Despite large current supplies and relatively low prices of commodities in the United States, world food supply and demand are tenuously balanced and uncertain even in the short run. A major reduction in crop production in the United States or abroad in 1982 could very quickly trigger sharp increases in commodity and food prices. World food production was highly unstable during the 1970s, and U.S. agricultural prices and incomes were significantly less stable than in the preceding two decades. Prospects for global food production in the 1980s are for more of the same—alternating years or short periods of relative abundance and scarcity. Given the international interdependence of U.S. agriculture, fluctuating global food production coupled with price-inelasticity of demand for food translates quickly into unstable commodity prices, farm income, and, to a lesser extent, food prices in the United States.
Flexible policies needed
Flexible program design and instrumentation—a policy for "all seasons"—are critical requirements if public policy is to cope with the inherent instability of agricultural production. Paramount among such needs is that for interannual storage of basic crop commodities. In this respect the 1981 farm bill contains many of the essentials: production management provisions, authority to influence farm prices above specified minima as incentives or disincentives to production, and grain reserves or storage authority. Whether they will be effective or not, of course, depends upon how the secretary of agriculture chooses to view and operate these programs, and on actual production and supply conditions in the next several years. In the past, the temptation has been strong to view the reserves program as a farm income maintenance or enhancement program, objectives not necessarily compatible with supply stabilization.
A version of this article appeared in print in the March 1982 issue of Resources magazine.
