The editorial "Candidates on the Farm" {Aug. 17} characterized the Harkin-Gephardt "family farm act" as "a terrible idea" and argued that Congress should stay with the 1985 farm bill, citing rising farm and land prices in Iowa as evidence that the '85 program is finally beginning to work.

In fact, according to Iowa State University's annual survey of farm-land value, Iowa farm land declined an additional 17 percent during 1986, down 63 percent from its peak 1981 value. Sale of Farm Credit System inventory land in Iowa during the first quarter of 1987 showed a further decline of 4.5 percent. An eight-state report issued by the Federal Reserve Board of Kansas City found a similar 14 percent decline in farm-land values during 1986 and a 55 percent decline since 1981. It is difficult to discern in these data the good news discovered by The Post.

More to the point, family farmers continue to go out of business at a record pace: the latest American Bankers Association survey indicates 387 farms were lost every day during 1986. More conservatively, the U.S. Department of Agriculture estimates the 1986 loss of farms at 165 per day. In Iowa, farm bankruptcy filings for the first quarter of 1987 have increased 40 percent over 1986 figures, from 105 to 147 cases monthly. Again, there is no evidence here to support the thesis that the '85 farm program is beginning to work for farmers.

Unless we are willing to turn over our food production to a few giant corporations, Congress must find an affordable solution to the ongoing farm crisis that is threatening the elimination of family farms and destroying the economy of thousands of small towns and rural communities.

The family farm act, described by The Post as "radical," seeks to restructure our farm programs to eliminate costly federal subsidies, saving taxpayers several billion dollars each year while allowing farmers to earn a fair price for commodities from the marketplace.

Farmers today, even with federal subsidies, receive less for their products than the cost of production. Further lowering prices, which The Post advocates, will only exacerbate the problem and accelerate the trendtoward a corporate takeover of American agriculture.

R. KEITH STROUP Legal Counsel, The League of Rural Voters Washington