs for farm subsidies and grain storage, and saving farmers production expenses. Alas, at mid-season the results of the ingenious new program are mixed.

PIK prompted farmers to remove from production 82.3 million acres of wheat, corn, sorghum, cotton, barley, oats and rice, amounting to 36% of all eligible crop land. The U.S. Department of Agriculture estimates that farmers planted only 60.1 million acres of one major crop, corn, down 27% from last year and the lowest level since 1878. Even with the acreage reductions, however, the nation's winter-wheat crop, planted last September and now in the midst of being harvested, is estimated at 1.94 billion bu., the third best crop ever and down only 8% from last year. Farmers in 13 states will bring in larger wheat crops than last year. The reason: record yields, a predicted average of 40.7 bu. of wheat per acre nationwide, up more than 10% from 1979. Says Kansas Farm Bureau President John J. Armstrong: "Yields are looking so good out here that we'll harvest nearly as much winter wheat in Kansas as last year on 1.5 million fewer acres."

As a result, wheat stockpiles are actually expected to grow this year. For every other commodity, however, PIK appears to be succeeding in drawing down the enormous surpluses. The USDA predicts that the unsold carryover of feed grains, mostly corn, may dwindle from 3.4 billion bu. to 2 billion bu. by the end of the year, a reduction of about 40%. Rice stocks are expected to be cut by almost half, from 68.2 million cwt. (hundredweight) to 36.3 million cwt. "Without PIK, we would have had a market glut like we've never seen," says Agricultural Economist Barry Flinchbaugh of Kansas State University. "It would have been a hell of a mess."

Prices have inched up since PIK was announced last winter, but not necessarily as a result of the program. Corn jumped from $2.36 in January to $3.15 this month, primarily because farmers held so much of their 1982 crop off the market that buyers had to bid up the price to get the available supplies. Cotton prices have risen nearly 10-c- per lb. this year, mostly because of bad weather. Eventually, however, reduced supply should strengthen prices and put more money in fanners' pockets. "The confidence level is better," says Tractor Dealer Bob Kennon of Tifton, Ga. "People are more optimistic about the fall harvest than they've been in two years."

When farmers signed up for PIK last spring, they received vouchers redeemable at harvest time for grain from Government-controlled storage. The amount varied from 80% (in the case of corn) to 95% (in the case of wheat) of what they would normally produce on their idled plots. After redeeming the vouchers, the farmers are free to sell the gratis grain or use it as livestock feed. "PIK sure looked sweet to me," says Kyle Bauer, who idled 700 acres of his 1,700-acre farm in northeastern Kansas. "I can give my ground a rest and still get a return on it."

Many farmers, however, are piqued with PIK. They cite poor administration, the possibility of getting paid with inferior grain and a timetable that sometimes forces farmers to sell at deflated prices. "The biggest concern I have is the quality of corn they are shipping in," says Alabama Farmer Bill Sanders. "Some of it is as much as two or three years old. I may have to buy hogs to get rid of it."

Texas rice farmers will receive medium-grain California rice for their PIK entitlements because there is not enough of the more marketable long-grain variety to go around. Worse, the shipments will arrive at the beginning of August when the market is flooded with rice. Cash-hungry farmers will have to sell at the lowest price of the season. "These old boys need greenbacks right away," says Rice Farmer Wayne Wilber. "They won't get nearly as much as they would if they got their entitlements later in the season."

Despite PIK's problems, the Government insists the program will save taxpayers $9 billion in storage costs and other outlays in fiscal 1984 through 1986. The savings pale, however, next to the estimated $21.2 billion that will be spent this year on farm price supports, five tunes the outlays of fiscal 1981. Says Agriculture Secretary John Block: "The costs that we are looking at today really are unacceptable." In preparation for redrafting the current farm bill, which expires in 1985, Block last week convened a two-day, closed-door "summit" of farm and agricultural business leaders to thrash out long-range methods for cutting costs and surpluses and aiding farmers. High on the agenda: the nation's sinking share of farm export trade, resulting from a strong dollar, world recession and stiffer competition from overseas.

For the short term, the Administration is pushing Congress to freeze "target prices" (the prices that determine the amount of a farmer's cash subsidy) for grain and to lower dairy price supports. Until Congress agrees, Block is delaying the announcement of the specifics of the 1984 PIK program for wheat. In the meantime, PIK appears to be the only game in town. "This miserable PIK program is designed to keep the poor buggers in farming alive," says Scott Hanson, administrator of the Washington Wheat Commission in Spokane. "Until someone comes up with a better idea, we're stuck with it."

--By Susan Tifft.

Reported by Gisela Bolte/Washington and Lee Griggs/Chicago

With reporting by Gisela Bolte, Lee Griggs This file is automatically generated by a robot program, so viewer discretion is required.