Family Farm (Continued f rom page 5) Don...

Don't high farm prices lead to high prices for consumers?

One argument often made for keeping farm prices below cost of production and supplementing farmers with tax dollars is that it keeps prices down for consumers. Some argue that at least the tax structure is somewhat progressive, whereas the retail food system is regressive; that higher farm prices would equal higher retail prices which would hurt poor people even more.

Unfortunately, this argument ignores the fact that most of our subsidized food products are shipped overseas to the Soviet Union, Europe, Japan, and the Middle East--which means U.S. taxpayers are primarily subsidizing foreign buyers at the same time they are subsidizing all U.S. consumers, rich and poor. 

In 1986, we will spend nearly $12 billion to subsidize corn and wheat. If prices for both these crops were raised to the levels adequate to meet farmers' current productions costs, it would add only $10 billion to the $340 billion U.S. food bill--an increase of less than 2.3 percent, and less than a nickel on a dollar loaf of bread. This increase of $10 billions in retail costs would result in a savings of $12 billion in taxpayer costs, creating a net savings of $2 billion--a savings that could be used to nearly double the food stamps available to poor people. In a letter to Congress from the AFL-CIO Legislative Director Ray Dennison during the last days of the 1985 Farm Bill debate, the unions spoke directly to the arguments for maintaining low farm prices in order to "help" consumers. Quoting directly from his letter: "In urging your support for the Harkin Farm Bill the AFL-CIO is aware of the opponents arguments that this program would result in higher prices and is therefore anti-consumer. While always concerned about the interests of consumers, millions of whom are union members, the AFL-CIO has painfully experienced the toil that an obsession for the lowest price can have on American industry and in turn the jobs of thousands of America's workers."

Don't we need low farm prices to gain more export markets? 

The only argument used in recent years to justify the subsidy system is that we must lower our prices and subsidize grain corporations to gain more export markets. Some economists and politicians still believe that more exports which would eventually raise overall income has some logic. But the logic has never been supported by economic facts. Volume has never risen enough to compensate for the lower prices. Export earnings have tended to fall with lower prices, even though volume may rise. For example, corn priced at $2.00 would boost exports to 2.2 billion bushels, valued at $4.4 billion. Corn priced at $3.60 would have sales of only 1.6 billion, but valued at $5.76 billion--almost 25 percent more. This does count the additional costs of imported fuel and fertilizer needed to produce extra bushels being sold at the lower prices.

Wouldn't higher farm prices push us out of world markets?

Another argument for keeping farm prices below cost of production is that if we raise prices to a decent level, "it would price the U.S. out of world markets." Since we supply over 70 percent of the world's soybean and corn, this argument is, on its face, ludicrous. But it is worth taking a closer look at it to understand the role of imports and exports.

A number of major farm commodity organizations contracted with the Food and Policy Research Institute at the University of Missouri to project grain export level sales under different price levels. Based on their calculations, there would be only a slight drop in volume of exports if farm commodity prices were raised to a break-even level here in the United States; due to increased prices, however, actual export earnings would be much greater. Since what is important in balanced trade deficits is dollars, not bushels, any proposals which may increase volume but decrease earnings must be seen as dangerous to the economic health of the nation.

For example, they project that corn set at current levels of around $2 per bushel would give the U.S. an export volume of 2.2 billion bushels with earnings of roughly $4.4 billion. However, if corn was set at $3.60, roughly the cost of production at this moment, it would generate total sales of 1.6 billion bushels and the new value of those bushels would be over $5.76 billion--nearly 25 percent higher exports under higher prices. In addition, the additional bushels sold at the lower price level, for lower export earnings, would also require imported fertilizers and fuels costing close to $1.6 billion to grow them, causing a new loss to our already badly damaged balance of trade of over $3 billion on just this one crop alone.

Don't higher farm prices benefit large corporate farmers more than small- and moderate-sized farmers?

The final argument used against any increase in commodity prices is that only the big corporate farmers would benefit, allowing them to grow ever stronger and larger. This is clearly an important concern, and is addressed directly in almost every proposal brought by Democrats to Congress. Senator Tom Harkin, in his Farm Policy Reform Act, included targeting provisions that would require family farms up to a $200,000 gross income to set aside only a flat portion of their productions, while farms over this size would face a set-aside rising directly with an increase in their gross income size. Targeting to benefit family farms is extremely important in any farm policy proposal, but must be carefully worded. Often these proposals pit small farmers against so-called "big farmers," damaging the coalition-building needed in rural America if we are to pass good farm legislation. A thousand acres may be large in some states and small in another; but they are all probably in trouble, needing a change in the overall policy.

This struggle between those who believe we should raise farm prices and eliminate subsidies and those who believe we should lower farm prices to boost exports will be an important and interesting one in the next year. The latest farm polls are now becoming available on these issues, with some surprising results. In a recent Kansas poll, for example, 81 percent of those responding supported the rights of farmers to vote on a referendum, and over 75 percent supported the approach which would raise commodity prices and impose effective supply management controls.

Compiled from a paper by Kevin Ristau of the Minnesota League of Rural Voters and Mark Ritchie of the North American Farm Alliance.

(Also see the Community Resource Directory listing for Michigan Farm Unity Coalition on page 18.)