A new Agriculture Department forecast of bumper crops in most major commodities this fall means that U.S. surpluses could return almost to levels preceding the costly payment-in-kind (PIK) program in 1983 and again increase federal farm-program costs.
The new report, which projects a record corn crop of 8.27 billion bushels, suggests that, with continuing slack domestic demand and sagging exports, massive amounts of grain could go into the government loan program and send budget outlays soaring again.
"The same kinds of pressures are building now as was the case during the pre-PIK time. We're getting back into the same situation again," said William G. Lesher, former assistant secretary of agriculture for economics.
Lesher, who left the department this year, was an architect of the PIK program aimed at reducing surpluses by giving farmers about $9 billion worth of grain and cotton in return for not planting 80 million acres of cropland.
Lesher said the new crop projection, coming as Congress is enmeshed in intense debate over a new farm bill and farm-program costs, has other federal budget implications.
"This report indicates an enormous surplus, which means falling market prices, pressure to spend more federal money, more pressure on writing a farm bill in Congress," Lesher said.
In addition to the record corn crop, based on field surveys taken several weeks ago, the department projected bumper crops of soybeans, sorghum, wheat and cotton. With continuing good weather in the major growing areas, the USDA is expected to make even higher projections in its September forecast.
The anticipated rosy forecast and unsettled congressional farm-bill debate have kept downward pressure on basic commodity prices throughout the summer. Corn prices are below $2.50 per bushel, below the price guaranteed through the federal crop-support loan program.
Assuming no slippage in the current forecast, the corn crop would pass the 1982 record of 8.24 billion bushels. Some experts anticipate that this year's final corn figure may be closer to a bin-busting 8.7 billion bushels and send loan-program costs into orbit.
USDA figures indicate that soybean production of 1.96 billion bushels will be 5 percent above last year, while cotton will be about 6 percent ahead of 1985 with 13.8 million bales. Wheat, although still in surplus, is expected to be down about 8 percent due to government planting reduction incentives.
Michael Hall, executive vice president of the National Corn Growers Association, said yesterday that the corn surplus -- and thus federal loan and support costs -- may far exceed USDA predictions.
Based on use projections, Hall said, as many as 4 billion bushels of corn could go into the loan program at $2.55 per bushel and then be forfeited to the government, with farmers keeping the money. Hall also predicted that direct income-subsidy payments as high as $3 billion could go to corn farmers who signed up for the program in huge numbers this year.
"I think this report and the next forecast, coming next month as Congress returns, is going to have a large impact on the farm-bill debate," Hall said. "You're going to have some arguing harder for mandatory production controls, and you are going to have some who will want to stabilize income and see how much federal money they can throw at agriculture."