The Agriculture Department yesterday raised its forecast of how much corn and soybeans American farmers will produce this year - paving the way for President Carter's expected moves to take more land out of production to keep farm prices from falling.
Carter disclosed yesterday he will announce in the next few days a "moderate" set-aside program, in which the Agriculture Department provides loans and subsidies for farmers who cooperate by allowing a portion of their land to remain barren.
However, Alfred E. Kahn, Carter's new anti-inflation czar, is opposed to any sharp increase in present set-aside levels. Kahn said in an interview he has "intervened" in the dispute to try to head off any sizeable increase in the amount of land out of production.
The decision is being seen as a first test of Carter's commitment to the new-anti-inflation program.
The department's estimates yesterday showed the corn harvest likely to reach 6.89 bushels this year - a rise from a 6.82 billion-bushel yield predicted only a month ago, and an actual crop last year of 6.37 billion bushels. The 1977 yield was a record.
The agency also predicted the soybean crop would yield 1.81 billion bushels, up from a forecast of 1.79 billion bushels compiled last month, and 3 per cent higher than the 1.76-bushel crop which farmers harvested last year.
In both cases, the higher estimates reflected better-than-expected weather.
The set-aside issue has sparked an intense debate within the administration. Under present arrangements, farmers must take at least 10 per cent of their land out of production to qualify for subsidies. The Agriculture Department wants to boost this to 15 per cent.
The White House last month approved a 20 percent set-aside minimum for wheat farmers. Some say if the president raises grain set-asides sharply, it could send prices rising.
Private analysts already have estimated that food prices are likely to rise about 8 per cent next year, slightly less than the 10 percent pace forecast for 1978. The Agriculture Department's estimate is 6 to 11 per cent for 1979. It's expected to update that forecast next week.
Farm prices technically are not subject to Carter's new price guidelines, although the president has said he will ask inflation-fighters to monitor agricultural prices. The cabinet-level Council on Wage and Price Stability has set up a special task force to consider the problem.