Agricultural prices jumped another 5 percent in January, capping a huge 25 percent rise over the last 12 months, the Agriculture Department reported yesterday.
The immediate impact on supermarket prices was apt to be more temporary, since part of last month's increase was weather and strike related. But the damage to President Carter's anti-inflation effort may linger.
Ironically, news that farm prices had hit an all-time record came just as farmer members of the American Agricultural Movement were gathering near Washington for another parade of tractors to demand still higher prices. In the last year, while the prices farmers receive for their products rose 25 percent, their own prices climbed only 11 percent.
Adding to current economic uncertainties, the Commerce Department reported that the index of leading indicators, often a forerunner of changes in the economy, fell 0.5 percent in December for the second month in a row.
Cattle prices were up 9 percent last month, partly because snow-bound farmers in the Midwest could not get fattened animals to market. They were up 48 percent in the last year. Lettuce prices almost doubled in January as a result of a strike by farm workers in California.
As another part of the continuing march of inflation, the Interstate Commerce Commission voted yesterday to increase bus passenger and freight fares 5.75 percent effective today. Commuter fares are not affected.
The surge in farm prices underscores the nation's inflation problem, which a parade of Carter administration officials has been telling Congress demands continued high interest rates and spending restraint.
Treasury Secretary W. Michael Blumenthal told the House Budget Committee yesterday, "I cannot say there would be or should be an easing of monetary policy unless there is a slowing of the economy and a slowing of inflation.
"It would be a mistake to move interest rates down at too fast a clip," Blumenthal added, because it would "be bad for the dollar" and for the anti-inflation effort. Earlier in the day, Blumenthal had also told the Joint Economic Committee, "I have been encouraged by the way the (monetary) aggregates have been moving."
The slow growth in the money supply was largely responsible for both the November and December drops in the index of leading indicators. Six of the 10 indicators declined in December.
Adding a further confusing note, there was another report from Commerce showing that new orders received by factories rose 0.7 percent in December. Orders had risen only 0.3 percent in November, but a roaring 4.0 percent in October.
However, the closely watched orders for non-defense capital goods -- often a weather vane for business investment intentions -- dipped 3.8 percent in December. That followed a sharp 7.4 percent drop in November.
Neither the administration, which predicts there will be a slowdown but no recession later this year, nor private forecasters who expect a recession, could see much evidence pointing definitively one way or the other in yesterday's spate of statistics.
Given all the economic uncertainity, Blumenthal advised the Budget Committee that, above all else, it should hold the line at the $531.6 billion spending target set by President Carter in his budget. In particular, he said it would be "disastrous" if the committee were to take the $2.5 billion earmarked for the administration's real wage insurance plan and spend it some other way.
"The $531.6 billion is the key number," the Treasury secretary declared. "That must not go up."
Meanwhile, House Ways and Means Committee members began suggesting changes in the real wage proposal, ranging from denying the tax rebate for workers whose wages go up 7 percent or less this year if their income is above $20,000, to giving the rebate to those who earn only the minimum wage. The administration wants to pay the rebate to those who comply with the pay standard on the first $20,000 of wages regardless of total income, and not give it to those getting the minimum wage since it was raised sharply only last month.
Yesterday also, the American Federation of State, County and Municipal Employees, the largest union in the AFL-CIO, announced its support for real wage insurance, but called upon Congress to extend it to low-paid workers.
In his JEC appearance, Blumenthal linked the same argument for spending restraint to the health of the dollar.
Also, Blumenthal avoided responding directly to a suggestion by Sen. Lloyd Bentsen (D-Texas), the JEC chairman, that the U.S. impose a surcharge to limit imports, a possibility mentioned the day before by Federal Reserve Chairman G. William Miller if inflation worsened.But Blumenthal made it clear he is not interested. Asked by a reporter as he was leaving if he disliked the idea of a surcharge, he declared emphatically, "I most certainly do."
About one-third of the January increase in farm prices was due to the higher cost of fresh vegetables, according to Agriculture Department economist Dawson Ahalt. Cattle prices shot up, he said, because "livestock slaughter is off 20-25 percent" since farmers haven't been able to get their cattle to sales points. Whenever the weather breaks, prices "should back off," he added.
But even without January's special factors, most prices farmers are getting are very strong.Poultry prices are 22 percent higher than a year earlier. Oil-bearing crops, like soybeans, are up 17 percent. Wheat, which was selling for $2.53 a bushel a year ago is going for $3.02.
Despite these increases, the department is still sticking by its forecast that food prices will rise between 6 and 10 percent in 1979, with a current precise forecast of 7 1/2 percent. Food prices rose 10 percent in 1978.