A number of agricultural policy decisions in the field of supply management reached in 1966 represent a sharp break with the past. It is still too early to tell whether the shift marks only a temporary deviation from a long-term trend of contracting acreage or the beginning of a sustained reversal.
Whatever the eventual outcome, the suddenness with which events seem to have overtaken agricultural policy is noteworthy. In the Congressional hearings of mid- and late 1965, from which emerged the Food and Agriculture Act of 1965, both the legislative and executive branches of government appeared intent upon reducing crop acreage devoted to food and feed grains. But within a few months the Department of Agriculture found is necessary to relax acreage restrictions for both wheat and feed grains, in a quest for greater output. While the Act has, so to speak, both a forward and a reverse gear, and can thus serve opposite purposes , nevertheless a significant break in policy direction is evident.
During 1966 wheat farmers collectively were given the opportunity to add up to nearly 17 million acres to their acreage-to-be-planted without forfeiting the various supports available to participants in the government program. They will not, however, receive domestic marketing certificates on production from the newly released acreage; that is, cannot collect the subsidized price at which wheat for domestic consumption changes hands. The incentive to avail themselves of the liberalized planting scheme lies wholly in the chance to profit from high market prices expected to prevail through the next year. Government support for the added production would come into play only at the support level of $1.25 per bushel, more than one-third below the prevailing market price at year's end. Thus, wheat growers who expand their production will be taking a calculated risk. But the fact that, as of December 1, seeded winter wheat acreage was estimated at 26 percent above the previous year's suggests that this is not a risk highly rated by farmers.
As for feed grains, all that was done, apart from a very small increase in the support price, was to eliminate the 1965 provision under which growers could earn additional government cash payments in return for acreage diversion beyond the mandatory level of 20 percent. Some 10 to 15 million acres of feed grain might thereby be planted that would otherwise lie idle. Thus, the stage has been set for what the government calls a return to production of about half the 60-million-acre "ready food reserve."
Why the sudden switch? As a general rule, policy moves are made when pressure of events force a new appraisal. In this case, the gradually declining grain stocks depleted by large commercial exports to Western Europe, the 1964 shipments to the Soviet Union, and the sudden and extraordinary demand to fill the void created by India's crop failure in 1965/66, have ended, at least temporarily, the major surplus problems of US agriculture. Incidentally, the shift bears out the implications of the World Food Budget, which for several years was in construction in the Department of Agriculture but which failed to attract much attention when it's full version was first published in October 1964. One can hardly claim that the food-population problem has come upon us suddenly.
With the turn in policy, it becomes extremely important to gauge the danger implicit in a headlong rush into expanding US agricultural production. True, the new Food-for-Peace legislation, passed in the waning hours of the 89th Congress, sets up some barriers against just such a rush. First, it establishes the principle that the United States should no longer seek to export what are merely the results of ineffective production control, but should purposefully plan both the amount and kind of its food shipments in light of circumstances in the recipient countries. Second, it provides that potential recipients must persuade the United States that they are engaged in "self-help," by making a strenuous effort both to augment supply through producing more and to check pressure on future demand through family planning. Finally, it directs a gradual switch from local currency to dollar sales; as a consequence, aids to production, such as fertilizer and agricultural equipment, will become more competitive with food imports, which hitherto were a more attractive aid to consumption.
Nevertheless, the pressure for increased food aid, especially in grains, is likely to continue and might easily grow. Moreover, establishment and policing of self-help criteria will raise many delicate questions in international relations—as exemplified toward the end of the year by Indian impatience with what was considered United States pressure through inaction; moreover, the best intentions of prudence and caution often crumble in the face of anguished cries for help, especially when the latter are paralleled by a host of vested interests at home that stand to benefit from booming agriculture and exports, no matter how financed.
Thus, American capacity to produce food, and the real cost of expansion to various levels and mixes of output, become important magnitudes to determine. While first steps of mobilizing temporarily idle acreage may have low costs—though information as to the nature, location, and advisability of returning to cultivation such acreage is largely lacking—the picture may change rapidly and radically as expansion continues. Capital inputs may be called for that are irreversible, time-consuming, and costly—as in the case of massive water works—suggesting a need to take thought before plunging. Moreover, as Secretary Freeman put it in testifying last February on the Food-for-Peace legislation "if we took off all of our allotments and all of our efforts to match production with effective demand ... we would be back where we started in rather short order, and that is not practical."
This is especially true when exports resting on concessional terms assume major importance. More than half the nation's wheat crop is now exported, and more than three-fourths of those exports are made with government assistance, so that government intention rather than the market sets the level of shipments. And unpredictable events often affect governmental decisions. An item high on the agenda, therefore, concerns the search for a policy which could facilitate production adjustments in response to governmental objectives and programs in the short run—or perhaps for the medium term—without setting in motion events and establish-ing positions that would make subsequent adjustments or reversals troublesome and costly. At the moment, federal policies involve most of the agricultural establishment in a major way whenever the official view of future world events, and especially world food needs or what goes by that term, calls for specified levels of government-sponsored exports. One is inclined to think that in the perspective of many more years of such efforts there might be a better way of procuring the desired kinds and amounts of food from the American agricultural establishment. Extending such procurement to foreign producers with a large export potential, and in the process improving their ability to help meet these needs, appears to warrant further study. In substance, when government becomes such a potent factor in setting the demand, should it not also become as active in terms of supply? Reactions in 1966 to events long in the making have set the stage for raising such questions. The year 1967 might bring some answers before irrevocable commitments are made in response to rising appeals for help.
