C§JLLETIN3~ ESM 45

COOPERATIVE EXTENSION SERVICE I THE OHIO STATE UNIVERSITY Even though farm numbers continue to decline rapidly, increasing production from the remaining farms more than adequately supplies the food and fiber needs of our in­ creasing population. Since farm incomes are lower than the incomes of non-farm workers, cooperative and legislative attempts have been made to improve the farmer's economic position and increase SUMMARY society's standard of living. Farm income from all sources on a per person basis now is about 80 percent that of non-farm people--an improvement over the 50 percent level of 1959. Legislators have provided various programs--price supports (either directly or through surplus purchases and storage), agricultural credit, production controls on acreage and marketings, the s01l bank, and more recently the voluntary partial land retirement programs (feed grains, cotton, wheat)--to impro\e low farm incomes. Wars, depression, diseases, droughts and changes in the Ame rica11 diet ha\e all contributed to a shifting of emphasis concerning farm needs and legislatiYe action. Changes in the future will continue to spur new programs aimed at improving conditions for agriculture and its contribution to our total welfare.

CONTENTS Farm Problems...... • ...... 3 Obfective s •...... , ...... •...... , ..... , . . . • • 4 Early Agricultural Policy...... • ...... • ...... 4 Education and Research...... • ...... • ...... 5 Farm Organization and the Cooperative Movement...... • . . . . • ...... • ...... • 5 Credit Smted to Farmers' Needs...... • ...... • ...... 6 Two Price Bills Vetoed...... • . • ...... • • 6 The Federal Farm Board...... 6 Agricultural Adjustment Act of 1933 ...... ~...... 7 Agricultural Act of 1936...... 7 Agricultural Marketing Agreement Act...... • • ...... • ...... • 7 Agricultural Act of 1938...... 7 Steagall Amendment...... 8 Agricultural Act of 1948. • ...... • . . • ...... • . . . . 8 Agricultural Act of 1949...... • . . . . • . . • . . . . • . . . • . • . . • . . • • . . • . . . • ...... • . 9 Agricultural Act of 1954...... • ...... • • . • • • . • . . • . • . . . . • . . . . • . . . . • . . • . . . . . • 10 Agricultural Act of 1956...... • ...... • ...... • . • ...... • ...... 10 Agricultural Act of 1958 ..•...... •.....•...... •.•.... 11 Feed, Grain Program...... • ...... • . . • . • . . • • . • . . . . • . • . . • ...... • . • . . . . • . . 11 Wheat Stabilization Program•...... •...... •.•..•.••...... •...•.•.....•• 12 The 1962 Agricultural Act. • • • • • . . • . • ...... • . . . . • . . . • . . • . . • ...... 12 Food and Agriculture Act of 1965...... ••...... •....•..••.. 13 Tobacco Legislation. . . . . • ...... • ...... • ...... • . . • . . . . • . . 13 Agricultural Act of 1970 •...... •.. 14 Future Programs •...... •...... •...... •...... •...... •....•...... 15

Revised 6/71··4M Issued in furtherance of Cooperative Extension work, Acts of May 8 and June 30, 1914, in cooperation with the U. S. Department of Agriculture. Roy M. Kottman, Director of the Cooperative Extension Service, The Ohio State University. legi1/afive Attempts fo Solve e 1•Fatm Income ob/em"

by Wai lace Barr*

Farm population, as a per cent of total United States population, has de­ clined rapidly during the past 100 years. Now, only about 5 per cent of our people are farmers. An important reason for migration from farms is that the average econo­ mic well-being of farmers has been lower than the average well-being of non­ farmers. This is true even though the farmer's return is not only from labor but as a manager and financier as well. It is recognized that some farmers do relatively well. Should average farm incomes be as high as non-farm incomes? One an­ swer is that keeping average agricultural incomes as high as those in the non­ agricultural sector would lower society's overall standard of living. Fewer farm people would seek non-agricultural employment which produces things for improving our living standards. This often is not a satisfactory answer, however, to those farmers who have had to make major adjustments as a re­ sult of income disparity. farm Problems Many farmers, non-farmers and congressmen have been concerned be­ cause average agricultural incomes are not on a "par" with those of other important groups in our society. They feel society should help raise aver­ age agricultural incomes. They point out that many other businesses are helped with both hidden and obvious subsidies. Over the years, a second major obstacle for farmers has been fluctuating farm prices. Demand for farm products is relatively "sticky" or inelastic-­ that is, the quantity demanded changes only slightly when farm prices rise or drop. Thus, small changes in supply are oft.en associated with great chan­ ges in price. For all agricultural commodities, prices change 4 to 5 per cent with a 1 per cent change in supply. Consumers will not buy many more farm commodities when prices are low than when prices are high. Relatively low incomes, plus fluctuating prices for the average producer, have been important reasons for creation of many of our farm programs over the last several decades. Farm programs are debated in almost every ses­ sion of Congress.

*Extension Economist, Public Affairs and Outlook. This is a revision and updating of an earlier bulletin published in 1964 under the joint authorship of Riley Dougan and Wallace Barr.

3 Another expressed concern of many people is assuring an adequate sup­ ply of food. The total food supply must increase to provide for our popula­ tion growth of about 1. 2 per cent per year. Continued development of better ways to produce farm goods helps meet this need as well as to fulfill export needs, Some farmers cannot or do not quickly change their farming opera­ tion to take advantage of new developments. Their slower adjustment re­ sults in lower net income for them. Objectives Three basic objectives of farm programs have been: (1) to raise average farm incomes and stabilize farm prices, (2) to provide freedom in farm op­ eration, and (3) to increase agricultural efficiency for the benefit of all so­ ciety, These objectives conflict, even in the same legislation. Jn the past we have frequently failed to define clearly which objectives our programs were expected to achieve. Frequently we, the public, uphold or condemn a certain program without consciously considering its objectives. None of us has only a single objective, excluding all others. We emphasize some more than others, and that emphasis changes from time to time, Throughout the last century our legislators have made frequent attempts to promote one or more objectives for improving the lot of farm people. Their task is a continuing one because of constantly changing conditions. Each succeeding Congress studies and seeks to satisfy the demand for farm aid or conditions influencing the competitive position of agriculture. Farmers have used science, technology and management effectively, in­ creasing production efficiency by the year and by the decade. National farm programs usually attempt to combine "adjustments" and "efficiency" objec­ tives--to balance output with needs; to provide "freedom"; to assure equit­ able producer returns with reasonable consumer prices; and to meet nation­ al and international food and fiber committments. Production that saturates markets loses the advantages gained by well run operations and suffers the disadvantages of market gluts. Without in­ centives to assure ample supplies, though, efficient operations can be hin­ dered by under production, with resultant losses in both domestic and for­ eign markets and slackened contribution to the general economy and stan­ dard of living. Early Agricultural Policy Almost from the beginning of our nation, a major question was how to provide for orderly settlement of new areas. From initial plans for sale of public domain lands in large blocks, policy gradually moved toward encour­ aging settlement by lowering the minimum acreage that could be purchased and providing for more lenient terms of payment by settlers. These poli­ cies culminated in the Homestead Act of 1862, which granted title to 160 acres to settlers who lived on the land for 5 years. After 6 months of re­ sidency, homesteaders could get title by paying up to $2. 50 an acre. The authorities did very little planning to determine which land should be home-

4 steaded and which should not, Some lands not economically suited for agri­ cultural production were settled. Since farming was the predominant way of life in early settlements, legis­ lation was "flavored" with the farm viewpoint. Tariff regulations, for ex­ ample, were influenced by the farm point of view, since the farmer was the major constituent of legislators. Diminishing farm population and reappor­ tionment has changed this situation. Education and Research About the time of the homestead legislation, Congress passed and Presi­ dent Lincoln signed the law creating the land-grant college system to provide education and research for citizens engaged in agriculture and mechanical arts. Agricultural research received a boost in 1887 when the first federal grants-in-aid came to state experiment stations. In 1914, educational op­ portunities were expanded for rural people through establishment of the Fed­ eral Extension Service, In 1917 the Smith-Hughes Act provided for teaching vocational agriculture and home economics in high schools. Legislation providing for applied agricultural science and educational pro­ grams for its dissemination has had a tremendous impact on the ability of U.S. farmers to produce more food for meeting the needs of a rapidly grow­ ing population. Output per farmer has increased more in one generation than in all previous generations. This creates a big need for change in farm or­ ganization, tenure arrangements, finance and labor arrangements. However, most people agree that this emphasis on education and research in agriculture is an important reason for our having relatively low food costs. farm Organization and the Cooperative Movement Agriculturalists felt the disadvantages of being unorganized as early as the late 1800's and began to organize cooperatives to overcome some of these dis­ advantages. The Grange, one of the first national farm organizations, was established in 1867. A few years later its members organized a number of cooperative stores for farmers. Although these stores eventually failed, ex­ perience with them helped in the later development of cooperatives. Other farm organizations important in the cooperative movement were the National Farmers Union, organized in 1902, and the American Farm Bureau, organized on a national level in 1919. A relatively recent entry into the farm organization field was the National Farmers Organization formed in 1955. These and other farm organizations received favorable attention from many congressmen. Congress passed the Capper-Volstead Act in 1922 which de­ fined the scope and described the functions of cooperatives. An early target attacked by cooperatives and other farm organizations was freight rates. This resulted in public regulation of freight rates. During the early 1900's, farm groups attempted to promote favorable farm legislation; but, in general, agriculture was relatively prosperous from 1900 until after World War I.

5 Although farm organizations have differed on short run objectives, essen­ tially they have aimed at improving the economic and social well-being of far­ mers. The main differences have been on a philosophical basis and on the me­ thods utilized to attain the desired obJectives. Credit Suited to Farmers' Needs One of the growing needs of agriculture during the early 1900 's was sound credit suited to farmers' needs. High interest rates, short term loans and, in some cases, lack of adequate loanable funds at critical times were impor­ tant farm credit problems. Establishment of the government-sponsored Fed­ eral Land Bank system in 1916 provided lower interest rates, longer terms and an amortization plan for farm real estate loan repayment. The Federal Intermediate Credit Bank Act in 1923 and passage of the Farm Credit Act in 1933 provided for additional short-term farm production credit needs. The government-sponsored production credit system provided lower interest rates, lower loan costs, and repayment plans suited to the unique needs of farmers. The Federal Land Bank system and Production Credit As­ sociations are farmer-owned today. The Farm Security Act, passed in 1937, and the Farmers Home Admini­ stration approved in 1946, were designed to provide credit to farmers unable to secure capital from existing lending groups. Farmers Home Administration lends to qualified farmers for both real estate and production needs, Jn recent years, they have extended their loaning function to non-farm rural families, rural businesses and rural community development, Two-Price Bills Vetoed Throughout the 1920's farm prices were considerably lower than they had been during World War I. This instigated several attempts to do something more direct about the "farm income problem." During the middle and latter part of the decade, Congress passed the Mc­ Nary-Haugen Bill twice. Each time it was vetoed by President Coolidge. In effect, the bill was a two-price plan to separate the goods sold on the domes­ tic market from those sold on the foreign market. The fear expressed by the President in vetoing the bill was that our foreign friends would interpret the plan as "dumping." He also believed a high domestic support price would en­ courage production and in turn create unfair competition with producers in the world market. The federal Farm Board The Agricultural Marketing Act of 1929 established the Federal Farm Board. Its main objective was to encourage orderly marketing of agricultural products and to stabilize prices. The feeling often expressed was that "mar­ keting is the real problem, " Congress appropriated 500 million dollars with which cooperative market­ ing associations were to provide loans and storage for certain commodities. No attempt was made to control the supply of commodities before they were produced. The Farm Board failed; it ran out of money before any stabilizing 6 effect was realized. Good crop years immediately followed the board's cre­ ation. However, the general depression of the early 1930's would have made it difficult for any program to stabilize farm prices. Agricultural Adjustment Act of 1933 The stated general obiective of the Agricultural AdJustment Act of 1933 was to "re-establish prices to farmers at a level which will give agricultural commodities purchasing power, with respect to articles farmers buy, equi­ valent to the purchasing power of agricultural commodities in the base period." This concept later was defined as "parity. 11 The act provided for an Agriculiural Adiustment Administration aimed at ad)usting output of certain farm commodities. The act declared certain com­ modities to be "basic. 11 Included were corn, wheat, cotton, hogs, rice, to­ bacco, and dairy products. Later amendments added other commodities. Producers of these items entered into marketing agreements with the AAA. A processing tax on handlers of a commodity financed payments to producers for withholding that commodity from the market. In early 1936 the Supreme Court declared this act unconstitutional. The court held that state governments and not the Federal government had the right to control production. Also, the method of paying the farmer from the proces­ sing tax was declared illegal. Agricultural Act of 1936 The Soil Conservation and Domestic Allotment Act of 1936 followed this decision. It provided for payments to farmers from general federal funds ra­ ther than from processing tax funds. The Soil Conservation and Domestic Al­ lotment Act encouraged planting of soil conserving crops for cooperating in an acreage control plan. This shifting of emphasis satisfied the question of con­ stitutionality raised earlier. The act was inadequate for production control and had little influence on prices and incomes. Agricultural Marketing Agreement Act In 1937, Congress passed an Agricultural Marketing Agreement Act. This act allowed producers of designated specialized commodities in a particular market area {such as fluid milk) to vote on market regulations for those com­ modities. These regulations, (drafted after holding public hearings) require a favorable two-thirds vote of the producers voting, or producers of two-thirds of the volume, before the Secretary of Agriculture can establish marketing or­ ders. SUch orders must be adhered to by all handlers of the commodities in­ volved. This act is still in effect. Agricultural Act of 1938 Many of our present agricultural policy terms originated in the Agricul­ tural Act of 1938. This act established acreage allotments for "basic commo­ dities." It also provided marketing quotas for certain basic commodities for which at least two-thirds of the farmers voting in a referendum cast a favorable vote. When quotas were in effect for a commodity, the producer marketing 7 from more acres than his allotment Yvas subject to a penalty on such market­ ings. In tho Act of 1938, "basics" included cotton, wheat and corn. These basic commodities were to be supported at a certain percentage of parity, and production of them was to be controlled through acreage allotments. Regulations were designed to provide ''an orderly, adequate and balanced flow of such commodities in interstate and foreign commerce through storage of reserve supplies, loans, marketing quotas, assisting consumers to obtain an adequate and steady supply of such commodities at fair prices." Congress established a mandatory level of support within a range of 52 to 75 per cent of parity for the basic commodities. The Secretary of Agriculture was g-r1:en discretion \\ ilhin that range to determine actual price supports. Al­ though tho word parity had been used as early as the mid-1920's to denote a concept of equality for agriculture, it did not become a part of legislaLion un­ til the Act of 1938, The parity concept has different meanings to different people. The general concept is one of making the cost-price relationship of a certain quantity of a commodity the same as it was in an earlier base period. For example, if the price of one bushel of wheat equaled the price of a man's shirt in a base period (say 1910-14), one bushel of wheat must still be worth one shirt to maintain a 100 per cent parity ratio between wheat and shirts. Through the years there have been modifications of the base period, but basically the 1910-14 period is still used. The 1938 act provided for supporting prices on certain commodities through "non-recourse loans." This meant that if the producer wished to turn his com­ modity over to the Commodity Credit Corporation for repayment of a loan, he could not be held liable for any drop in the price of the commodity. However, if the market price should increase above the loan rate, the producer could choose to sell the commodity and pay off the loan plus a small interest charge. Steagall Amendment Not long after the adoption of the Act of 1938, our country became involved in war. The objective in agricultural policy quickly changed from maintaining prices by controlling production to encouraging farmers to produce more to help in the war effort. To encourage this production increase (through greater use of machinery, labor, etc.), the government raised the support price for many commodities, first to 85 percent of parity and later to 90 percent of pari­ ty and agreed to continue this level of support for two years after the official end of the war. These guarantees to farmers were comparable to cost plus prices and conversion payments to non-farm producers who contracted to shift production from peace time to war time products. This was done not only for basic commodities, but for many non-basics as well. Added to the basics list were rice, tobacco, and peanuts. Non-basics incluCled such things as hogs, eggs, chickens, turkeys, milk, dry peas, dry edible beans, soybeans and flax for oil, potatoes and sweet potatoes. These commodities became known as the Steagall Amendment commodities. Agricultural Act of 1948 Following World War Il, the major objective of farm legislation shifted from 8 encouraging production to maintaining agricultural prices by production ad­ justment. The Agricultural Act of 1948 provided price supports at 90 per cent of parity for basic commodities until the mid-1950's, if farmers followed cer­ tain regulations. The act guaranteed supports at 90 per cent of parity for Irish potatoes through January, 1949, and for milk, milk products, hogs, chickens and eggs marketed before January 1, 1950. Certain other Steagall commodities were to be supported until January 1, 1950 at not less than 60 per cent of parity. The act of 1948 also introduced a ne\v formula for .computing parity of individual commodities. This formula adjusted the 1910-14 price by a moving average price of the most recent 10-year period. The revised formula result.ed in a lowered parity price for many crop commodities and a raised one for many livestock commodities but did not actually change the parity ratio for all agricultural commodities. Flexible Supports Approved Another provision of the Act of 1948 established flexible price supports for basic commodities within a range of 60 to 90 per cent of parity. The sup­ port was to be determined by a formula based on the percentage by which to­ tal supply was above or below the normal supply. After total supply reached 130 per cent or more of normal supply, the price support could drop to no lower than 60 per cent of parity, The act defined normal supply as that need­ ed for estimated domestic consumption, plus estimated exports, plus an al­ lowance for some carryover. Supports at not more than 90 percent of parity could be made available for non-basic commodities, but the framework around which they could be set was much less rigid than for basics. The price support for wool was to be at whatever price level was necessary (not more than 90 or less than 60 per cent of parity) to encourage annual production of about 360 million pounds. The potato price support was to be lowered to not less than 60 per cent of par­ ity. Agricultural Act of 1949 The Act of 1949 modified the act of a year earlier in many ways. It re­ vised mandatory support levels for the basics within the range of 75 and 90 per cent of parity; however, levels were still determined by the percentage by which total supply was above or below normal supply, Certain commodities were called "designated non-basics" in the 1949 act. These were: wool, tung nuts, honey, potatoes, milk and butterfat. All ex­ cept milk and butterfat were to be supported at 60 to 90 per cent of parity. The dairy product supports were to be between 75 and 90 per cent of parity. The act gave the Secretary of Agriculture the authority to set support rates between O and 90 per cent of parity for other designated non-basics. other revisions in the Act of 1949 included the addition of hired labor, interest and taxes as part of costs in computing parity ratio. Because of the Korean conflict support levels of the basics were maintained by annual amend­ ments at 90 per cent of parity,

9 Agricultural Act of 1954 A major feature of the Agricultural Act of 1954 was to provide flexible price supports for the basic commodities. This proYision had also been in the 1948 and 1949 acts, but it had never been allowed to become effective. The Act of 1954 allowed support rates for basics (except tobacco) to fluctuate between 75 and 90 per cent of parity after January 1, 1956. Tobacco received separate treatment in that, as long as farmers voted in favor of marketing quotas, price support was to be frozen at 90 per cent of parity. Earlier, it was mentioned that carryover was a factor considered in de­ termining the level of support. The Act of 1954 provided an additional "set aside" carryover of basic commodities. This was not to be figured in deter­ mining support levels. For example: the set aside of wheat amounted to a minimum of 400 million bushels and a ma1dmum of 500 million bushels. Thus, computed supply was not to be as large as actual supply for the purpose of figuring price support. The Agricultural Act of 1948 had defined a new method for calculating parity but permitted the use of the old method, if it provided a higher price. By 1954, the new method was still unused, but the 1954 act made its use man­ datory, after January 1, 1956, for computing parity prices on all commodities. Direct Payments to Wool Growers Another important feature of the Act of 1954 concerned wool. Congress desired an increase in domestic wool production. Therefore, it raised the maximum support rate to 110 per cent of parity. The method of supporting wool prices was a change from using a storage and loan program to making direct payments to producers. This meant that wool prices would be set by the open market; the government then would pay the difference between the average market price for wool and the average support price. Import duties on wool were to provide the funds for such payments. Food for Peace The Agricultural Trade Development and Assistance Act of 1954 was passed to expedite the sales of surplus agricultural commodities for foreign currencies. These currencies then were to be used to expand international trade, to encour­ age economic development, to purchase strategic materials, to pay United States obligations abroad, to promote collective strength, and in other ways to foster the foreign policy of the United States. This act was known as P. L. 480. Agricultural Act of 1956 This legislation was more popularly called the Soil Bank Act. The objec­ tives of the program were (1) to improve farm income by removing land from production and (2) to promote conservation of the nation's land, water and for­ est resources. The program was established in two parts--ihe "Acreage Reserve" and "Conservation Reserve." In the first, farmers voluntarily diverted for pay­ ment acreage from the production of a basic commodity or allotted crops to conserving uses for a one-year contract period. No crop (including hay or pasture) could be harvested from the diverted land. Cropland diverted under 10 various programs are shown in TalJle 1. Eligibility for price support a;.1d participation in the Acreage Reserve d0- pended upon compliance with applicable acreage cll.otments, quotas and planting conserving crops on diverted acreage. The ucrcas'E rese1·ve or partial farm land retirement phase of the Soil Bank was cermwated alter the 1958 crop year. The conservation reserve was a voluntary program i:'.l which farmel's signed long-term contracts of 3 to 10 years duration for dne:ting cropland to grass, trees, or water storage on a part- or whole-fc.rm l:Jasis. ::Vlost part1ci­ pants were on a whole-farm basis. With the discontinuance of foe acreage re­ serve, the conservation reserve was grea·Jy ln 1959 and 1D60 (Ta1Jlc 1). Annual per-acre payments were made for the duration of the contract. Aid was available to establish conserving practices. Farmers could not har­ vest a crop from the designated croplanct No grazing was pennittell and nox­ ious weeds had to be controlled. Agricultural Act of 1958 This act provided for a farmer referendum on corn to decide which pro­ gram would be in effect for 1959 and subsequent years. One choice included acreage allotments and price supports between 75 and 90 per cent of parity in commercial corn producing areas. The other alternative, chosen by farmers, had no acreage allotments with prices supported at the average market price of the three preceding years, but not less than 65 per cent of parity. The other important feature of this act was to adjust price support levels of cotton and rice so they might vary from 65 to 90 per cent of parity. Wheat and peanuts price support remained at 75 to 90 per cent of parity and tobacco remained at 90 per cent of parity when quotas were in effect. Feed Grain Program Congress, in 1961, enacted the Emergency Feed Grain Program with the stated purposes of (1) increasing farm income, (2) reducing the ultimate feed grain program costs to the taxpayer, (3) assuring the consumer of an abundant supply of meat, eggs and dairy pi-oducts at fair and stable prices, and (4) cui-­ tailing the further buildup of feed grain supplies. The Feed Grain Program was a voluntary program in which farmers diver­ ted a minimum of 20 per cent of their feed grain (corn, grain sorghum and bar­ ley) acreage to conserving uses. The diverted conserving acreage was in addi­ tion to the average conserving acreage during 1959-60. The diverted acreage could not be harvested or grazed. Participants were eligible for price support loans on feed grains at not less than 65 per cent of parity plus a payment for each acre diverted to a conserving use. The 1961 act provided a new means of paying for participation. The Secre­ tary of Agriculture was given the authority to sell Commodity Credit Corpora­ tion feed grain at market prices to pay for the acreage diverted, Previously, the Commodity Credit Corporation could sell only at 105 per cent of the support price plus some handling charges. In a 1962 amendment, the 105 per cent limit was reinstituted effective on the 1963 crop. Another amendment effective for 11 the 1963 crop permitted a direct payment above the applicable price support level for those voluntarily participating in the program. Wheat Stabilization Program The Vi/heat Stabilization Program was passed in 1961 to be effective for the 1962 wheat crop only. Tr.e stated purposes were to (1) increase farm income, (2) reduce the excessive buildup of wheat supplies, and (3) reduce government storage cosrs. The methods utilized included acreage allotments, marketing quotas, price supports and some special features approved in a wheat referendum. One fea-· ture was a mandatory reduction of 1962 wheat allotments by 10 per cent. Far­ mers could voluntarily agree io reduce further their wheat acreage a minimum of 10 per cent below their new 1962 allotment and divert an equal amount to con­ serving uses. The amount diverted io conserving uses could not be harvested or grazed and was in addition to the average conserving acreage during 1959-60. Participants in the program were eligible for a payment for each acre di­ verted and for price support on wheat. The money to make payments to far­ mers voluntarily participating was raised by the sale of wheat at market price from CCC stocks. The 1962 Agricultural Act During 1962, further wheat legislation was enacted. One part of the legis­ lation provided for the continuation of the Wheat Stabilization Program for the 1963 crop year with some modification. The modifications included the elimin­ ation of the 10 per cent mandatory allotment reduction and allowed increasing the voluntarily diverted acreage to a minimum of 20 per cent of a participant's wheat allotment to conserving uses. Also a direct payment above the applicable price support rate was initiated for wheat. The law permitted the selling of wheat from CCC stocks at not less than the support rate. The second part of the legislation provided for a long-range wheat program to begin with the 1964 crop. The stated objectives were (1) to provide for an adequate and orderly fl.ow of wheat in commerce, (2) to provide fair and reason­ able prices to farmers and consumers, (3) to maintain adequate reserve sup­ plies, (4) to prevent acreage diverted from wheat adversely affecting other com­ modities, and (5) to reduce taxpayer costs. Wheat farmers were provided the opportunity to choose between two alternatives in a referendum. The major features of the "yes" vote alternative included (1) a mandatory 10 per cent reduction in acreage allotments from the 55-million-acre national allotment with mandatory diversion to conserving uses, (2) a two-price plan with part of the wheat to be supported at $2. 00 per bushel and the remainder at $1. 30, (3) a voluntary diversion of wheat acreage to conserving uses with per-acre payments, and (4) marketing quotas. The major features of the "no" vote alternative included (1) acreage allot­ ment 10 per cent below the 55-million acre national allotment and (2) price supports at 50 per cent of parity or $1. 25 a bushel. There would be no mar­ keting quotas or penalties for overplanting allotments nor land diversion pay­ ments. 12 Farmers chose the latter alternative, The nalional vote was -!.S pc>r cent for the "yes" alternative and 52 per cent for the "no" alternative, with a t\\O­ thirds majority required for the "yes" vote to become effective. Following the defeat of the wheat referendum, emergency legislation was passed for the 1964 and 1965 wheat crops providing for a voluntary program similar to the 1961 \l\lheat Stabilization Program. For the 19G,± and 1965 feed grain crop, a program similar to the 1961 Emergency Feed Grain Program was enacted. Cotton received similar special attention. Food and Agriculture Act of 1965 The Food and Agriculture Act of 1965 was a voluntary program with stated purposes of (1) strengthening farm income, (2) reducing government storage stocks and costs, (3) providing ample food and fiber at reasonable prices to consumers, and (4) enabling U.S. cotton, wheat and feed grain producers to compete in world markets with minimum use of export subsidies. The voluntary program provided for producers to divert a minimum of iheir historic wheat and cotton allotment or feed grain base to conserving uses for which no payment was made, Additional acreage could be diverted from these crops to conserving uses for payment. No crop could be harvested from diverted acres. Producers were required to maintain their conserving base. Participants were eligible to receive support loans, support payments, and diversion payments. Support loans were $1. 25 per bushel for wheat, 21¢ per pound for cotton, and corn support loans were $1. 05 per bushel. Support payments for corn were made at 30¢ per bushel on the estimated yield up to 50 per cent of the base acreage. Support payments on wheat were the difference between the parity price on July 1 of the marketing year and the loan rate of $1. 25 per bushel. This was a new feature. Diversion payments were made on acres diverted to conserving crops be­ yond the minimum required for participation and based on normal yields and support rates. These payments were compensation for production foregone. The Food and Agriculture Act of 1965 also authorized 5 to 10 year con­ tracts for crop land adjustment with farmers willing to convert crop land to water, soil, wildlife or forest conserving uses. Annual payments per acre were authorized at a rate not to exceed 40 per cent of the value of the crop that would have been produced. Tobacco Legislation The tobacco acreage allotment-price support system was initiated in 1938, and had received support of all segments of the tobacco industry. However, allotments no longer could cope with the application of technology to tobacco as rapidly rising yields meant large amounts of tobacco moved into CCC stocks. Congress enacted the first major change in tobacco control programs in 1965 with legislation that provided for poundage control rather than acreage control. In a referendum that year, the flue-cured growers approved a na­ tional tobacco poundage marketing quota. This approval assured growers of price supports at 90 per cent of parity. The annual national quota is based 13 on an estimate of domestic and export ..Jse. The farm quota is the number of pounds of tobacco that a gro1ve: may mar!{et each year and is based on the farm's past acreage and yields. ()\,·er-marketing ln one year is permitted up to 10 per cent of the quota. Under-marketing of a quota in one year is added to next year's quota. Burley grmvers operated under allotment procedures until 1971 when they approved in a referendum a burley tobacco poundage program with the same features as for flue-cured tobacco, Again the build up of CCC stocks due to the maintenance of small tobacco allotments and rising yields brought on the abandonment of ihe allotment or acreage approach in favor of a quantity or poundage quota program. Agricultural Act of 1970 After long debate, Congress passed the Agricultural Act of 1970. This le­ gislation provided for a three year voluntary land retirement program for cot­ ton, feed grains and wheat; limited payments to a maximum of $55, 000 for participation in each commodity program; established wool price supports at 72 cents per pound. It amended ihe 1937 Marketing Agreement Act to permit dairymen to institute class 1 base plans as a means to further regulate the flow of milk to market, and it extended the P. L. 480 or Food for Peace Pro­ gram authorizing donations and long-term credit sales to less-developed na­ tions (with foreign currency sales discontinued at the end of 1971). The legislation was comprehensive in that major commodity legislation was combined into one act under various titles. Much of the legislation is a synthesis of past programs but there were some new features introduced. One new feature was the limitation of payments to producers. This limitation provided that no producer can receive more than $55, 000 each for corn, cot­ ton, or wheat in support payments for reducing crop acreage, Loans are not included in the limitation. Another new feature gave individual farmers more flexibility in their farm operation. Objectives of the legislation were to (1) proteci and improve farmers' in­ comes, (2) keep production in line with anticipated needs, (3) give farmers more opportunity for decision making on their farms, and (4) put more re­ liance on the market place as a source of farm income, The provisions applicable to feed grains provide for a voluntary minimum "set aside" or diversion of crop land acreage to conserving uses to be eligi­ ble for loans and support payments. Any conserving base must be maintained. Additional "set aside" is permitted with diversion payments as compensation for production foregone. Producers must plant a minimum of 45 per cent of their feed grain base to a feed grain or approved substitute. Failure to do so results in loss of the base. After meeting these requirements, producers are free to plant any crop (except the quota crops of peanuts, rice, tobacco, and sugarcane) in any quantity they desire. Support payments are made on one-half of the feed grain base at the differ­ ence between $1. 35 per bushel (for corn) and the average market price for the first five months of the marketing year (starts October 1). Corn support pay­ ments cannot be less than 32~ per bushel, Price supports on the non-recourse 14 loans through 1973 cannot be less than $1. 00 per bushel to partic1patii1g far­ mers. The wheat portion of the act prm ides for a mlnimum voluntary ''set asiae'' from the domestic wheat allotment \4:3 per cent of the former a:!.lotment) to conserving use to be eligible for loans and .:iuppori pa~ ments. On the \\heat used domestically (about 530 million bushels) a payment for participation of the difference between 100 per cent of parity on July 1 ($2. 82 per bushel in 1970) and the average price for the first five months of the market year (start­ ing July 1) will be made. Wheat processors vvill continue to pa) 75t per bush­ el for domestically consumed wheat. The non-recourse loan rate to partici­ pating farmers may not be set below $1. 25 per bushel. The price support loan on middling, one-inch, upland cotton is to be 90 per cent of the average world price for the two preceding years. Payments for settting aside crop land (not to exceed one-third of the cotton allotment) would be the difference between 35C per pound (middling, one-inch basis) from the average market price for the first five months of the market year. In no case will payment be less than 15~ per pound. Future Programs This summary of various attempts to help solve the "farm income problem" includes only a partial list of the legislative provisions affecting agriculture which have been passed in the U.S. during the last 50 years. The aim of this bulletin has been to point out certain changes as the programs have evolved. One fact, emphasized again and again, is that new legislation is based upon old legislation. Policies do not change quickly, even though administrations sometimes do. An example of this is that most of our present legislation and terminology was used in the Agricultural Act of 1938. An example of the persistence of agricultural terms is the use of parity. Parity or the concept of equality has long been a favorite term that has de­ veloped a mysterious quality. The parity calculation uses a mathematical formula to show the relationship of farm prices and farm costs, using 1910- 14 as a base. Few people question the concept but many criticize the use of the formula to set product price supports. Critics of parity point out the formula is a backward looking approach that makes little or no allowance for technological advances in agricultural and industrial production, in transportation, in marketing, in financing, and in a host of other related fields. There are new farm commodities like soybeans which were of no consequence in 1910-14. There are new farm inputs like pipeline milkers, field shellers, etc., that did not exist in 1910-14. A fre­ quent error in using parity is to equate parity prices to parity of income. In­ come involves not only prices paid and received, but also the volume and ef­ ficiency of production. In the future, inevitable change in the relationship of agriculture to the rest of our economy will continue the need for new proposals and new legislation affecting farmers. Thus, as long as society must depend on farmers for food and fiber, legislators will keep on trying to adjust farm incomes to those of non-farm workers and to increase agricultural efficiency for the benefit of all 15 society. Legislators and society have been mcerested m improvrng the mcome of farmers because they don't hl..e to have a segment of society belm:v "par" 'vith another segment. One ma]or trend m farm mcome leg1slat1on is the mm ement toward a more marb.et-onented farm program. This is berng done through less reliance on price supports as an income transfer and through sluftrng to farmers greater decis1on-makmg respons1b1ht:y m deter­ mmmg v.h1ch crops to plant, and the acreage of each.

Table 1. CROPLAND DIVERSION UNDER SPECIFIED PROGRAMS, AND CROPLAND HARVESTED

DIVERTED ACRES UNDER SPECirIED PROGRAM Conser­ Cropland Ci opland C1opland Acreage vation Feed Conver- Ad1ust- Total Hai ve­ Year Reserve Reserve Gram Wheat Cotton s10n ment a/ sted (lVIil. Acres) 1957 21 4 6 4 27.8 326

1958 17. 2 9,9 27.1 321

1959 22 5 22.5 324

1960 28. 7 28 7 319

1961 28.5 25,2 53.7 303

1962 25.8 28.2 10 7 64.7 295

1963 24 3 24.5 7. 2 0 1 56.1 JOI

1964 17.4 32.4 5.1 o. 52:/ 0.1 55.5 298

1965 14.0 34,8 7. 2 1. oEI 0.4 57.4 299

1966 13 3 34.7 8,3 4. 6 0.4 2 0 63 3 292

1967 11. 0 20.3 4 9 0.6 4 0 40. 8 311

1968 9.2 32. 4 3 3 0,5 3 9 49.3 301

1969 39.1 11.1 0.5 3,9 58. 0 292

1970 0.1 39. 5 16.7 3.4 59.7 301 ~/ Total Diverted mcludmg acreage devoted to substitute crops. E/ Not required to be put m conservmg uses. Source Agricultural Statistics

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