Agriculture Secretary John R. Block yesterday announced the first details of 1986 federal farm programs intended to drastically lower the prices of basic crops, require massive retirement of land from production and increase the cost of federal subsidies for farmers by billions of dollars.
Block and other Agriculture Department officials said they expect lower prices for crops will persuade record numbers of farmers to seek the federal government's income subsidies, known as deficiency payments.
Last year, income subsidies to corn and wheat farmers were in the $3.5 billion range, but the programs announced yesterday could push those costs in 1986 to $8.8 billion or more, according to Daniel G. Amstutz, undersecretary for international affairs and commodity programs.
The new policy is intended to make U.S. crops more competitive in world markets by lowering prices to "market clearing" levels. However, even with substantially lower prices, most analysts do not think that slumping U.S. farm exports will rebound quickly. Amstutz agreed that the new programs' effects may not be felt for a year or more.
Amstutz declined to speculate on how the program changes might also reduce farmers' profits. Department specialists also had no comment on the consumer impact of the changes, but in theory they could translate to lower retail costs for meat and other basic foodstuffs.
The government will bring down prices by lowering loan rates. This year's loan rate for corn will be $1.92 per bushel, compared with $2.55 last year. The wheat loan rate will be $2.40 per bushel, $1 less than last year. When market prices fall below those levels, farmers can post their crop as collateral and receive federal loans at the guaranteed rates.
Authority to lower the loan rates to improve export sales and discourage overproduction was a major administration goal during last year's heated debate over new farm legislation. Congress agreed but insisted that income subsidies be frozen at 1985 levels over the next two years to protect farmers from lower prices that will result.
The farm bill signed by President Reagan last month projected farm program costs over the next three years at $52 billion, but some USDA officials and other analysts have said $60 billion is more likely.
Block also outlined yesterday a program of huge acreage reductions that farmers must carry out to qualify for federal income and price protection. The reduced plantings, aimed at ending price-deflating surpluses and high costs of government surplus acquisitions, could range into tens of millions of acres.
Rice farmers would be required to reduce plantings by 35 percent, wheat and cotton by 25 percent, corn and other feed grains such as oats, sorghum and barley by 20 percent. Wheat and feed grain growers would be paid, in cash or surplus grains, for 2 1/2 percent of their acreage cutbacks of 25 percent or 20 percent, respectively.
Block also unveiled plans for a "conservation reserve," authorized by the new farm law, that will pay farmers to take another 5 million acres of highly erodible land out of production this year and devote it to long-term programs featuring grass or tree planting to stop soil erosion.
Farmers will be asked to offer bid prices for retiring erodible land, but no more than 25 percent of crop land in any county will be allowed into the reserve to assure that agribusiness sales -- seed, fertilizer, implements -- are not unduly curtailed.
Details also were given for the dairy-surplus reduction program, under which dairy farmers who wish to quit can offer herds for sale to the government. Farmers whose bids are accepted must stay out of dairying for five years and assure that their milk-production facilities are not used during that period. The program will be financed through a fee paid by all dairy farmers.
Although Block had said for months that he would use his full authority to set lower loan rates for federally protected commodities, the steepness of cuts announced yesterday surprised some observers. Similar sharp cuts are expected when details of rice and cotton programs are announced.
Amstutz, who oversees commodity programs, noted that lower loan rates might result in higher government spending but said the decision "is consistent with what the secretary has been saying . . . . He wanted to ensure that what we produce clears the market.