366 GENERAL FARM PROGRAM 



This year, Doe's 300 acres of wheat, averaging 15 bushels, brought 4,500 

 bushels. He saved 500 bushels for seed and home use. He sent 4,000 bushels to 

 his local co-op elevator for sale. At his harvest time, like most wheat farmers, 

 he fouud the market price below the support level. So he had the local manager 

 send the grain on to an approved warehouse, and he obtained a CCC loan at his 

 local loan rate. 



The national parity price for wheat was $2.22 on June 15. The support price, 

 nationally, at J)0 percent of parity was $2. His local loan rate, allowing for 

 freight and handling charges, was $1.80. 



He realized for his crop — his total gross income before the service and interest 

 charges on his loan — $7,200. Out of this he met production costs, interest, taxes, 

 and family-living expenses. 



While tlie new parity formula was not in effect this year, if it had been, Doe's 

 loan value would have been 40 cents a bushel less. That would have been 18 

 percent down. If new parity had been in effect, even at 90 percent of parity 

 his gross income would have been about $5,904. instead of $7,200. 



Now in 1949, next year, Doe again will have 300 acres of wheat, produce 4,500 

 bushels, and he will again put 4,000 bushels under loan. 



Come next harvest time, even the old parity is likely to be lower. The loan 

 rate will be fixed on the June 15 report of what BAE finds farmers pay for a 

 list of items used by the average farmer. Included are feeds. Doe buys no 

 feed ; some of his wheat is used as feed, especially bran and middlings ground from 

 his grain. Feeds have gone down, so Doe's wheat parity will be down. Doe has 

 to buy a lot of what the parity index calls "tractors and machinery."' It's his 

 biggest expense next to tractor fuel. 



The price for machinery and tractors has a weight of 5.4 percent in the parity 

 index of prices paid by farmei's, l)ecause a lot of other farmers don't spend mucli 

 on that item. Tractors and machinery are not going down. They went up in 

 1948, and they'll go up in 1949. So actually. Doe's costs will not be lower next 

 year; they will be higher, but the index of prices paid by farmers, largely due 

 to lower feed and food pric-es, will go down. It is expected that, instead of $2.22 

 recorded as wheat parity last June 15, the old wheat parity next June 15 will 

 be $2.13, and it may be lower. 



Next year's 90 pei-cent of old parity support iirice will probably be around 

 $1.92, if parity is $2.13. Doe's local loan rate will be $1.72. Before service and 

 CCM.' loan interest charges, he will realize .$(5,8X0. If the new parity were in effect, 

 even with 90-percent support he would gross about 18 percent less, or approxi- 

 mately $5,642. 



Now, recalling that Doe's net income, like every farmer's net income, is quite 

 different than gross income and that his costs in 1949 actually will be higher 

 than in 1948, Doe in late 1949 becomes really interested in the new long-range 

 farm act which is at pi'esent due to go into effect January 1, 1950. 



Assuming that the Eighty-lirst Congress does nothing — which I am sure 

 would be an erroneous assum))tion — this is what John X. Doe would find when 

 harvest time rolled around in 1950: 



First, he would hnd that the support price was flexible — like the ground under 

 the tractor tires on a very wet day — a bottom, but not a very siire or comfortable 

 one. As shortages disappear, the sui)port price tends to be the price. 



The support price will depend in 1!)50 and subsequent years on what tlie 

 "supply" of wheat, the carry-over ]tlus the new crop, is found to be in relation- 

 ship to "normal" supply. •'Normal" supply is made up of what it is estimated 

 we used in the U. S. A., what we will export, with provision for a carry-over. 

 If "supply" is 100 percent of "normal" supply, the support price is to be 75 i)ercent 

 of the new parity. If supply is lielow 100 ))ercent of "normal" supply, ranging 

 down, the suppoit price can go as high as 90 percent of the new ])arity, but no 

 higlier. If the supply is large, the support price can range down to as low as 

 60 percent in case the supply is 130 percent or more of "normal" supply. Wlien 

 the supply is 120 percent of "normal" sui)ply, the Secretary of Agriculture, the 

 law specifies, must proclaim acreage allotments and call foi- a vote on marketing 

 quotas. Sucli quotas go in elfect if voted by a two-thirds majority of producers. 



(liemembei-, too, we have used, mainly because of high exports, a lot of wheat 

 in recent years. We hiwe iiroduced big ci'0])s but used them. The outlook for 

 the future isn't as bright as the past for wheat markets.) 



Second, by harvesttime in 1950, Doe has learned that, while old parity was 

 •based on relationships of prices paid by farmers for a list of things the average 

 farmer used as compared to the prices of those things back in 1909 to 1914 and 



