The Rural Voice, 1983-10, Page 8Drought, PIK money, bring wide
variations in U.S. farmers' fortunes
by Mervyn Erb, Agrico
Travelling through Ohio, Indiana
and Illinois talking to farmers and
fertilizer people gave us some real eye
openers on the drought conditions,
when we attended the second Annual
Midwest Ag -Industries Exposition in
Danville, Illinois in August.
The Midwestern drought, in con-
junction with the payment -in-kind
program (PIK), is hitting U.S.
farmers with the intensity of a tor-
nado.
From one county to another, and
even within the same county, the for-
tunes of individual farmers offer
striking contrasts.
Farmers with grain to sell are wat-
ching prices rise and are surprisingly
cheerful; those without much grain
couldn't be gloomier.
The climb in prices is increasing
overall farm income significantly.
And by a twist of fate, the drought
and the federal PIK program (which
guaranteed farmers crops from
government storages if they planted
less than usual this spring) are shrink-
ing the vast troublesome surpluses of
most commodities. As a result, many
observers expect heavy plantings,
surging farm profits and a sharp cut-
back in government subsidies next
year.
Previous price support programs
encouraged growers to store the
bumper crops of 1981 and 1982 rather
than sell them. So, although there is
plenty of corn around, not much of it
was available for sale until July, when
surging prices triggered the release of
government -controlled supplies. And
PG. 6 THE RURAL VOICE, OCTOBER 1983
the PIK program, by reducing spring
plantings, and the drought, have fur-
ther reduced prospective supplies.
As a result, the corn on hand in the
U.S. next year is expected to dwindle
to the lowest level since the 1980
drought season. By October 1, 1984,
the corn surplus is likely to drop 70
per cent from a record level this fall,
to about one billion bushels. By the
1984 fall harvest, soybean supplies
are expected to be about half the 455
million bushels that will remain as of
September 1, 1983. That should
return them to a more normal situa-
tion.
The drought in the Midwest may
also turn the politics of agriculture
upside down.
Before the drought, a lot of people
in Congress were beginning to think
that cuts should be made in the costly
programs that help farmers.
But now, persistent heat and lack
of rain have driven farm prices much
higher. Because it won't cost the
government as much to subsidize
farmers, lawmakers aren't likely
anymore to consider it urgent to
make cuts in the price -support pro-
gram.
When Congress returns (in
September) from its recess, farm state
legislators are expected to argue that
other programs should continue un-
changed, and they will probably pro-
pose drought -relief measures for
some areas.
According to Michael Hall, lob-
byist for the National Corn Growers
Association, the drought has turned
around the thinking of many people.
It's been a major political develop-
ment.
The drought may also affect pro-
posals in Congress to change the pro-
gram that supports milk prices. And
it may lead the Reagan administra-
tion to end the program that reward-
ed corn farmers for leaving acreage
idle:
Farm program spending is expected
to reach $21.8 billion in fiscal 1983,
which ends September 30; in the
1970's, the average was $3.5 billion a
year. Agriculture Secretary John
Block calls the outlays indefensible
and he is trying to persuade Congress
to freeze price -support levels, which
rise automatically each year.
Under the price -support program,
eligible farmers are paid the dif-
ference between target levels and the
market prices they receive for their
crops. Before the drought, because
target prices were high and market
prices low, payments to farmers were
growing rapidly.
To stem the rise, Block tried to
reduce surpluses by paying farmers
with government-owned commodities
to reduce their plantings. This
payment -in-kind program has work-
ed too well in the case of corn. Great-
ly reduced plantings have magnified
the drought's effect.
The drought also could hurt efforts
to increase farm exports. Farm -state
lawmakers and the Agriculture
Department have long lobbied for
more export subsidies to battle
foreign competitors. But diminished
surpluses will make it more difficult
to rationalize the need to ship more
products overseas.
Eventually, this summer's crop-