Some Highlights of 1965: Agriculture

Some solid evidence and several straws in the wind in 1965 pointed toward possible major changes in agricultural policy. A new farm bill, the Food and Agriculture Act of 1965, was passed and a National Advisory Commission on Food and Fiber was appointed. Among the less tangible indications of change were some of the political maneuvering about the Act and some talk about possible drastic shifts in policy direction.

Although the new Act introduces no radical changes from previous programs, the direction of change appears to be toward deemphasizing indirect subsidies through propped-up price levels, and favoring the market as a determinant of prices and also favoring direct subsidies as a means of supporting farm income. In addition, the Act provides basic authority for the next four years, thus offering a breathing spell in which to review the past and appraise the future.

Like its predecessors, the Act has different provisions for different commodities. Most controversial during the debate preceding its passage were those portions affecting cotton and wheat.

The new cotton program includes a decisive shift away from price supports toward income supports, from government stocking toward marketing, and stronger incentives for non production. The Act establishes a domestic acreage allotment for cotton; producers who cooperate in 1966 by reducing their acreage by at least 12.5 percent are eligible not only for loans (price support), but also—and this is a significant innovation—for direct payments (income support) on what they do produce, as well as for version payments, within certain limits, on that portion of the allotment of land not planted to cotton.

In addition, the "right to produce," i.e. the allotment, is made more flexible. Transfers of acreage allotments are permitted between farmers in the same county and, by two-thirds vote of all cotton producers in a county, to farms in other countries of the same state. There is also a modest withdrawal of both controls and subsidies in that up to a quarter million acres of cotton beyond the allotted acreage may, upon application, be grown by producers with a previous record of production who produce wholly for export; they will not be eligible to receive price supports or supplemental payments on their production, but neither will they be subject to penalties for growing beyond their allotments

The new program continues a one-price policy for cotton, but with this difference: formerly, the price was greatly in excess of the world price with subsidies for exports and for domestic processors to enable them to remain competitive; now, is at essentially the world price, without subsidy provisions for export or for domestic consumption, and with the consequent reduction in farm income made up by direct payments to producers. This is basically the approach that has quietly ruled domestic wool production of some years. For cotton, strong opposition of most growers to direct subsidies, which they considered both undignified and subject to easy government manipulation, kept the issue in doubt till close to the end of the legislative term.

The wheat program largely resembles its predecessor. The principal proposed departure, which would have raised the existing mandatory payment by millers to growers sufficiently to relieve the Treasury of all subsidy obligations, ran into heavy opposition, both in and out of Congress. Attacked as a bread tax, and defended as not large enough to force a significant increase in the price of bread, the provision was withdrawn prior to voting.

In its final form, the Act establishes a domestic allotment of 45 percent of normal production but in no event less than 500 million bushels, on which the price will be supported at 100 percent of parity (now about $2.57). Support will come from more than one source. Farmers will be given certificates for their share of this national total, and wheat moving into domestic human consumption must be accompanied by certificates. These, in turn, will be sold by the Commodity Credit Corporation to processors for a price equal to the difference between the national average loan level (set per bushel for 1966) and CCC itself will pay the grower the difference between $2.00 and full parity.

Wheat other than the domestic allotment will have a loan level of $1.25 in 1966—the estimated world wheat price and also the estimated value of wheat for livestock feed. Exports may be subsidized, but only slightly; exporters are still required to have certificates for export, but their value will vary, if necessary from day to day.

A feed grain program closely similar to the present one is authorized through 1969. Here too, direct payments are gaining greater importance. The Secretary, who previously was not allowed to drop the price support (loan) rate below 65 percent of parity, may now do so, provided cash payments for cooperation in the program are large enough to make total assistance equal to no less than 65 percent. Participation in crop control can thus be made more attractive. The program points in the same direction as that for cotton, but does not go as far.

Finally, there is provision, largely new but similar to previous programs, for cropland retirement. Contracts under which the Secretary may pay up to 40 percent of the estimated market value of production foregone, can be made to lease land for five to ten years; such land can be shifted to various conservation uses, and owners can receive additional payments to aid in establishment of such programs, including specified outdoor recreation activities, on their land. In order to avoid the criticisms which helped end the Soil Bank, provision is made that the total acreage of land placed in this program in any county or community, will be limited to assure that the local economy is not adversely affected. For the country as a whole, there is an annual ceiling to commitments for this purpose of $225 million.

While the new Act has many detailed provisions varying from present law, the cropland retirement portion is perhaps the principal area of the program that is not tied to base acreage allotments and to marketing of product and thus not aimed primarily at the commercial farmers. And even this provision deals with production rather than income adjustment, as evidenced by the rule that the farmers must retire specified portions of land in surplus crops in order to be eligible.

In late October the President created the National Advisory Commission on Food and Fiber. When announcing it, the President said: "I am asking this commission to make a penetrating and long-range appraisal of our agricultural and related foreign trade policies." The Commission is to report in eighteen months. While it has farmers and representatives of farm organizations among its membership, two facts are notable: (1) none of the general farm organizations is represented as such; and (2) food processors, food marketers, labor unions, and university scholars are represented.

Perhaps more significant in the long run than the formal provisions of the new Act were the political implications reflected in the maneuverings behind the 1965 legislation. Congressmen from rural areas had provided the necessary margin of votes in the House for repeal of Section 14b of the Taft-Hartley Act in return for promised support by urban congressmen on farm legislation. The provision for making food processors bear a much larger share than in the past of the difference between world market price and parity was part of the Administration's bill. But, as mentioned above, it was strongly opposed by the processors as a "bread tax." Just before the bill came up for vote in the House, this feature was changed to provide that these additional payments should come out of federal appropriations, and that was the way the Act read on final passage.

It is apparent that farm legislation can today pass only with substantial urban support—and primarily Democratic support at that. Agriculture as an industry has become increasingly dependent upon the President and upon urban congressmen; as long as each needs rural support for desired urban programs, agriculture has some vote-trading power; but, if the time should come when these votes were no longer needed, agri-culture's political position would be indeed weakened.

There is concern in many quarters over the world food situation and speculation as to the possible role of the United States in alleviating the apparently growing food deficit in underdeveloped countries. World farm output per person in 1964/65 declined 1 percent from the preceding year's level. That the decline was not more serious is only because output recovered sharply in the Soviet Union (after the disastrous 1963/64 year), Eastern Europe, and Mainland China. Problem areas such as most of Latin America, India, and Pakistan suffered declines in per capita output. Thus the story of the inability of agricultural output to pull ahead of population growth continues for yet another year.

It is not difficult, therefore, to establish a "need" for large tonnes of food in many countries if anything like adequate diets are to be provided to rapidly growing populations. While some of these countries lack the means to pay for the food—and, given a choice, some would prefer to import more machinery and industrial products to stimulate economic development—nevertheless, large imports of food itself may well be called for. And for humanitarian and political reasons, there will be pressure for the United States to provide a considerable part of it. There has been increasing discussion of the possibility of a drastic shift in farm policy—to uncontrolled production at publicly supported prices, with the inevitable surplus over domestic needs bought by the government for export to needy countries. A more refined variant of this approach visualizes a transition from haphazardly produce surpluses in grains to deliberately produced surpluses in such foods as appear most desirable from a nutritional point of view. Many agricultural producers and processors would support such an approach; it could be very costly.