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FARM PRICES and SUPPORTS 



that the taxpayer's money is being used 

 to hike the prices he is paying to his 

 grocer, his butcher, and the milkman. 

 The issue has even been brought into 

 the political campaign but so far 

 neither party has been able to fasten 

 the blame for high food costs. 



Some of the critical statements have 

 implied that the farm price-supports 

 were foisted on the public at the whim 

 of government officials. This certainly 

 is not the case. These price supporting 

 activities are the result of action by 

 Congress and are required by law to 

 be carried out in full. These laws were 

 passed with the support of the Amer- 

 ican Farm Bureau Federation and the 

 Illinois Agricultural Association. 



The original law requiring minimum 

 support levels for farm prices (90 per 

 cent of parity in most cases) was a war 

 measure to stimulate agricultural pro- 

 duction. This law was to run two full 

 years after the end of the war, which 

 would be to the end of this year. 



In the closing hours of the last regu- 

 lar session, Cengress, by enacting the 

 Agricultural Act of 1948 extended the 

 requirements to run through 1949, and 

 on crops produced in 1949 until the 

 end of the marketing season running 

 into 1950. Beginning with the 1950 

 crop, the Act provides for a new 

 method of computing parity and for a 

 variable level of price support, ranging 

 from 60 to 90 per cent of the "modern- 

 ized" parity with the percentage varia- 

 tions based on the yearly level of sup- 

 plies of each commodity in relation to 

 a "normal supply." 



With respect to support prices gener- 

 ally, there are two items which need to 

 be noted. 



First, support prices are in effect 

 a form of insurance. Farmers are 

 requested to hold or maintain 

 production at a level which will 

 meet domestic and foreign needs, 

 and in return, they are given some 

 assurance against disastrous price 

 breaks. 



Second, actual support-price op- 

 erations have been relatively minor 

 during the war and so far in the 

 post-war period. 



Farmers are not "guaranteed" that 

 prices will not go below the "floors." 

 They are offered loans, purchases, or 

 purchase agreements that give them an 

 alternative to selling below support 



lAtovrwmwr 



PRICES RECEIVED By FASMERS IN U.S. 



AS OF SEPT 15 I9«6. 

 SOURfE: U.S.DEPT. OF AGRICULTURE 





levels if market prices should go below 

 the support price. Furthermore, it 

 seems likely that even with the support 

 programs some sales will be made be- 

 low the floors because the support pro- 

 grams may not be technically fully 

 effective. 



For example, a farmer may have to 

 sell corn for less than the support price 

 because he doesn't have approved stor- 

 age, making it impossible for him to 

 get a loan on his corn or to enter into 

 a purchase agreement with the Com- 

 modity Credit Corporation. 



Larger support operations are prob- 

 able for this year as a result of record 

 crop yields. Cotton, wheat, and new- 

 crop corn prices are now at, or near, 

 the support level, but this does not 

 mean that huge losses have been neces- 

 sarily realized. 



In fact, operations of the Commodity 

 Credit Corporation (other than war- 

 time subsidies which were mainly for 

 the purpose of holding the line on price 

 ceilings) from the time of its first loans 

 in 1933 through June 30, 1948, showed 

 a gain of about $80 million after paying 

 all operating expenses of the corpora- 

 tion. 



What have support prices really done 

 to the price of food? Many key food 

 prices are far above the level at which 

 the government would have to come in 

 with its support program. 



To reach the support level, hogs 

 would have to drop 42 per cent; butter- 

 fat, 22 per cent; milk, 27 per cent; 

 chickens, 19 per cent. Other products 



NO SUPPORT 



on which there are no support prices 

 are even higher. Beef cattle are 79 |>er 

 cent above parity price and lambs and 

 veal calves are nearly as far above. 

 Certainly support prices haven't affected 

 these products. 



The accompanying "balloon chart" 

 indicates that the prices of very few 

 products are down to, or below, their 

 support level or 90 per cent of parity. 

 Only four products — potatoes, eggs, 

 wheat, and cotton — have reached, or 

 gone below, the point where, according 

 to the law, they must be supp>orted by 

 the government. 



Prices paid to farmers are only a part 

 of the cost of a loaf of bread or a 

 bottle of milk delivered at your back 

 door. Food prices include the cost and 

 profits of middlemen, processors, dis- 

 tributors, and retailers. What part of 

 the consumer's dollar does the farmer 

 get? This varies of course for differ- 

 ent foods but it was down to an average 

 of 51 cents in June. That was the 

 farmer's pay for growing the food. The 

 remaining 49 cents pays for the cost of 

 transporting, processing, and delivering 

 the food between the farm and the 

 consumer's table. In June, 1932, the 

 farmer was getting only 29 cents of the 

 retail food dollar while the middle- 

 man was getting 71 cents. 



In the current boom, farm prices have 

 risen much more than marketing 

 charges giving farmers, rather than the 

 middlemen, the edge. In the next few 

 years, if history repeats itself, farm 

 (Continued on page 34) 



NOVEMBER. 1948 



