COMMITTEE REPORT: THE PRESENT FARM PICTURE Conditions in American agriculture at the present time are not good. Four years experience has shown that reduced acreage, reduced prices, and rising costs lead only to reducing farm income to a disaster level. The last four years have clearly proven, based on records within the Department, that we can not reduce production by reducing prices. Further, they show that we can not reduce world production by merely reducing United States production, and we can not control United States production by reducing United States acreage. The records of the past four years prove that as we reduce price we increase production, and as we decrease acreage in basic commodiities we increase production per acre and release more acres for nonbasic commodities, thereby increasing total United States agricultural production. The record shows that, if the farmer cuts production to the point of obtaining parity of price at the market place, he will have to create a scarcity which will further reduce his incomeand will be dangerous for the consuming public. While changes in the law must come from the Legislative Committee, and changes in policy must come from Department officials, members of this Committee feel that we should point out the increasingly bad situation which exists and should report to the Congress some of the causes, as we see them, of present farm conditions and changes which might be made, both in policy and in the law. Although not related directly to funds in the 1958 appropriation bill, these factors are important to the future welfare of American agriculture, and are significant in terms of appropriations required for future years. THE RECORD Four years ago net farm income was $14.3 billion, or about 5 percent of the national income of $281.8 billion. Four years ago the farmer received 47 cents of the consumer's food dollar. At that time the farmer received an average of 82%1⁄2 cents per hour for his labor. Conditions then were considered to be serious for the farmer and it was generally agreed that something had to be done to improve his economic position. For four years now the Department of Agriculture has been trying to improve that situation. During this period the Department has insisted that the primary cure for the farmer's plight is to (1) reduce support prices, (2) reduce acreage, (3) increase funds for research and extension, and (4) undertake a rural development program. Then last year, after almost four years of following the Department's policies, as the American people approached an election with farm income down, the Department recommended and the Congress passed the Soil Bank to put up to $1.2 billion from the Treasury in the farmers' hands. During the last four years the Department has tried to carry out its policies. It has reduced price supports an average of 20 percent. It has reduced acreage for cotton by 38 percent, for rice by 22 percent, for wheat and tobacco by 23 percent. Funds for research by State experiment stations have been increased 133 percent; funds for other research in the Department and the Extension Service have been increased 56 percent. In 1957 the Department will spend more than $2 million in 57 counties in what it calls rural development for low income families, an average cost of more than $36,000 per county. Nearly every agency in the Department is involved in this program. In 1956 and 1957 the Department will give away with few strings attached, under the acreage reserve provisions of the Soil Bank, hundreds of millons of dollars, money which the Department counts as part of farm income. THE RESULT In 1956, after four years, farm income was down to $11.8 billion, which includes direct relief payments from soil bank funds. This is a drop of $2.5 billion, or 17.5 percent, since 1952. Comparatively, the personal income of other segments of the American economy increased from $271.8 billion in 1952 to $306 billion in 1956, an increase of 12.5 percent. During this period the farmer's share of the consumer's dollar decreased from 47 cents to 40 cents, a drop of 15 percent, while the share for the group between the farmer and the consumer increased correspondingly. Since 1952, the hourly return to the farmer for his labor has dropped from 82%1⁄2 cents per hour to 70 cents per hour, while earnings of nearly every other economic group have increased substantially. In the same four year period, farm costs have increased about 10 percent, reflecting increases in income to practically every group between the farmer and the consumer. Further, the farmer's required capital investment and his overall farm debt have increased significantly. The average capital investment required per farm has increased from $22,836 in 1952 to $26,327 in 1956, an increase of over 15 percent. Total farm debt in 1952 was $14.8 billion. This had increased to $18 billion in 1956, an increase of 21.6 percent. In spite of the great optimism of officials of the Department of Agriculture, the past four years have not brought parity of income to the farmer from the market place, nor from any other place for that matter. Today finds the farmer receiving much less from the market place than four years ago and depending more and more on direct payments from the Treasury. In the 1958 Budget, $1 billion is requested for direct payments to farmers under the guise of the Soil Bank. In the opinion of a majority of the Committee, the only sound basis for the acreage reserve section is to help offset loss of income at the market place. Since 1952, according to records of the Department, price supports on the major crops have been reduced as follows: Corn, 20 percent; cotton, 12 percent; cottonseed, 33 percent; barley and grain sorghums, 26 percent; oats and flaxseed, 25 percent; rye and soybeans, 21 percent; and milk and butterfat, 18 percent. As prices to the farmer have been decreased an average of 20 percent, his part of the national income has decreased in almost the same proportion, about 20 percent. During this period of reduced price supports, there have been severe reductions in acreage allotments for basic commodities each year. As pointed out earlier, acreage planted to cotton has been reduced approximately 38 percent since 1952. Acreage for rice has been reduced around 22 percent; wheat and tobacco acreage Lave been reduced approximately 23 percent. Contrary to the expectations of agricultural officials, who have maintained that reduced price supports and acreage reductions would reduce production, production increased steadily during this period. Not only did the farmer increase his per-acre production of basic commodities, but acreage reductions for basic commodities made available more acres for nonbasic commodities, increasing total production. The Secretary now sees that reduced price supports and reduced acreage, which he has offered as the cure to so-called over-production, has not worked. In his February 28, 1957, appearance before the Committee he admitted that "controlling production is not the answer." In his appearance on April 16 of this year he told the Committee: Farmers last year turned in a remarkable performance. areas. Notwithstanding the Secretary's present use of his authority to sell Commodity Credit Corporation inventories competitively in world trade, leading to the greatest export volume in years in 1956, CCC holdings increased from $2.5 billion on January 1, 1953 to $8.2 billion on January 1, 1957. This is largely due to increased production generated by reduced price supports and reduced acreage. Certainly these results prove the Department's present policies and programs to be inadequate to meet the problem. The facts recited above should lead all interested persons to study the causes and seek the remedies for the present situation, since this country can not long continue to prosper with one segment of its economic structure seriously ill. ACREAGE CONTROLS INEFFECTIVE Part of the trouble lies with the agricultural laws passed in 1933, which except as to price support levels, largely govern present farm programs. At that time the United States produced such a large share of the world's supply of basic commercial crops that it was felt that regulation of United States production would regulate world production. At that time it was believed that cutting United States acreage would control United States production. Provisions for such actions. were included in that law. Time and experience have shown that these provisions have not been effective since, as United States acreage has been reduced, world acreage has increased. Further, as United States acreage has been reduced each year, the American farmer has increased his yield per acre through more intensive cultivation and increased use of machinery, fertilizer, and insecticides. According to USDA reports, per acre yields for corn increased from the 1945-54 average of 37.1 bushels to 40.6 bushels in 1955 and 45.4 bushels in 1956. For wheat, the 1945-54 average of 17.1 bushels per acre increased to 19.8 bushels in 1955 and 20 bushels in 1956. The yield per acre for cotton increased from the 1945-54 average of 283 pounds to 408 pounds in 1956. The same increase has been true for many other crops. One of the more serious aspects of the reduction in acreage each year is that, as the farmer has increased his production per acre, he has made further cuts in his acreage for the next year under the formula contained in the present law, freeing more acreage for production of other farm crops. Further, current programs are encouraging the the farmer to exploit his land, which runs counter to the long-range soil conservation objectives of the Federal Government. ERRONEOUS PRICE-SUPPORT POLICIES The belief of the present Secretary of Agriculture that lower price supports would reduce farm production and increase domestic consumption has not been borne out, as shown by the records of his own Department. As the farmer's price has gone down, he has increased his production to protect his level of income as far as possible. Despite price support reductions of 20 percent for corn, production in 1956 was 159 million bushels more than in 1952. Likewise, price support reductions for such commodities as barley, flaxseed, rye, sorghums, soybeans, butterfat, and milk resulted in greater production in 1956 than in 1952. At the same time, domestic consumption on a number of crops has decreased despite price reductions. Domestic consumption of cotton decreased 461,000 bales in 1956 as compared to 1952, although price supports were lowered 12 percent by the Department as a means encouraging increased consumption. Despite reductions in price support levels during the past four years for cottonseed and oats, domestic consumption of these commodities also decreased. It is significant to note that the percentage of consumer income spent for food decreased from 34.4 percent in 1952 to 32.1 percent in 1956. Further, the record indicates that reductions in prices to the farmer have not been passed on to the consumer. Instead, such reductions have merely increased the take of the so-called "middlemen." Since 1952 the spread between the farmer and the consumer has increased from 53 percent to 60 percent. On the basis of the nation's 1956 food bill of $53 billion, an additional $3.7 billion went to these middlemen in 1956 as a result of this increased margin. If only half of this amount taken from the farmer and made available to the middleman had gone to the farmer, it would have provided him much more money than he can hope to get from the Soil Bank. If as much as two-thirds of the middeman's added take had remained with the farmer, he would have been able to maintain his 1952 level of farm income, and his plight today would be much less serious. FAULTY EXPORT SALES POLICY Another part of the trouble lies with the erroneous export sales policies followed by the Department until about 18 months ago. While the United States was paying 738 United States foreign aid technicians to help improve foreign agriculture, the Secretary of Agriculture was refusing to offer United States commodities for sale abroad at competitive prices, as authorized by law. 21494-58-pt. 4——19 The Secretary continues to talk of the United States price support program holding an umbrella over world agricultural production. Yet he readily admits to the Committee that he has had authority to sell in world trade on a competitive basis all along. There is no way to avoid the fact that this price umbrella is due to a decision not to use such authority until late 1955 and early 1956, rather than to the price support program. The Committee would point out again that the Department has always had authority to sell in world trade for what the commodities would bring. The Secretary admits to such authority and is now using it successfully. In 1956 more agricultural commodities were exported than in any time in twenty years. If the Department had fully used this authority in recent years, the farmers and the Commodity Credit Corporation would be much better off financially than they now are. NEW FARM PROGRAM NEEDED With economic protections built into the law of the nation for nearly every segment of our economy, the farmer will always be at a competitive disadvantage unless he also has some degree of legislative protection. Constantly increasing costs of transportation, processing, and distribution will continue to force his prices down, since at the opposite end of the economic ladder consumer resistance to price pushes the increased take of the middlemen on to the farmer. Further, as the cost of production increases, and the use of more fertilizer, equipment and insecticides is required to meet the pressure for increased yields, the cost-price squeeze will become even more acute. Based on years of study of Agriculture, and the familiarity which has come from the annual review of the financial requirements of all of the programs of the Department, it is the opinion of the majority of the members of the Committee that an entirely new legislative approach must be developed if the present conditions are to be corrected. This is essential if the farmer is to share in the general prosperity of the rest of the country-if he is to own an automobile, send his children to school, enjoy a reasonable standard of living, and save and protect the nation's natural resources. It is to be remembered that, during the long period prior to the 1930's when the farmer had no such protection in law, we wore out 40 percent of our fertile soil and used up 80 percent of our virgin timber. It must be remembered that such a drop in farm income as we have had since 1952 has always led to a depression. We have had 14 freight rate increases since World War II. have minimum wages and bargaining rights provided by law. We have had increasing profit guarantees. All these things lead to the fact that the farmer, too, must have a fair return for his investment and his labor. However, he should have such a return from the market place instead of the Treasury. SUGGESTIONS FOR NEW FARM PROGRAM Numerous suggestions have been made as to how the farm program might be changed to give the farmer the opportunity to earn a fair income. One method, which was offered originally as the "Brannan Plan" and was adopted later by Secretary Benson for wool, is to make up from the Federal Treasury the difference between what the farmer gets at the market place and a fair price. While this approach may |