The government's payment-in-kind (PIK) program, which gave farmers about $9.7 billion worth of surplus grain and cotton in return for not planting in 1983, also had a bright side for major trading companies -- nearly $200 million in grain as their payment for helping run the program.
A study by the General Accounting Office found that Cargill Inc. and Continental Grain, two of the biggest traders worldwide, were given $77 million worth of wheat, corn and grain sorghum as payment for putting grain in the hands of farmers eligible for PIK payments.
The Agriculture Department turned to trading firms and warehouse operators to help distribute PIK commodities when it learned that some areas of the country had insufficient government-owned supplies to make payments to local farmers.
Private firms with supplies in the deficient areas provided PIK grain to farmers and were repaid by the government with grain from other parts of the country, plus a bonus for helping out.
The GAO calculated that 237 contractors shared $162.3 million worth of corn, $21.3 million of wheat and $8.1 million of sorghum as commissions.
Agriculture Department officials defended the arrangement on the ground that it saved the government the extra cost of transporting grain to deficient areas and that it allowed farmers to receive their PIK payments more quickly.
But Rep. Glenn English (D-Okla.), a frequent critic of USDA's handling of the PIK program, said yesterday that the GAO study confirmed his and others' belief that PIK would cost the government more than had been expected.
"When the president announced the PIK program, he said it would be carried out with government surpluses," English said. "In fact, there were no surpluses and the government had to purchase grain from farmers to make it work . . . . Those who said PIK would cost taxpayers more, without solving the overall problem, are proven right by the GAO."
Farmers agreed to withhold about 50 million acres from production in 1983 in return for federal surpluses, which they were free to sell or use on the farm. The USDA contended that the program was the most economical way to reduce surpluses and bolster sagging farm prices.
PIK and drought combined to reduce most surpluses, and the program for corn, rice, cotton and sorghum was stopped at the end of 1983. A wheat PIK went on for a second year but only marginally reduced excess supplies, and they continue to hang over the market.
"There would be far greater strength in our markets today if the wisdom of those who wanted a paid diversion cash for not planting had been followed," English said. "The reason the administration went through with PIK was to keep the program off-budget before an election. It did farmers a disservice."