For most of history, bountiful harvests have been good news. It is a measure of how unnatural our agricultural institutions have become that now these harvests are bad news instead. The Agriculture Department now estimates that there will be a record corn crop this year and a near-record soybean crop. The wheat crop is also expected to be large -- and there are hungry people all over the world. Yet there is no ready way to bring harvest to table. For farmers, their bankers and the administration officials and members of Congress trying to write a new farm bill, this good news is a source of gloom.
The reason is familiar. In economic as distinct from humanitarian terms, there is too much food. The government's storage bins are already overflowing. When the harvest is over, the corn surplus is likely to be a third of a year's crop, the wheat surplus, two thirds. The surpluses and good harvests elsewhere in the world have so depressed prices that for many staples they are below protion costs. That in turn has driven up the cost to the government for the support programs that keep the farmers on the land. It is a tight budget year, and the agriculture committees in Congress are under pressure to reduce these costs. They should also reduce support levels for other reasons. Most U.S. grain is now grown for export. But the supported U.S. price is above the world market price (and the gap is greater because of the overvalued dollar), so U.S. products are not competitive. Buyers come here last, and exports are sagging. The support levels also help keep marginal farmers and marginal acres in production. They help elicit the very excess production they are designed to combat.
For economic reasons, the members of the agriculture committees, who tend to come from farm states, are thus being called upon to put some of their own worthiest constituents out of business. The social and possible political costs of an engineered shakeout of that kind are clear. There will also be financial costs. The people, and their debts, will not just disappear. The farm credit system is also in weakened condition. It, too, may need a federal infusion before too long.
The House and Senate committees tried to finish their work before Congress left for its summer vacation. They couldn't bring themselves to do it. Both have pretty well decided to lower the price supports that are keeping U.S. products out of world competition. But they are trying to maintain at or near present levels the separate system that supports farmers' incomes. They are also toying with various forms of export stimulus and acreage limitation. Neither has come even close to bringing likely expenditures down to the levels called for in the budget resoltion Congress adopted.
The same day the government put out the new crop forecasts it put out the July producer price index. The cost of food heading into supermarkets was up for the month, but down for the past year. That is the good news from farm country. Unfortunately, it is outweighed by the bad.