90 OUR USE OF THE LAND 



on the selling prices of farm products and the cost of industrial 

 products bought by the farmer. For example, the Secretary of 

 Agriculture may decide that under normal conditions a hun 

 dred bushels of wheat should buy a mowing machine. Say the 

 mowing machine costs $100, then wheat should be worth $1 a 

 bushel. Now suppose the price of the mowing machine goes up 

 and the price of wheat goes down, so that the actual price of 

 the mowing machine is $150 and the actual price of the 100 

 bushels of wheat is $50. The parity price of the wheat, how 

 ever, would be $150, since parity price in this case means that 

 the price paid for 100 bushels of wheat must equal the cost of 

 the mowing machine. Parity price is really a balance between 

 two kinds of commodities. In this simplified instance it is a 

 balance between wheat and mowing machines. If the actual 

 price of wheat drops to 52 per cent of parity price, the federal 

 government can lend you up to 75 per cent of the parity price. 

 Thus if the parity price of wheat for any month is $ 1 .50 a bushel 

 and the actual price of wheat is 75 cents, the actual price is less 

 than 52 per cent of parity price. Therefore the Secretary of 

 Agriculture can give you a commodity loan on your wheat. He 

 can lend you up to 75 per cent of $1.50, or $1. 121/2 a bushel. 

 The hundred bushels of grain will be turned over to the govern' 

 ment and you will get $1 12.50. 



If you think there is danger of drought or insects ruining 

 your crop, you can apply for crop insurance. This system works 

 like a regular insurance policy. The difference is that you 

 insure a crop. You pay the premiums in the crop and benefits 

 are repaid to you in crops. For instance, if your average yield 

 of wheat is 1000 bushels, you can take out insurance with 

 the government so that in case of crop failure you will be sure 

 of getting at least 750 bushels, that is, 75 per cent. In good years, 

 when you have a wheat surplus, you give the government a cer' 

 tain percentage of that surplus. In bad years, when your yield is 



