The state of the State

Too much grain, not much policy

By CHERYL FRANK

AS IT now stands, many Illinois farmers are literally awash in their own grain reserves with no affordable place to sell and precious little space left to store. Not only in Illinois but across the nation, farm surpluses are swamping the farm economy. In response to the oversupply, the Reagan administration has proposed increased government intervention to reduce excess grain supplies.

In January U.S. Secy, of Agriculture John Block announced the administration's voluntary set-aside program to encourage farmers to reduce production by setting aside land for conservation purposes. He also announced that the 1982 wheat and feed grain crops can be immediately entered into the farmer-owned grain reserve.

The problem for farmers is that record corn and wheat harvests over the last two years have resulted in record surpluses and lower prices. With their grain selling at low prices, U.S. farmers must seek ever-increasing yields in order to keep up with rising costs and sky-high interest rates. But this depresses grain prices further and makes the problem worse next year.

The Reagan administration's program is voluntary but with some incentives. Farmers who participate in the set-aside are eligible for price supports; those who do not will not be reimbursed if the price of grain falls below the target price. (The target price for corn this year has been set at $2.70 per bushel and for wheat at $4.05, both higher than last year.) Farmers who participate in the set-aside can put their grain into immediate reserve for three years and receive a higher loan level from the Commodity Credit Corporation ($2.90 a bushel for corn, $4.00 a bushel for wheat). Farmers who do not participate or who cannot store on their own farms or find an approved warehouse willing to commit storage space for three years will be eligible only for the regular loan level, which is considerably lower ($2.55 per bushel for corn, $3.55 for wheat).

Under the set-aside plan, a wheat farmer must reduce his wheat crop at least 15 percent from his base (his 1981 acreage or an average of 1980-81, whichever is highest). The required set-aside of land for conservation purposes is then 17.65 percent of what he actually plants. A farmer whose base for wheat is 100 acres would have to reduce acreage by at least 15 percent. The required set-aside would then be 15 acres (17.65 percent of 85 acres). But if that same farmer decided to reduce his wheat acreage by 50 acres (50 percent of his base), the set-aside would be 8.8 acres (17.65 percent of 50 acres). The base for corn, sorghum, oats and barley is figured the same way; but for these grains the acreage must be reduced at least 10 percent of the base, and the required set-aside is 11.11 percent of the actual acres planted.

Although an informal survey of major Illinois farm organizations suggests they will not oppose the program, reservations, some deeply felt, do exist.

Groups such as the American Agricultural Movement, the Farmers Union, the Illinois Chapter of the National Farmers Organization and the Illinois Farm Alliance, as well as many unaffiliated farmers, do not think participation levels will be high enough in this state to make a difference. For one thing, Illinois farmers are already running out of storage space and will have difficulty taking 1982 crops off the market to be stored. Many also feel the financial incentives are not attractive enough to elicit participation.

Groups like the traditionally conservative Farm Bureau and the Grange, which generally support only free-market measures, have apparently gone along with the Republican set-aside as part of the fight to turn the economy around. However, there had been no formal stand by the national or state Farm Bureau as of early February.

Meanwhile, set-aside programs and policies related to food prices and other farm issues are being discussed by the Illinois Agriculture Study Committee on Economic Issues which was formed in December. The committee grew out of the American Agriculture Movement's (AAM) call for public discussion of farm problems and the need for a united front among farmers and related commodity groups. The committee is to report farmer-backed recommendations to Illinois Agriculture Director Larry A. Werries.

At its first formal meeting January 27, two days before Block announced the administration's proposal, the concept of an "attractive" set-aside program was endorsed by all 29 committee members present. The committee tied its endorsement of a program to adequate financial incentives and an aggressive marketing campaign by the Lurking behind farmers' economic concerns and calls for unity is the fear that no cohesive farm policy is in sight federal government to relieve farmers of their oversupply of crops.

Werries, who is Block's successor as Illinois agriculture director, has already formally endorsed the administration's proposal; the committee,as of February 15, had not done so.

Lurking behind farmers' economic concerns and their calls for unity is the fear that no cohesive farm polio is in sight, whether based on the free market or planned government intervention or some hybrid of the two. Some farm groups feel that food commodities may be used increasingly as international political hay, further restricting markets. Others say cashflow imbalances may drive beginning farmers out of business, leaving prime Illinois farmland on the market for investors, some foreign. Taxes continue to take a toll, some say a disproportionate one.

4/April 1982/Illinois Issues

Bill Rowe, AAM legislative liaison, said it's a myth that Illinois farmers are benefitting from New Deal-type direct subsidies. He said the state is in an "extreme agricultural depression" and that the borrowing crisis began around 1972-73 when interest rates went up drastically.

But his misgivings go deeper: he thinks government is using its reserves (held as collateral for loans to farmers) to "hold over the heads of farmers" to make them absorb the losses during "down" price periods. The government then takes away the "up" periods through market manipulation in response to the irresistible urban political pull to keep food prices down. But, Rowe said, the farmers' share of the cost of food is small compared to other factors such as freight rates, taxes, labor, energy and middlemen.

The new set-aside program, Rowe speculated, is a stopgap measure, designed "not so much to help farmers, but to help government" in easing its cash-flow problems and deficit projections. "We [Americans] don't have $3 or $4 billion to spend on feeding people and reaching 90 percent parity [a measure of farmers' real income as compared to other business sectors], but we have $200 billion to buy bombs," Rowe said.

Illinois Farmers Union (IFU) spokesman Harold Dodd emphasized that his organization is an avid believer in an effective land retirement [set-aside] program: "All other industries do not overproduce knowingly or mal-distribute their products. You can't feed a hungry world with a bankrupt price to the farmer." Dodd said that the IFU wants the federal government to institute a comprehensive price support program, with a well-conceived supply and management policy to effectively market what is produced at a price that takes into consideration the real costs of production. The administration's proposed set-aside program seems a long way from that kind of comprehensive farm policy. □

April 1982/Illinois Issues/5