Washington

By ROBERT MACKAY

Recycling bumper crops: the PIK plan

PITY Agriculture Secretary and Illinois hog farmer John Block. His "voluntary" crop reduction program is not working, net farm income is at its lowest point in 50 years, the federal farm budget is reeling, and most dairy farmers would like to attach him to a milking machine.

Dairy farmers are mad because the U.S. Department of Agriculture (USDA), in an effort to cut dairy production, began assessing in December a 50-cent fee on every 100 pounds of milk marketed by farmers. The money is to be used to help offset the $2 billion the USDA will spend this year to buy surplus dairy products.

Block learned of the outrage when, to avoid possible litigation, he asked for public comment on the plan. The department was soon inundated with about 25,000 letters and almost as many names on petitions from angry dairy farmers. USDA officials said they could not remember ever receiving such a large negative reaction to a proposal.

Dairy producers complained the fees subtracted from the government support price would force some farmers out of business. And they warned that the wealthier farmers would continue to expand their herds and increase production. Despite their protests, the plan was put into effect. Block earlier had implemented a "voluntary" program for farmers to produce less crops, thereby reducing government grain stocks and price support costs that are busting the federal farm budget. It is not working. The USDA, before the bumper 1982 crop, estimated farm programs would cost around $4 billion. The actual cost will be at least $12 billion, with costs even greater this year unless production is curbed or the markets improve.

A record harvest of wheat, corn, soybean and other basic commodities in 1981 and 1982, combined with the recession, slack demand and a strengthened dollar that has hurt U.S. exports, is causing storage facilities to overflow. Throughout 1982, monthly reports showed the prices paid to farmers for raw farm products were almost uniformly below levels set one year earlier.

In the fall, Block began floating a trial balloon of a new crop reduction plan he thinks might induce farmers to reduce their grain production. President Reagan has since endorsed the plan called Payment-In-Kind (PIK). Legislation containing some or all parts of this plan is expected to be introduced in Congress early this year.

Under the plan, the government would provide farmers who agree to grow less grain with a certain amount of grain from its overflowing storage bins to sell instead. Farmers would not have to take physical receipt of the grain, but would be given a warehouse ticket that could be sold to a buyer. They would be given roughly the same amount of grain that they would have grown.

The idea behind PIK is that a large part of the nation's cropland would be taken out of production, prices would go up and government grain stocks and price support costs would fall. The plan has drawn mixed reviews from farmer and commodity groups and members of Congress. Block contends PIK could save the government as much as $5 billion between 1983 and 1985.

"We're certainly looking at it," said a spokesman for the American Farm Bureau Federation. "It was tried before in the 1950s and it didn't work. We're not overjoyed by it, but we're not ruling it out either. It's a question of whether farmers now are convinced they have to make that kind of adjustment." Block, expressing frustration about the farm situation, says of the PIK plan: "It's the only game in town."

But, Block wants Congress to give him certain new authorities, including the power to freeze "target price" direct subsidy payments to farmers at 1983 levels, in order to make PIK work as he envisions. The politically popular subsidies are automatically increased each year, and Block's request is sure to run into trouble on Capitol Hill.

The Farm Bureau advocates eliminating target prices on grain altogether. The price supports are a "tremendous incentive to overproduce," the Farm Bureau spokesman said. And Democratic Rep. Tom Daschle of South Dakota, who tried last year to push a "Farm Crisis Act" through Congress, criticized PIK as "too much of a welfare program. Farmers want to farm."

In his first testimony to a congressional panel about the plan, Block was unable to provide details to a number of questions raised about PIK. Sen. Alan Dixon (D-Ill.) was among those who expressed concern that not enough details had been worked out to allow quick approval. But sentiment on Capitol Hill is running high for some kind of decisive action on the farm issue early this year.

Daschle intends to try again this year to enact a "farm crisis act," because he feels voters in the November congressional elections sent a message of disapproval of the administration's farm policy. Five Republican members of the House Agriculture Committee, including Paul Findley of Illinois, lost their seats. Republicans say other issues were involved, and the farm vote was not the deciding factor in the outcome of those elections.

Without decisive congressional action or an economic recovery, Block is going to find his job getting harder and harder this year and his popularity among farmers getting lower and lower.□

February 1983 | Illinois Issues | 37