An Agriculture Department official told a congressional committee yesterday that Secretary John R. Block may cut support loans for wheat and corn crops 10 percent next year.
"That's a difficult thing for a secretary to do, but we are increasingly believing that that's the thing to do," J. Dawson Ahalt, deputy assistant secretary for economics, said at a hearing yesterday before the House Government Operations subcommittee on agriculture, which is investigating the rapid cost escalation in USDA's price-support program.
The USDA estimates that it will spend a record $21.4 billion on a variety of farm programs, including price supports, this year. That figure has increased fivefold since 1981. Ahalt said that cutbacks may be the only way to save the support programs, which, he said, are in jeopardy.
If Block follows through with the cutbacks, federal price supports for corn would drop to $2.29 per bushel for corn and $3.19 per bushel for wheat. Ahalt said no decision has been made, but "the odds favor" a cutback.
Farmers who receive the loans may choose not to repay them, but then must give their harvest to the government. Ahalt said that the inflexibility of current law has put the price-support system "out of tune with economic realities, and we want to take steps to get it back in line."
The loan program is a major element of the federal price-support program designed to protect farmers' incomes both from disastrous years of low crop yields and years of overabundance which can drive down prices.