THE I. A. A. RECORD 



Page Thirteen 



■^^V' 



A DEFENSE OF FARM - ^ - - s 

 1 ACREAGE REDUCTION 



Address by Secretary of Agriculture Arthur M. Hyde Before the Midwest Retail Mer- 

 chants' Council, Kansas City, Mo., August 5, 1930 



JUST now the price of 

 wheat is disastrously 

 low. Few farmers can pro- 

 duce wheat to sell at pres- 

 ent prices without losing 

 money. The cause of pres- 

 ent low prices is plain. Year 

 after year farmers have 

 gone on expanding their 

 acreage, with consequent 

 cumulative increases both 

 of domestic and world 

 stocks of wheat. There are 

 other elements in the farm 

 problems. Taxation, order- 

 ly marketing, diversifica- 

 tion, and land use are some 

 of them. I shall not dis- 

 cuss them here. When pro- 

 duction is so clearly out of 

 balance with the market, and a surplus 

 is continually piling up, there is no 

 need to hunt for or to discuss other 

 factors of the price depression. 



The world wheat acreage is today 

 42,000,000 acres larger than it was be- 

 fore the war. The American share of 

 that increase is 14,000,000 acres or 

 one-third of the total. These figures do 

 not include Russia, which, before the 

 war, was the world's largest exporter 

 of wheat. 



43,000,000 Bu. Too Much 

 Production has for the last seven 

 years outrun demand by an average of 

 45,000,000 bushels annually. 



The American carry-over of wheat 

 on July first of each of the years speci- 

 fied below was as follows: 



1926 99,000,000 bushels 



1927 123,000,000 



1928 128,000,000 " ' i- 



1929 245,000,000 



1930 265,000,000 " 



The world carry-over has likewise 

 been accumulating in volume as shown 

 by the following tabulation: 



1926 272,000,000 bushels 



1927 332,000,000 



1928 418,000,000 



-" ; 1929 589,000,000 



-,; 1930 489,000,000 



The world carry-over for July first 

 of this year indicates a decrease of 100,- 

 000,000 bushels. On its face, this fact 

 seems encouraging. But world produc- 

 tion in 1929-30 was 514,000,000 

 bushels less than in the previous year. 

 If world consumption had held its pre- 



MR. HYDE presents here an able and logical 

 defense of the Farm Board's recommenda- 

 tion to wheat growers that they decrease their 

 acreage planted to this crop and thereby relieve 

 the surplus situation responsible for present low^ 

 prices. 



Some will not agree w^ith his criticisms of the 

 equalization fee and the debenture plan, the for- 

 mer advocated by the Farm Bureau, th« latter 

 by the Grange. Yet because the entire speech is 

 addressed directly to the problem we are all in- 

 terested in, it is presented herew^ith in full with 

 the hope that it w^ill provoke thought and so 

 lead to a better understanding of everything in- 

 volved in the solution of the farm problem. 



— Editor, 



vious high level, the carry-over should 

 have been materially reduced. The 

 past year has proven, however, that 

 consuming countries not only can, but 

 have, reduced their consumption of 

 wheat. By high tariffs against out 

 wheat, by forcing the consumption of 

 substitute cereals and starches, and by 

 encouraging the expansion of their own 

 acreage they reduced their importations 

 by 237,000,000 bushels below the level 

 of 1928-29. The smaller 1929-30 

 world production was due to short 

 crops in Canada and Argentina. This 

 shortage cannot be expected to con- 

 tinue. Both countries have large acre- 

 ages and are expanding their acreage. 

 The persistence of this large world 

 carry-over in the face of a lower world 

 production is a stubborn fact, the im- 

 portance of which must not be ignored. 

 The Inevitable Result 

 Thus we have increased acreage, in- 

 creased production and made cumula- 

 tive additions to both the American 

 and the world carry-over. As a natural 

 and inevitable result, prices have fallen 

 to ruinous levels. 



Many of us do not like the law of 

 supply and demand. To some it ap- 

 pears to be a monstrous fiction ruth- 

 lessly created by buyers and dealers to 

 beat down the prices of farm commodi- 

 ties. But, like it or not, there it is. 

 Nobody invented it. It is merely a 

 statement of the way in which buyers 

 and sellers the world over, and ever 

 since the world began have acted and 

 will act under given conditions. It is 

 bedded deep in human nature. It ap- 



plies to every product of 

 human toil, from wheat to 

 automobiles. If the seller 

 has too much of a given 

 commodity, he gets panic 

 stricken and throws some 

 or all of it on the market 

 for what it will bring. If 

 the buyers know that the 

 supply is too large, they 

 hold off until they think 

 the bottom has been reached. 

 The normal interplay of 

 these human, selfish motives 

 and reactions of buyers and 

 sellers is called the law of 

 supply and demand. 



It is claimed that, since 

 all farm products are ulti- 

 mately consumed, there is 

 never any surplus of farm products. 

 It is true that all foods and fibers 

 produced on the farm are consumed — 

 somewhere, sometime and at some price. 

 Under the weight of a burdensome sur- 

 plus, the price falls. At each succes- 

 sive lower price level, new outlets and 

 uses for the product can be found. 

 Thus ultimately the price drops until 

 the surplus disappears. But the farmer 

 cannot live unless the price equals his 

 cost of production plus a profit. 

 Cost Dossn't Govern 

 When an unwieldy surplus burdens 

 the market the crop must sell for what- 

 ever the cheapest user will pay. Under 

 such conditions the cost of production 

 has nothing to do with the price. 



In a nutshell, then, the situation is 

 this. There are 40 million more acres 

 in wheat than there were before the 

 war. For seven years the world has 

 produced an annual average of 43 mil- 

 lion bushels of wheat more than it con- 

 sumed. Our American carry-over has 

 piled up to the record height of 265 

 million bushels. The world carry-over 

 has accumulated to nearly 500 million 

 bushels. The new crop threatens to 

 be larger than the last. The world price 

 burdened by that huge surplus will be 

 governed by the amount the cheaper 

 users will pay. Our American price, 

 so long as we produce for export, will 

 be governed by the world price. Prices 

 are disastrously low. 



The case is plain enough. The vital 

 question is, what shall be done about it? 



Several programs are, or have been, 

 proposed. Some of them are based upon 



