FOR
INDIANA
FARMERS
INFORMATION
Volume 1 No. 3
Lafayette, Indiana
September, 1947
Prepared by members of the Agricultural Staff of Purdue University
WHAT WE NEED IN AGRICULTURAL POLICY
(Summary of remarks by DR. O. B. JESNESS, University of Minnesota, at luncheon meeting of Indiana
State Farm Management Tour, July 22, 1947)
IT is wise for farmers and farm leaders to discuss the salient
features of a sound agricultural policy during times of
high prosperity on the farm. It is during such times that we
can view the crucial issues objectively and come nearer
reaching a sound conclusion than would be possible in times
of distress. Farm groups everywhere need to meet and discuss intelligently the various aspects of agricultural policy in
order that they can make their desires known to legislators
and congressmen in the difficult adjustment days ahead.
Question Of Support Prices
One of the most important questions American farmers
must face is whether they want a permanent program of
support prices for farm products. The prices of most major
farm products are currently supported at 90 per cent of parity
during 1947 and 1948. At the moment, most prices are so
high that this support is ineffective. However, there is strong
sentiment in many quarters to extend this type of support on
a permanent basis.
Consequences Of Support
I am not here to argue whether farmers should or should
not campaign for a permanent system of support prices.
I do contend, however, that those who favor support prices
should be fully aware of the consequences which go with
them. It is an economic axiom that any level of artificially
supported prices will call forth production in excess of the
quantity which will be absorbed by the market at the
existing price.
This will create a "surplus" problem. This will lead inevitably and rather quickly to some system of production
control. It is my general impression that most farmers during the 1930's and early 1940's did not favor the system of
production controls. I doubt if most farmers would want to
return to that system. However, it must be recognized that
production control is the Siamese twin of artificially supported prices.
Some people believe that it should be possible to support
domestic prices at an artificial level and to market the
surplus abroad. To do this, however, would call for some
type of subsidy on that portion of the crop marketed abroad,
because the foreign market usually will not absorb any
great quantity of foodstuff at an artificially maintained
price level. This process of marketing surplus abroad at sub
sidized prices is what is commonly known as "export dumping". This system of marketing rapidly leads to international
complications and to retalliations from other producing areas
in the world. It is almost always pre-doomed to failure.
Export Rate Can't Continue
At the present time foreign markets are absorbing tremendous quantities of American foodstuffs. However, the
current rate of exports cannot continue. At the present time,
our exports exceed our imports by a net annual rate of
approximately 15 billion dollars. This volume of exports is
being maintained by loans to European countries, the utilization of dollar balances foreign nations hold in this country and various other devices whereby foreign countries
can  obtain  dollars  in  the  United  States.
However, we face an imminent shortage of dollars held
by foreigners. When the pinch comes, the volume of exports must inevitably level off. This will suddenly bring us
face to face with the realization that the foreign market
for agricultural foodstuffs is not insatiable.
We need to recognize that if we are going to continue
to export foodstuffs to foreign countries over a long period
of years, it must be at a price level which they can afford
to pay. Moreover, our program of exports must be in conjunction with some program of imports. After all, over the
long run, the only way foreign countries have to pay for exports which we send abroad is with imports which we accept
from them. Foreign trade is a two-way road. Every American needs to realize this fact.
Farm Economy Cushion
If American farmers should decide against support prices
for individual farm products and production controls that
go with them, they may want to recommend some kind of a
cushion under the farm economy in times of distress. This
might take the form of income payments to individual
farmers which would prevent their level of income from
falling below a "distress level". Such a system of payments
would still permit considerable individual freedom of the
farmer to plant what he chooses and manage his farm as he
sees fit.
(Continued on Page 3)