WHEN FARM-STATE senators insisted last month that the Agriculture Department begin an export subsidy program, the administration said it was a bad idea. The senators prevailed -- the export program was their price for supporting the budget resolution -- and the department last week announced plans to subsidize a first wheat sale to Algeria. But the administration was right; the program goes in the wrong direction. It puts the government in the absurd position of paying simultaneously to support farm prices and reduce them.
The supports are the familiar kind; they are achieved through loan rates. These are minimum prices set by the government each year for basic farm commodities -- the prices it will pay for products put in its storage bins on loan. The loan rate is the lowest price for which you can buy a supported product in this country. No farmer will sell for less, because he can turn to the government instead.
The problem with the loan rates is that they cannot take account just of domestic circumstances -- how much food we want, what we want to pay for it, what we think is a fair return for farmers. A great deal of U.S. farm production is now for export, and the loan rates must also be attuned to buying power and prices abroad.
In the 1970s this was easy. For the most part world food demand was high, world prices rode well above the loan rates and U.S. farm exports and world market share both soared. We bought foreign oil and autos with grain, and our farmers prospered.
In the 1980s, however, the problem has become more complicated. The world economy has been weak; there have been fewer buyers. The dollar has been strong; in international terms, U.S. prices have been high. Foreign producers -- some aided by export subsidies from their governments -- have been able to undersell U.S. farmers. Buyers have gone to foreign suppliers first, come to us last. We have become residual suppliers of grains and other products, and our exports and market share have declined.
The subsidy program agreed to last month -- the department is authorized to give U. S. exporters up to $2 billion in surplus commodities free to help them meet foreign competition -- has no chance against these fundamentals. It could even have the reverse result if foreign governments step up their export subsidies in turn. What Congress should do instead, in the farm bill it is now writing, is what the administration wants: it should lower loan rates. U.S. farmers will be less protected but more competitive. Those who are hurt can be helped as necessary by other means -- raising the separate payments the government already uses to shore up farm income. The U.S. taxpayer ought not be put in the business of financing two contradictory farm price policies. His pockets aren't deep enough.