Economic and Marketing Information
FOR INDIANA   FARMERS
Prepared by the Agricultural Staff of Purdue University, Lafayette, Indiana
June 30,   1964
FOOD STAMP PLAN-Its Meaning to Farmers
by Don Paarlberg, Agricultural Economics Department
The Food Stamp Plan, tried on an experimental basis
in 8 areas in 1961, was expanded to 25 areas in 1962.
By April of 1964, experimental programs were operating
in 43 rural and urban areas in 22 states, with 382,000
participants. Proposals have been made for much greater
expansion. What is the purpose of this plan, how does it
work, and what is its meaning to farmers?
Purpose of the Plan
The Food Stamp Plan has twin purposes, directly related to one another. The desire is to find a useful outlet for our agricultural abundance on the one hand and
to improve the nutrition of needy people on the other.
The Food Stamp Plan is considered an alternative to the
Direct Donation Program, which has been providing
about a quarter of a billion dollars worth of surplus
food annually to more than 6 million people on public
relief in this country.
How Does the Plan Work?
Eligible for participation in the Food Stamp Plan are
people certified by local officials as being in need. Standards are set up, based on the number of dollars required to buy a nutritionally adequate, low-cost diet. To
make possible the purchase of such an adequate diet,
the qualified people pay money and receive stamps.
How much do they pay? If they have no income they
pay nothing. About 10 percent of them fall in this category. Families with higher incomes pay higher amounts.
Those whose incomes approach the "income exclusion
point" ($245 per month for a four-person family) pay
an amount approaching the whole exchange value of the
stamps. Those with incomes above the "income exclusion point" are ineligible to participate. The guiding rule
is that the participant pays an amount roughly equal to
the normal food expenditures of his particular income
group.
Din exchange for this payment, the participating families
receive stamps sufficient in value to purchase the nutritionally adequate diet specified by the Department of
Agriculture. Theoretically, then, a participant obtains
the wherewithal to buy an adequate diet, for which he
pays in accordance with his means. In the experimental
project begun in 1961, involving 146,000 people in 8
areas, recipients paid $63 on the average for $100 worth
of stamps. With their stamps the recipients buy at approved stores, food of their own choice. All foods are
eligible for purchase with stamps except alcoholic beverages, coffee, tea, cocoa, and foods clearly identified
on the package as imported. Thus, for almost all the
foods in the store, the stamps are the equivalent of cash.
Purchases of domestically produced food items are made
with stamps bought at a bargain. Any additional food
beyond what could be obtained with the stamps, any imported food and any nonfood items purchased in the grocery store, are bought with cash. The stores turn the
stamps in at the bank where they are redeemed at face
value. Banks in turn receive cash for stamps from the
federal government.
What was the experience with the pilot operation?
During January of 1962, program participants totaled
146,000. The total value of stamps issued was more than
$3.0 million. Of this total, recipients paid almost $1.9
million, and the federal subsidy amounted to a little
more than $1.1 million, or 37 percent of the total. The
subsidy thus figures out to a cost of about $8 per person per month, or a rate of about $100 per person per
year. It is slightly greater than the per capita cost of the
Direct Donation Program.
When the Food Stamp Plan was started in the pilot
areas, the Direct Donation Program was closed out.
Those who had been receiving the donated commodities
became eligible, on a voluntary basis, for participation
in the Food Stamp Plan. But only about half of the
eligible ones came in. When the commodities were free,
the people were happy to receive them. When a cost was
involved, even a relatively small cost, many people dropped out of the program. A major effect of the program
is to weed out the marginal cases. The subsidized foods
go to those eligible persons with the greatest fell need
(not necessarily the greatest nutritional need). This
weeding out of marginal cases is a feature not found in
the Direct Donation Program.
The major increases in food purchases in the pilot program were in meats,  dairy  and  poultry  products,  and