THE FARMERS are in trouble. They have had too rapid a rate of growth of productivity, and too much technical innovation, and too much good luck. At a time when the rest of the economy suffers a deficit of those commodities, the farmers have achieved too much. The result is that they are now producing much more grain than this country or-- in the midst of a profound recession--the world can buy. Their prices and their incomes have been falling sharply. The costs to the government, in the various subsidies and price supports, have been rising even more sharply.
The Reagan administration, when it drew up its budget a year ago, expected the government's farm price supports to cost about $6.5 billion in 1982 and, in 1983, to drop to $1.5 billion. With the declining markets for agricultural products, those estimates turn out to have been grossly unrealistic. The actual cost in 1982 was twice the estimate, and it will be even higher this year. That's part of the explanation of the enormous increases in the budget deficits.
Last month, the administration, in desperation, suddenly embraced a dubious plan called PIK-- payments in kind. The idea was to induce farmers to reduce their plantings for the coming year, not with the conventional payments in cash, but with grain taken out of the present bulging reserves. But while payments in kind would reduce the impact on the federal budget, the immediate effect would be to put more grain than ever on the market and doubtless drive prices lower than ever. That's why a lot of farmers fought it, successfully, in the lame- duck session of Congress.
It was not one of the administration's better ideas. The White House now seems to be preparing to put it into effect without legislation. That is an even worse idea. Voluntary crop reduction schemes have not proved very effective in recent years. The administration needs to think beyond one-year palliatives.
Farmers have been repeatedly misled by events over the past decade. After the government sold the American grain reserves to the Russians early in the 1970s, it became common wisdom that the world was in for a prolonged period of food shortages, inducing American agriculture to produce at its limit. In the following years, American farm exports rose extremely rapidly. With steady progress in agronomy--among the highest of the high technologies--crop yields continued to rise. But now, because of the recession and the debt burdens of the farmers' customers in Eastern Europe and the Third World, the export market has ceased to grow. The farmers brought in another record crop last year, and the question is what to do with it.
While voluntary crop limits are ineffective, mandatory limits are impossible. That leaves only one solution: a price low enough to reduce production by pushing some farmers out of the business. But there the administration needs to go very slowly, and to err on the side of caution--that is, on the side of plenty. It is infinitely better to produce too much for a time, even at a substantial cost in federal subsidies, than to run short in a year of bad weather, with the resulting surge in food prices and, in poorer countries, much more ominous kinds of distress. Even when the government has to buy it and store it, a surplus of food is better than the other possibility.