The Carter administration, expecting more rapid food price increases, apparently has decided against a wheat set-aside program that would take a large numbers of acres out of production.
Weighing the political consequences of idling land when consumers are expecting price increases against the need to raise farm income, administration strategists are said to have dropped the notion of a set-aside program. The deadline for announcing a set-aside is Friday.
Several months ago when record or near-record grain production was expected for the second year in a row and producers were being clobbered by high costs and low prices, some type of a set-aside program was a fore-gone conclusion. In fact, there was pressure from Congress and from wheat-growing regions to announce the set-aside early.
Since the drought and heat have wiped out a substantial part of the corn harvest -- reducing the forecast to 14 percent below 1979 levels. Farm prices, although still relatively low, have started back up. And the Carter administration has announced improvements in farm price supports to provide farmers with other relief.
In light of the changed circumstances, setting aside acreage that would normally be used for wheat production has been generally written off, said Carl Schwensen of the National Association of Wheat Growers. But Schwenson and Argiculture Department officials said that the administration is expected to keep open the option of diverting some acreage next spring, after the election.
Under the set-aside program, producers must idle a fixed number of acres to qualify for USDA's price support and other farm programs, so that the amount of land taken out of production usually is established by the set-aside figures. Under the divesion program, farmers are paid for the acres they voluntarily divert, but the final figures are much more in the hands of producers. In either case, the idea is to increase farm prices by limiting production.
Political consequences of a decision to do without a wheat set-aside program would be softened both by keeping that option open and other actions the administration has taken recently tostrengthen farm prices.
Besides, said Schwensen, "Farmers watch the numbers themselves. They've seen the estimates of the corn crop erode and no doubt feel that the decision on set-aside is tilting in the other direction.I don't believe there will be shock registered."
A decision on whether to set aside land used for production of corn and other livestock feed grains is due later this year, but no one seriously expects a set-aside in view of the drought's impact on corn and grain sorghum production. USDA's chief economist Howard Hjort told an American Farm Bureau Federation grain conference in Illinois yesterday that he would not favor either set-aside or diversion for 1981 feed grain crops.
"Secretary Bergland was under pressure this spring to divert feed grain acreage, and last fall they wanted set-aside," said Dawson Ahalt of USDA. Although Bergland was criticized for not removing corn acreage from production back then, the decision looks good now, he noted.
Farm prices, which have been low in the first half of the year, have been rising recently. Farm prices improved by 5.2 percent in July. Reducing the number of hogs, cattle and poultry and other factors are expected to produce bigger increases in the second half of the year. With the impact of the drought, 1981 prices are expected to rise even faster.
Wheat prices now average about $3.82 a bushel, compared with a low of about $3.50 earlier this year and compared with $3.88 a bushel before the administration announced its embargo on grain sales to the Soviet Union. Even the $3.88 price is below what USDA estimates as the cost of production.