The Reagan administration's payment-in-kind (PIK) program for aiding farmers and reducing crop surpluses also is benefiting the nation's major grain companies, which are receiving handling fees in the form of grain worth millions of dollars.
Big traders such as Cargill Inc., Continental Grain Co. and Bunge Corp. have become players in the program by providing grain to the Department of Agriculture in areas where it has insufficient amounts to fulfill its PIK obligations to farmers.
In return, the government is giving the trading firms, warehousers and grain elevators their own payments-in-kind of wheat, corn and grain sorghum from federal stockpiles in other areas around the country that have excess supplies.
The Department of Agriculture says the names and fees earned by participating grain companies have not been tabulated. The privately owned major trading firms, never very communicative about their activities, offer little additional information. A spokesman for Cargill, for example, which is considered to be the largest, said his firm would discuss no financial aspects of its involvement in PIK.
But government and industry officials say the firms are likely to end up with grain worth millions of dollars as their fees under the program.
Industry and USDA officials say the alternative to using the grain companies would be massive, expensive shipments of federal surpluses around the country that would cost the Treasury far more than the fees the companies are receiving. But the USDA acknowledges that it has no figures to support this argument.
Merrill D. Marxman, deputy administrator of the Agricultural Stabilization and Conservation Service, which oversees the PIK program, said the USDA has had to transport no grain to satisfy its commitments in grain-deficient areas.
"We put 72.1 million bushels of wheat in the hands of the farmer and we used 5.2 million bushels as payment to handlers . Our cost came out to about 25 cents per bushel. It would have cost us a lot more if we had had to physically move the grain," Marxman said.
"The logistics of the government trying to move this much grain in six months would be almost impossible," said Jim Knight, an ASCS official at Kansas City, where most of the PIK supply details are coordinated.
In the case of corn, although distribution will not be final until Nov. 1, the government so far has given handlers a national average equivalent to about a fourth of a bushel for every PIK bushel handled for a farmer. On a $3 bushel of corn, the average fee works out to 66 cents--a figure regarded by government and industry sources as very generous.
The handlers so far have received about 26 million bushels of corn and grain sorghum, worth roughly $90 million at today's prices, in payment for distributing these grains to farmers in areas where government supplies were short. The USDA estimates that perhaps twice that amount of grain will go to the handlers before distribution is complete.
The supply program's exchange rates are set on the basis of bidding among hundreds of firms for the right to provide grain in the deficient areas, a system that tends to give the largest companies, with their extensive supply networks, an edge over smaller firms.
A Tennessee elevator official put it this way: "The major companies will make a killing on corn, particularly in the South. Most corn is stored in the North. There's little in the South, partly because of the drought. Millers and hog-feeders here will have to pay more . . . , but the PIK price to the farmer won't vary much. It is a very lucrative thing. They stand to do very well."
Another elevator man, Ken Hostetter of Hanover, Pa., said that large grain-handling firms "will have a big corner on the market" because of their nationwide transportation and terminal networks.
"They'll do real well because of volume . . . , but it's still a good deal for the government, because it's the most cost-efficient way to deliver this PIK grain," he said.
The wheat picture is somewhat different. The average payment to handlers was 7 percent of every bushel handled--less than for corn because the handlers faced smaller transport costs. Unlike corn farmers, most wheat farmers preferred to sell their PIK entitlements rather than obtain the grain.
Yet although the handlers' bids are supposed to include all costs of handling and moving the grain, scattered reports indicate that some firms have taken from 5 to 10 cents a bushel off wheat prices as an additional service charge.
Marxman acknowledged that the USDA has received complaints from farmers about additional charges. But, he said, the department in each instance has warned suppliers that farmers must be paid the same for their PIK grain as they would get for grain they raised.