The Carter administration, nervous about low farm prices and their possible impact on the election, is moving toward raising farm price supports.
Although some presidential aides want to defer any such decision because of its impact on the budget deficit, White House sources said the administration is leaning toward shoring up prices.
The contemplated increases would cost an estimated $1.3 billion, but their impact on the budget deficit might be softened by reducing funds for agriculture in some other areas.
Meat and egg producers, who have been the hardest hit by low farm prices, wouldn't be helped by an increase in price supports. But an increase would aid wheat and corn producers who fear they may have to market their crops at below the cost of production.
The price supports in question are the per-bushel prices (loan rates) the Agriculture Department pays farmers who put their crops in reserve. Current rates are $2.50 a bushel for wheat and $2.10 a bushel for corn. Raising the loan rates would also raise the level at which crops must be taken out of reserve and sold. That, in turn, would keep grain in reserve, where it wouldn't push prices downward.
An increase in price supports for wheat is under strongest consideration, with relief for corn producers next in line. Soybean producers might also get some relief. USDA yesterday forecast record high wheat production of 2.32 billion bushels. The figure is 8 percent higher than last year's production, which was near the record set in 1976 and left large inventories of wheat on hand this year, depressing prices.
USDA predicted that corn production would drop by 6 percent to 7.28 billion bushels from a record high in 1979. But the big question about corn production is drought and heat in large areas of the United States, USDA economist Howard Hjort said.
The Agriculture Department has forecast that annual income for farmers may fall by 20 to 40 percent this year. Those figures have not added to Carter's appeal in rural areas, where he is already unpopular for the grain embargo and high interest rates.
Farm prices have strengthened lately, but, even so, it looks like a bad year for many farmers.
"We're in a weather market. There is concern that crops may not be very good this year (and might reduce projected yeilds)," Hjort said. "That's already led to some increases in prices."
Those increases and better prices for meat producers because supplies of pigs and poultry have begun to be reduced mean that food prices will rise more rapidly in the second half of the year than they did in the first, Hjort said. During the first half of the year, food prices have risen at about a third of the general rate of inflation, providing some relief for consumers.
If adverse weather conditions persist, farmers who don't lose their crops will enjoy better prices, and the impact of a higher price support payment on the budget would be decreased, Hjort said.
He said there have been meetings in recent days and weeks with the president and his advisers to review farm programs and the impact weather will have on crops. "Those reviews are continuing. There has been no decision at this point as to changes," he said.
Higher price support levels have already been approved by the House and Senate Agriculture committees.
USDA also said yesterday that good weather in the Soviet Union has improved the outlook for the grain harvest there. The Soviets are expected to produce an estimated 215 million metric tons, up considerably from last year's bad harvest. (A metric ton is 2,200 pounds.)
Even so, the Soviet Union is expected to import an estimated 30 million metric tons of grain, the same amount as last year. "It does take some of the pressure off the Soviet Union to have a good crop," Hjort said.
The report on U. S. production released yesterday was based on July estimates and was premised on normal weather. In fact, production will probably be lower because of the bad weather.