Announcer: From the nation's capital, the
American Enterprise Institute for Public Policy
Research presents public policy forums, a
series of programs featuring the nation's
top authorities presenting their differing
views on the vital issues which confront us.
Today's topic, "U.S. Farm Policy: What Direction?"
Peter: I'm Peter Hackes in Washington.
The winter of 1976, 1977 was the worst in
40 years in many parts of the country.
The coldest temperatures in decades and heavy
snowfall struck the east, damaging crops from
the farms of New Jersey down to the citrus
groves of Florida.
The West suffered a tremendous decrease in
precipitation, leading to a drought situation
which farmers say will have far reaching impact
on crops and also in livestock production.
In the aftermath of all this, policymakers
must make some important decisions about farm
and agricultural policy.
In recent years, U.S. farm policy has been
one of less control, that is, there have been
relatively fewer price supports.
Farmers have been left more or less alone
to grow and produce whatever crops they chose.
How have farmers fared under this hands-off
policy?
Has it helped or hurt the American consumer?
Should the U.S. return to more controls?
Coffee prices are soaring.
What can the United States do when other countries
wage economic warfare with food that they
export to the United States?
What should be done when a domestic agricultural
industry like the sugar industry gets into
financial trouble?
Should the government step in and try to protect
it by reducing the quotas of imported sugar?
And what is the United States' place in the
world food picture?
Should there be an international food reserve
created to meet emergencies?
How do our agricultural imports and exports
fit in with our overall foreign policy objectives?
Welcome to another Public Policy Forum presented
by AEI, the American Enterprise Institute,
a nonprofit, nonpartisan research and education
organization.
Today, four expert panelists will discuss
the topic, "U.S. Farm Policy: What Direction?"
Appearing on our panel today, Dr. John Schnitger,
former Undersecretary of Agriculture under
President Johnson and former President of
the Commodity Credit Corporation.
Dr. Schnitger is president of Schnitger Associates
and a consultant on agricultural policy to
several committees of the Congress and to
foreign governmental panels.
Democratic Congressman Thomas Foley of Washington
State, he is chairman of the House Committee
on agriculture and chairman of the House Democratic
Caucus.
Congressman Foley is a leading author of legislation
on nutrition.
Republican Congressman Paul Findley of Illinois,
a member of the House Committee on agriculture,
and the House Committee on international relations.
Mr. Findley is chief sponsor and author of
the famine prevention program of 1975.
Dr. Clayton Yeutter, former deputy special
Trade Representative in the Executive Office
of the President, he previously held a variety
of positions in the U.S. Department of Agriculture
under President Nixon and Ford.
And he helped develop U.S. policy for the
multinational trade negotiations in Geneva.
Moderating the panel is John Charles Daly.
Mr. Daly is a veteran news analyst and correspondent
for both CBS and ABC and served as vice president
of ABC.
For three years, he was head of the Voice
of America.
Now, here is Mr. Daly.
John: This Public Policy Forum, part of a
series presented by the American Enterprise
Institute touches every American home and
pocketbook, and in its broadest context, the
stability of the international community.
One in 25 Americans live on farms.
The rest of us buy the products from those
farms, and we pay the taxes that finance agricultural
governmental programs.
The year of 1977 is a benchmark in this complex.
This sometimes tortured interrelationship
and legislation authorizing the complex of
farm programs.
A tangled web of efforts to resolve the agricultural
crises of past decades generally expires in
this benchmark year.
There is a new opportunity then for Congress
and the people to find new initiatives, and
perhaps solutions to such thorny problems
is, boom bust prices, subsidies, quotas, tariffs,
and accommodating the basic planting and harvesting
cycles of our farms to the increasing sophistication
of space age technology and weather forecasting.
So, "U.S. Farm Policy: What Direction?"
Representative Foley as Chairman of the House
Committee on agriculture, what changes in
farm legislation do you see as most important
to achieve in 1977?
Congressman Foley: Well, I think 1977 is as
you say, a benchmark year not only because
the basic farm legislation is expiring the
so-called Agriculture and Consumer Protection
Act, which was passed in 1973.
But because a number of other major agricultural
bills have their expiration date this year,
and also the most important of the nutrition
programs that the department of agriculture
administers, the food stamp program also expires.
And it will be also the first time that a
major agriculture program will be enacted
under the new Budget Act, which was first
enacted in 1974.
So in answer to your question, I would say
that, one, the legislation will have to reflect
the change conditions of American agriculture
since the 1973, the continued dependence of
American agriculture in international trade.
But the strong concern that exists in the
country that the buzz that was made about
the 1973 bill that it provided for full production
with protection has seemed a little hollow
to many American farmers in recent months
as the prices particularly of grains have
dropped very dramatically.
The legislation will have to walk I'm afraid
a rather narrow line between those who would
want to see greater expenditures in this area,
and the rather tight fiscal constraints that
exist in the Congress.
For those that would want to see higher price
supports for farmers, and those on the farm
and off who are concerned that the price supports
not be so high as to interfere either with
our foreign trade or result in the takeover
by government of stocks, which I think largely
is resisted by most of the American agricultural
community.
Very briefly, I expect that the philosophy
of the 1970, 1973 bills, more market oriented
than previous programs, will continue to be
seen in the basic thrust of the bill.
The questions are not so much a return to
the old style of marketing quarters and tight
allotments.
I don't think that'll happen.
But a question where we're going to put these
target prices and price support levels.
That'll be one of the critical questions.
John: Right.
Representative Findley, as a Republican member
of the House agricultural committee, what
are the most important things that consumers
have to lose or gain from 1977 farm legislation?
Congressman Findley: This year, certainly
can be very critical for the interests of
consumers.
I would say that the interests of the American
people much more broadly are at stake.
We can make some blunders, we can get loan
rates too high, target prices too high, which
will induce some increase in food prices,
perhaps not inordinate increases, but nevertheless
an upward trend.
But I think the greatest damage that mischief
at the hand of the Congress might cause to
the American people is not in their capacity
as consumer, but rather in their capacity
as taxpayers and as a part of the economic
life of the nation.
The Ford administration has actually handed
to the Carter administration an agricultural
plant that is the healthiest, that it has
been in at least 40 years.
What we have at hand this year is the challenge
of avoiding mistakes.
The finest thing that could possibly happen
for consumers, as well as for taxpayers, and
citizens with even broader interest in that
would be a simple extension of what we have
now, because the plant is going full blast.
Government payments are way down.
The average farmer depends on income from
the U.S. Treasury only for about 2% of his
income, whereas before the Republican administration,
it was as high as 27%.
The people in the rural areas are now getting
almost the same income per capita that their
city brethren get, and this is a radical improvement
for country America, farm exports have tripled.
And this is of vital interest to every citizen,
I don't know what we could possibly do today
were it not for the earning power of American
agriculture in foreign markets.
And as Chairman Foley has stated, we have
a tight line to walk because we've had some
test votes in the committee on agriculture
and indicating a strong tendency within committee
membership to jerk loan rates too high, which
will cause great difficulty in the marketing
of farm products abroad.
And if that happens, we'll have surplus conditions
to contend with, we could easily stumble back
into the same costly surplus condition which
also led to an inefficient agricultural plant.
So this is a critical year for consumers as
well as in the other capacities of the American
people.
John: Right.
Dr. Schnitger, a former Undersecretary of
agriculture, you recently suggested a limited
one year extension of the present farm price
support bill to allow more time to construct
some Fundamental new legislation as you put
it.
Well, what fundamental new legislation do
you support?
Dr. Schnitger: I guess I'm not so serious
about fundamental new legislation as I am
about the need to avoid making some serious
mistakes in the case new legislation is enacted.
But much of what I think about the current
year was summarized by Congressman Foley.
Now, I would also say that, even though I
suggest pretty much the extension of the 1973
Act for one more year, it isn't because it's
really been tried and proved that it can do
the job.
In fact, the 1973 Act has been in suspension
most of the four years since it was enacted.
There's been a tendency for people, especially
Mr. Butz before he left the office of secretary
of agriculture, to claim that all of the good
effects of the 1973 to 1976 period, higher
prices for farmers, good incomes, high exports,
were the result of the 1973 Act.
That isn't fair to the situation, it's really
a rewriting of history.
It isn't even fair to the 1973 Act.
In fact, foreign policy has been suspended
since the 1973 Act was enacted.
And we ought to give it another year to try
it out.
John: Right.
Dr. Yeutter, is one who has operated a 2500
acre farm toward Agricultural Economics, and
who was President Ford's deputy Special Representative
for trade negotiations.
What new legislation would you like to see
affecting international trade and relations?
Dr. Yeutter: Well, John, there are really
two elements to this international package.
One is the domestic farm legislation that
we have.
And the other one is the negotiating side
where we're trying to reduce trade barriers
around the world.
So that we can penetrate some of these markets
that are out there, and one really has to
work on both of them simultaneously.
With respect to this side on Farm policy,
what we really need to say is that we want
to have a domestic Farm policy that, if possible,
will facilitate the movement of U.S. agricultural
products on the world scene, or at a very
minimum, not hamper or impede the movement
thereof.
Now, some years back, we had a bit of difficulty
in this regard, because we permitted our support
levels to get beyond world market prices and
we became uncompetitive, we're a residual
supplier, we often say, and which means that
we sold after everybody else in the exporting
business finished their sales.
That's oversimplified, but that's the essence
of it.
The only way we could be competitive then
was through the use of export subsidies.
That's just not a very good way to operate.
Not a good way to run the store.
Some changes have been made through the years,
we are a competitive agriculture now.
I think U.S. farmers can compete with anybody
in the world.
That being the case, we really need an environment
internationally in which we can compete.
And we wanna avoid getting into some international
regulatory schemes where we'll lose some of
that competitiveness at the negotiating table.
And we wanna also avoid going back to the
high price support levels that my colleagues
here have mentioned already, to the point
where they exceed market prices.
And we price ourselves out of that market
unless we use export subsidies.
But by and large, what I'd like to see as
the Congressman Findley and Foley and their
colleagues not get too eager about legislating
everything in this area and allow some discretion
with the Secretary of Agriculture in the setting
of loan rates so that he can make sure we
stay competitive.
In other words, maybe they ought to just kind
of keep their cotton picking hands off loan
rates.
Congressman Foley: I'll just make a comment,
which I...
John: Please do sir.
Congressman Foley: ...I think might be in
the nature of trying to correct the record
a little bit.
John mentioned rewriting history.
Going back to the 1973 Farm Bill, it was not
the first position of Secretary Butz or the
Republican administration to have the program
that was later enacted.
It was later enacted after congressional initiatives
were started, bipartisan congressional initiatives,
and the administration finally came into agreement
on the bill.
But the first position was to phase out all
the farm programs over a period of five years.
And what actually happened was not an administration
proposal that was adopted by the Congress,
but a congressional concept initiated first
in the Senate Committee on agriculture and
forestry.
And the target price for example, being generally
credited to Milton Young, Republican senator
from North Dakota, as the beginning of a movement
away from the more rigid allotments and market
quotas of previous programs.
But we had been moving toward this over the
years over a considerable period of time.
And I just state this because it's sometimes
I think wrongly said that, we now have a Republican
farm program, which Democrats resisted.
If Democrats had resisted it, it couldn't
have been enacted by a Democratic congress
in 1973, which was almost as heavily Democratic
as it is today.
John: Dr. Yeutter.
Dr. Yeutter: I will just gonna supplement
that a bit, John, by saying that I really
don't even visualize farm policy term as being
very partisan anymore.
I think a great deal of the partisanship is
gone.
And one of the reasons for that is it's become
such an internationally oriented endeavor
that partisanship has disappeared.
I think almost everybody on both sides of
the political aisle agrees that we wanna maintain
this export momentum.
And international economic policy is really
what I would visualize as a non-partisan kind
of effort.
Congressman Foley: I was trying to make a
kind of bipartisan correction.
Congressman Findley: You know, could I just
add a little more bipartisan commentary.
I intended to salute the fine cooperation
of the Democrats in the Congress and bringing
about the AG act of 1973.
And also to criticize my own party a bit for
what happened to wheat loan rates last fall.
I think our administration overreacted to
the political climate at the time by raising
wheat loan rates too high.
Wheat consequently had difficulty moving aggressively
into foreign markets.
But at least that experience should be a warning
to all of us that we shouldn't go even farther
in the direction of raising loan rates.
And one of the problems we face in this Congress
is the fact that so few of the members have
any memory as politicians of the high price
support, highest surplus, high cost era immediately
after the Korean War.
That's one of the problems we have.
And I hope we can find a way to bring about
an adequate education of these new members
in time to avoid disaster.
Congressman Foley: Well, I think there's one
point in that which might be mentioned statistically
about 60% of the House of Representatives
has been elected since 1970.
John: Dr. Schnitger, you...
Dr. Schnitger: We may have a bipartisan foreign
policy, and everything could be sweetness
and light, but we had better have a big fight
on farm policy this year, or we will have
a disaster.
Congressman Findley: I agree.
Dr. Schnitger: Because we have a series of
proposals being made in 1977, which are right
out of the '40s and '50s to raise price support
levels to level which are unsustainable in
the world market.
And to spend so much money on the farm programs,
money which would go mainly to the big farmers,
that the budget would be unbalanced.
And other programs, which I think 95% of the
people in the country would define as higher
priority programs would be starved.
We've gotten off to a very bad start in the
1977 farm debate.
And I don't know whose fault it is, but I'll
pick a scapegoat or two.
The Congress in its wisdom, I believe, required
the Department of Agriculture in the 1973
Act, to do some studies on cost of production.
And cost of production has become the parody
of 1977.
We are on the track of supporting farmers
through the budget in big crop years at full
cost of production, starting a spiral of land
costs which will lead us on higher and higher
and will cost 5 billion or 6 billion one year,
and 6 billion or 7 billion another year.
And if there isn't a big fight, as I say,
we're gonna have a disaster and it won't be
a partisan fight.
I agree with that.
It will be a fight between the people who
look back in farm policy and the people who
look ahead.
Congressman Foley: Well, I share that viewpoint
that we really need to focus on these issues
in 1977.
Because amazingly enough, as long as we've
had target prices and loan rates in existence,
there's still a lot of confusion as to what
they are and how they work and what they're
supposed to do.
And I'm not sure even that everybody in the
Congress or in the agricultural community
agree on all of this.
But to me, at least, the income protection
for farmers should come from the target prices.
I think that's what target prices are out
there for, to give some minimum assurances
in the income side.
Loan rates, on the other hand, should not
be used to provide minimum incomes.
Because if an attempt is made to do that,
that is when we begin to get into these cost
of production sorts of concepts that John
has talked about.
One can always rationalize on any cost of
production if one wants to put a high enough
value on land.
And then we get the loan rates up to where
we're uncompetitive.
So we ought to stop talking about loan rates
as income protection and concentrate on talking
about target prices as income protection and
keep the loan rates down where they're competitive.
John: Representative Findley you would...
Congressman Findley: We have not mentioned
up to now, an element of great importance
and that's the attitude of the new president.
Jimmy Carter from the Deep South involved
himself in the production and marketing of
one of the historic old basic crops, peanuts,
has called for a balanced budget by the end
of his four year term.
He has also called for budget restraint this
year.
Now, an interesting testing of his commitment
to budgetary management is going to be the
farm bill itself.
His recommendation in regard to peanuts, for
example, called for a cut of about $50 million
from the level of last year, this would require
some very substantial remodeling of the peanut
program.
So far, that remodeling is not in prospect.
He's going to have to use the weight of his
office to get his peanut constituency to go
along with remodeling the program.
And I don't see that happening.
The sentiment that has already been visible
within the AG committee in favor of higher
price supports, loan rates is another term
for that, means higher budget outlays there
can be no other possibility, perhaps a doubling
or a tripling of the outlay for commodity
programs contrasted with last year under President
Ford.
Now this is going to tear up the Carter budget
ambitions leading to a balanced budget at
the end of his term.
So the gentleman in the White House is going
to have a lot of influence on the outcome
of this battle, is he going to surmount his
historic base in the Deep South and high price
supports guaranteeing high prices at the expense
of the consumer, or is he going to, as they
say in Lyndon Johnson, country bite the bullet
and force some changes.
John: Let me ask a favor while we're on this
issue of loan rates and price support, there
are some terms which to city dwellers such
as I am, you discuss so complex the product
is...a subject is agricultural policy, I think
need definition.
So, I would ask for volunteers and only two
or three terms, I think which would help with
definition to make things much clearer tonight,
loan rate.
Dr. Schnitger, would you give us a definition
of loan rate?
Dr. Schnitger: Yes, loan rates refer to the
actual price at which a commodity is supported,
wheat in the 1977 is being supported at a
level not lower than $2.25 per bushel at the
farm and it's done by way of a government
loan to the farmer, which helps him hold the
wheat off the market until the price is at
least $2.25 a bushel.
So support and loan rates are interchangeable.
John: All right, target price, Congressman
Foley would you take that.
Congressman Foley: Now target price is a price
set in the act often subject to escalation
in terms of certain inflation factors.
And that particular level or target price
is the price that is designed to be income
support or protection for the farmer.
If the market prices for the crop actually
in the market during the marketing year, fall
below that target price on the average and
cooperating farmers get paid the difference
between the actual average market price and
the target price.
An example would be if the target price were
$2.50 and the average market prices for wheat
were $2.25 during the marketing year, and
cooperating farmers would be paid 25 cents
a bushel, the difference between 2.25 and
2.50.
They are however limited by payment limitations,
which in most crops are $20,000.
In rice $55,000, there are target price programs
for wheat, feed grains, cotton, and rice.
John: Under the present contract, the 1973
contract as I understand it, the crop is on
price supports for one year and if the market
falls below the loan rate, then the government
takes ownership.
And Secretary Bergland, proposes a program
of price support loans that would induce farmers
to enter into long term agreements to store
their grains and then to market the grain
only in times of dwindling supplies and rising
prices.
This replacing the present one year loans
would have what effect?
Would it for instance, stabilize at a lower
level, the loan payment structures that we
have become used to in recent years?
Who would like to tackle that?
Congress Foley: Let John...
Dr. Schnitger: I think Secretary Bergland
has proposed that the authority be given to
extend them for two or three years, in one
order instead of year by year.
The risk there I believe, is in giving the
farmer the option of when the loan would be
terminated and when the grain would be called
in.
This has really got to be part of a reserve
package and a reserve to be useful has to
be available.
And the only person that can manage a reserve
with any view to the public interest is the
government.
And therefore the government has to have at
least a string or a rope on that reserve,
and be able to terminate whatever benefits
have been given to the farmer to cause him
to hold it.
To end the loan, to stop the storage payments,
even to require the farmer to market that
grain within a certain period.
So it will come in and do its job, prevent
prices from rising much higher.
But it isn't a great change from what we've
had.
Congressman Foley: I would agree with what
John says.
But I also think in fairness to the Secretary
that he has suggested that under certain circumstances,
there would have to be authority either to
raise the interest rates on loans, or reduce
the time period somehow gives them flexibility
so that there wouldn't be a matter of the
farmer being able to hold them necessarily
for two or three years at his option.
There would be some incentives that could
draw the grain into the market if necessary.
John: Yes, sir.
Dr. Yeutter: A fundamental issue, of course,
in this area is whether we should have any
kind of a formal grain reserve or food Reserve
Program, and that one can become a whole lot
more controversial.
Now, whether one has it in...well, first,
as to whether one has some kind of a formal
program, and secondly, if so whether it be
in government hands or private hands or some
combination of the two.
And then thirdly, how that relates to what
we do internationally.
And I think we have to be very careful in
1977 that we don't get ourselves involved
in unilaterally in a grain reserve program
that would not work to the best interest of
the United States.
And there have been a number of grain reserves
proposals that have been floating on Capitol
Hill over the last several years, and they
will undoubtedly be floated again in 1977.
And I would just hope that the Congress would
look at them with a very jaundiced eye before
we do something that we very much regret in
terms of international economic policy.
John: Right.
Representative Findley, you would...
Congressman Findley: We cannot separate the
foreign market angle from our discussion,
domestic policy either.
Last year and the year before that, and the
year before that, we sold in the range of
$20 billion to $22 billion of agricultural
products abroad.
Now we bought a lot of foreign products too,
about $10 billion or $11 billion, but we had
an immense favorable balance of agricultural
trade.
And one of the deep concerns I have about
the mystery this Congress might do to our
domestic farm programs is the effect it might
have on those foreign markets.
If we get into price supports that are too
high, we're going to have the buildup of surpluses,
farmers will then seek some kind of income
protection, there will probably be a set aside
program at great cost, our plan will become
less efficient, we'll have less chance to
compete and hang on to these foreign markets.
And the U.S. dollar is going to be under even
more severe attack than it has been.
John: Congressman Foley.
Congressman Foley: I wanna make two points
on reserves.
First of all, John mentioned that reserve
policy, insofar as it exists, has to have
some government levers in terms of making
it work.
But I don't think anybody is proposing, anybody
that I know in the administration is proposing
the idea of going back to large government
held stocks reserves.
What Secretary Bergland has talked about,
in terms of extending the loan programs is
farm stored grain, or at least farmer controls
grain.
The other point is that people who are concerned
in urban America about running out of food,
sometimes aren't quite aware of the situation
we have.
I listened to a talk show one time about a
year ago and a young caller called up and
said he didn't favor exporting any wheat to
the Soviet Union or to any other country when
we barely had enough wheat in the United States
to go around for our own citizens.
We've had 2 crops of about 2.1 billion to
2.2 billion bushels back to back.
And we use about 700 million bushels a year
for all purposes domestically.
Beyond that, and as of May 31st this year,
we will have between 1.1 billion and 1.2 billion
bushels of wheat on hand and a carryover,
the largest carryover since the early '60s.
John: Dr. Yeutter.
Dr. Yeutter: Yes, just to supplement what
congressman Foley said on the reserve question.
There are really two aspects of reserves that
have to enter any kind of a policy discussion,
and one of them is food security.
And congressman Foley has indicated that that's
not a problem here in the United States.
And that's true.
And the other one is price stability.
Some people have price stability objectives
with a reserve program.
From a price stability standpoint, that is
one that everybody can debate.
Some would suggest that there are benefits
to U.S. consumers and other consumers around
the world by having some kind of a reserve
program that would stabilize markets a bit.
Some would suggest that it's even better for
farmers because it gives them a little more
assurance of income levels or price levels
and a little less worry about inordinate fluctuations.
I'm not sure that's worth the cost, you really
have to make a benefit cost calculation then
as to whether the storage costs and all the
other elements of conducting a reserve program
are worth it in terms of price stability benefits.
So at any rate, that's a tough decision.
But on the price stability side, it's an easy
decision on the food security side.
Looking at it internationally, if we wanna
throw those elements in, then it becomes a
matter of if we wanna do this, because it's
gonna contribute to peace in the world or
better relationships with other nations and
whatnot.
Okay, that's a decision that the administration
will have to make based upon all of those
elements.
But my primary point there, John would be,
then for heaven's sakes, let's negotiate it.
And let's get the importing nations to pick
up their share of the tab, let's not unilaterally
establish a food reserve here and have the
U.S. taxpayer pick up the tab for everybody
else in the world.
John: All right, Congressman Findley.
Congressman Findley: Chairman Foley correctly
said that, nobody is proposing large reserves.
I can't name a single member of the House
of Representatives or senate who is out trying
to establish large government held reserves.
But a lot of them are out clamoring for high
price supports, high loan rates.
And they don't seem to recognize that large
government held reserves and high price supports
are the two sides of the very same coin.
And I'm afraid this message is not widely
recognized.
But somehow we've got to get it across or
we're gonna have disaster.
John: Well, now there are those who say that
since 1972, and I throw this out to anybody
who would like to tackle it.
That since 1972, we've entered a new era of
worldwide food shortages.
Do any of you think that is so and if so,
what's to be done?
Congressman Foley: Would you like to start
John?
Dr. Schnitger: Well, we've had extensive food
shortages since 1972 and during several growing
seasons, a real fear that the shortage would
get even worse.
These have not resulted in large famines.
But if crops had failed as seriously, in 1976,
in several countries as they did in 1975,
we might have had, we certainly in a much
different situation in the early '70s, than
in the '50s or '60s, when the crops were much
more stable, and much more predictable.
One simply doesn't know whether that's going
on into the future or not.
Personally, I'm impressed with the climatologists'
argument, that the weather pattern of the
world has changed slightly to the worse so
far as crop production is concerned, and that
we have to expect slightly greater variation,
more bad years in the next 5 or 10, than in
the years before 1970.
So I don't look forward to the famine or disaster,
except perhaps locally, in an occasional year,
but a slower rate of growth and greater instability.
Yes.
Congressman Foley: And looking out 10 or 12
or 13 years when 700 million people may be
born in Asia alone.
The question about whether the world collectively
is going to be able to produce the necessary
food to feed the new population is still a
real and open question.
And I think that one of the things that U.S.
policy should do and I wanna compliment Paul
Findley because he was the author of the Act
is stress, the need to put developmental emphasis
in many of these food deficient countries
under agricultural sector.
Because if we can make a mistake by providing
too much food aid, too many concessional sales,
that will have the tendency to smother the
incentive of food deficient countries to provide
incentives for their own agriculture and we
cannot feed the world ourselves.
You can't project the United States just farming
more acres in Iowa and Illinois, Nebraska
and Kansas and Washington and meeting any
projected populations that might occur.
John: Well, let's run right down the line,
would you like to go next Congressman Findley.
Congressman Findley: Yes.
I am convinced myself that there is a critical
world food problem, it's going to get worse
and rather rapidly.
It's very true that the increase in production
of food has been about the same as the increase
in population.
But the increase in production has not matched
the areas where the greatest population increase
has occurred.
The third world has experienced steady increase
in population advancing less in death rate,
increased birth rates, which of course has
burgeoned their population and they have not
had the capacity to grow their own food at
the same increased rate nor have they had
the purchasing power with which to buy food
elsewhere.
I think that financial incentives can result
in a tremendous increase in food production
in the world.
But the third world has to have the means
with which to buy the food or it has to be
able to grow it itself.
John: Dr. Yeutter.
Dr. Yeutter: Yes, I was just going to add,
Congressman Foley mentioned production disincentives
in some of these importing countries, and
that's one of the real problems in increasing
food production around the world.
A whole lot of nations not only do not provide
incentives for their farmers, they have production
disincentives allegedly to help consumers
and keep the price of food low.
John: Dr. Schnitger.
Dr. Schnitger: Congressman Foley called attention
to the fact that wheat stocks especially are
increasing sharply in the winter of 1977.
In fact, the world in the middle of 1977 when
the new harvest began, will have about as
much grain stored away as it had five years
ago, just before the so-called Russian wheat
deal, or the first big crop failure in this
recent era.
So while the world talks about a food reserve
and a reserve policy, it has built a reserve
quite accidentally.
Now, if we're going to avoid having that 40
or 50 million tons of increased stocks frittered
away on cattle feed, or sent off to Russia
or someplace.
The next time we have a short crop somewhere,
and have it when we need it for a food emergency
in some poor country, or for price stability
here at home, or to export for cash to maintain
our own balance of payments, then we need
a food reserve policy, which simply means
a set of guidelines on how we eventually use
the grain that we have accidentally accumulated.
Peter: It wasn't too long ago in the history
of the United States that one in four families
lived on a farm, now, only about 1 in 25 Americans
lives and works on a farm.
But today's farms are producing more food
for more people than ever before in history.
How much influence does the farmer with his
shrinking numbers have on policies which govern
his business?
When prices soar are farmers making inordinate
profits?
Are middlemen, the food processing industry
taking all the profits?
And should U.S. producers be allowed to make
huge deals with other countries, such as the
recent grain sales to Russia, when it might
result in shortages here and higher prices
for the American consumer?
Now, for some challenges to our panel, let's
get the views of the experts in our audience.
John: May we have the first question, please.
Man: Jean Halton, [SP] American Farm Bureau
Federation.
We hear a great deal about the World Food
problem and hungry people.
Some of this discussion suggests that we're
facing a situation where the world may not
be able to feed its people because we don't
have the capacity to produce.
I have a little different view, I suspect
that the problem for the immediate future
is not capacity to produce, but capacity of
some people to buy.
In other words, it seems to me that the problem
of hungry people is the problem of people
who do not have capacity to come into the
market system and buy food, which could be
made available if they had that capacity.
And I wonder if members of the panel would
comment.
John: Who would like to start, Dr. Yeutter?
Dr. Yeutter: The problem is one, much more
one of purchasing power than it is one of
availability of food, barring some tremendous
natural disaster that would permeate much
of the world.
The way we're interested in purchasing power
around the world to take this production that
we have coming off of U.S. farms.
Now, that purchasing power has been greatly
hampered the last three or four years by the
worldwide recession and amplified by the oil
crisis.
The actions of the OPEC nations have been
devastating in this respect and have drastically
reduced purchasing power for food, because
at the margin, countries and people have had
to choose between petroleum and food.
And to a considerable degree over the last
few years, they've had to use less money for
food and more money for petroleum.
John: Congressman Foley.
Congressman Foley: Well, I agree very much
with Dr. Yeutter said, I think in the long
range looking over a decade or more, we may
find a situation where the world's capacity
to produce is outstripped by population.
Now, there are still some major growing areas
of the world that could be brought into enormous
production, but with very expensive developmental
programs, the Sudan and the Amazon basin and
some others.
But in the short range, food stocks have gone
up dramatically, but many people still do
not have the capacity to buy.
And the problem with payments, particularly
international payments situation of the third
world because of the oil crisis is very, very
acute and their ability to buy food markedly
reduce.
John: Next question please?
Yes, sir.
Marvin: Marvin Hayengay from General
Foods Corporation.
For many years prior to 1974, the domestic
sugar industry was one of the control features
under farm legislation.
Since 1974, they have been not carefully protected,
rather it's just been a modest tariff on imports.
However, the International Trade Commission
has indicated its intention to recommend a
protective import quota on sugar imports.
How do you believe the Congress will react
to this recommendation?
Or is there a better policy alternative?
John: As the author of "Sugar: A Sticky Mess
in Congress?"
How would you like to handle it Congressman
Findley?
Congressman Findley: Well, Mr. Chairman, happily,
sugar is not a sticky mess in Congress now,
it was when I wrote that article back in 1966.
Subsequent to that date, the Congress had
the good judgment to let the Sugar Act expire.
And I regret very much that the commission
recommended quotas from abroad.
I think that's the beginning of trouble in
the sugar industry again.
I hope that President Carter will see fit
not to act upon that recommendation.
It's true that some sugar producers are having
difficulty under the present price situation.
And I'm sure some sugar producers almost always
will, unless we go back to a system in which
government authority succeeds in keeping the
market price high enough so that even the
inefficient can make money.
Now, the price of all this, of course, is
higher cost to the consumer.
I'm amazed and delighted with the reaction
of the market to the end of the Sugar Act.
A lot of the users of sugar in this country
have made contracts abroad, they found out
that they can deal through marketplace channels
or their market system in a sense had atrophied
during the some 30 years of the Sugar Act.
And now they're finally getting back into
business, they found that getting out of the
cage of government's control, they can fly
after all.
And I just hope we can resist the temptation
to reconstruct in any degree a Sugar Act,
similar to what we had in the past.
John: Well, everybody wants a shot at this.
Congressman Foley.
Congressman Foley: Well, happily enough, we
have a disagreement.
I think that we do have a problem in the sugar.
We import about half of our sugar in the United
States and we produce about half of it now.
And I think it's a question of whether we're
gonna have a domestic sugar producing industry
very long unless we have some form of government
program in a way of price supports or quotas
on imports.
Secretary Bergland has talked about the possibility
of a very modest price support program on
sugar which would be backed by quotas to restrict
imports to protect that price support.
We're talking now about something in the nature
of 12 or 13 cents of price support at that
level.
It wasn't very long ago that American consumers
were paying 45 cents and 50 cents and 60 cents
a pound for sugar.
John: And they're screaming.
Congressman Foley: And yes, indeed, but I
think that on the other hand that if we raise
it too high, obviously that would be a problem
not only for the consumers, raising the question
of equity, but also the high fructose corn
sweetener industry would probably have an
umbrella under which to take away a lot of
the industrial market.
But I do think some modest price support program,
either through direct price supports backed
by quotas, which would have to be imposed,
or a tightening up of the so-called World
Quota now is essential to protect our basic
cane and sugar beet industry.
If that doesn't happen soon, we're just going
to see it disappear.
Congressman Findley: Could I add just one
point.
Present law does give the domestic producers
of sugar, approximately 2 cents a pound protection
against foreign imports, so they aren't left
totally on their own.
Congressman Foley: Right.
Now to another point if I can.
The one danger for the consumer is if we get
out of the sugar business in the United States,
the production of sugar, and we come to completely
dependent on world markets.
Those markets are increasingly tied around
the world to long term contracting and preferential
sugar agreements that other countries have
established.
And the so-called free market can be a very
short one or volatile one and you risk the
danger of wide swings in sugar prices, very
cheap sugar prices in one year, a couple of
years later, you might have a dramatic run-up
with sugar prices, and the consumers will
ask the question, why are we paying 45 cents
or 50 cents again for sugar?
John: Dr. Yeutter.
Dr. Yeutter: Well, yes, the one thing that
people who advocate restrictions on sugar
imports, always have a tendency to forget
deliberately, is that they're illegal internationally.
Under the General Agreement of Tariffs and
Trade, to which we're a member, and of which
we were one of the leaders in terms of its
beginning back in the '40s.
This is the agreement under which we try to
have some rules that make sense in the conduct
of international trade.
Now, the quotas that we have on sugars to
today are illegal, but nobody's complaining
about them because they're not restrictive.
But if we pass legislation now that includes
the imposition of restrictions, whether they
be quotas or some other restrictions, we're
gonna find ourselves in violation of the GATT
rules.
And it's a little difficult for the United
States to insist that other people follow
the GATT rules when we don't wanna follow
it.
John: Dr. Schnitger.
Dr. Schnitger: It's only fair that we can
have some kind of a price stabilization program
for sugar, unless we're going to argue that
we should end the price stabilization programs
for wheat, corn, cotton, rice, and everything
else.
But moderation is the point and simplicity.
Legality too, but moderation and simplicity
far more than legality because the illegal
aspects of foreign trade under GATT rules
are legion.
Congressman Findley: Could I add just one
comment?
John: Yes, please do.
Congressman Findley: The American sugar producer
has really no idea today how efficiently he
can produce sugar.
For about 30 years he operated under the most
tight government control that was ever inflicted
upon the production of any commodity.
The Sugar Act was the most thorough government
control program we've ever had in this country
and it existed for 30 years.
Now they've been out from under the Act for
a couple of years.
They're just beginning to test their wings.
Let's wait a few more years before we decide
how high the price has to be to protect the
efficient producer.
John: Congressman Foley.
Congressman Foley: Well, we're beating an
old argument.
But almost every country in GATT has some
kind of sugar program, or is a participant
one way or the other in one.
And I think it's drawing a pretty tight legal
bow, to say that the United States cannot
have a modest, a modest, and I agree with
John Schnitger on this, program of price support
without violating GATT or creating an enormous
reaction.
If we established one that's technically questionable,
legally, we'll hear a lot about it from our
negotiating friends at GATT.
But I don't think the United States should
be too inhibited in this area.
And I do think, contrary to Mr. Findley that
if we wait a few more years, we may not have
a domestic sugar industry to go back to.
John: Dr. Yeutter?
Dr. Yeutter: All I would say is that if we're
gonna violate the GATT by this new scheme,
let's go into it with our eyes wide open and
recognize that that's gonna come back to us
with other countries and coming along putting
restrictions on U.S. agricultural products,
and we shouldn't expect to be able to complain
too vociferously then when they restrict our
exports, when we've just restricted theirs.
Congressman Foley: I can't resist one more
comment Mr. Daly.
John: Go.
Congressman Foley: I think the broad objective
of government policy should be to permit countries
to produce the commodities they can produce
most efficiently.
And one of the troubles with the Sugar Act
was that every year we increase the U.S. quota
to screen out the foreign countries, which
had natural advantage in the production of
sugar.
Now, Paul Douglas, the late Senator from Illinois
once said, you could probably grow bananas
on Pikes Peak if the government would support
the price of bananas high enough.
We can grow enough sugar in this country to
supply the entire U.S. requirement.
But I think the objective of our policy should
be to adjust our agricultural plan so that
we produce the things we can produce best
and import the things that other countries
can produce best.
John: If I dared, I'd say how sweet it is.
May we have the next question please?
Ellen: Try something sweet too.
I'm Ellen Haas from Community Nutrition Institute.
And over the past eight years, consumers have
learned the hard way that they have a great
stake in agriculture farm policy.
By that, I mean, despite the fact that Dr.
Yeutter, said that we don't have a food security
situation on hand, consumers did learn when
prices went skyrocketing, that they were very
insecure, and that there was not a safeguard
or an insurance system through a food reserve
plan.
I'd like to know how Congress can address
this issue so that it can really balance the
needs of consumers with those of farmers,
and that what kind of operating rules can
be established so that it won't be a farm
depressant?
And what chances do we have of getting a grain
reserve system written into legislation?
John: Who'd like to start on that one?
Congressman Findley?
Congressman Foley: I doubt very much we'll
see that enacted, at least at the level of
the committees?
I don't know of anyone who proposes a former
reserve in the sense of particularly of a
government held stock purchased by the government.
Now, in the terms of the reserve concept as
John Schnitger defined it with some policy,
we will be encouraging farm support of grains...farm
storage of grains rather, probably with facilities
loans and with some increase in the loan periods,
some incentives, and probably also some reverse
incentives to release that grain under circumstances
where it's needed.
And in that sense, I think we may well get
into a reserve policy.
John: Congressman Findley.
Congressman Findley: Consumer concern is a
real problem though, because a growing percentage
of U.S. citizens live in cities.
They really I don't think understand the importance
of agricultural sales abroad.
And when prices tend to rise as they did recently,
and consumers began the clamor for export
controls.
They really struck at the heart of the American
export economy, farm exports are the best
earners of foreign exchange.
And the worst thing that could happen to the
American people, not just farmers, but all
citizens, would be for us to turn the faucet
on and off on export markets.
When we do that a country like Japan that
has to import about 85% of its food to survive
is going to hunt around for dependable sources
of supply, and when they find alternate sources,
then our markets dry up.
So the attitude of consumers should be a vital
concern to the Congress, not because we're
going to run out of food in this country at
a reasonable price because I don't think that's
gonna happen, but because it might trigger
an urban oriented Congress to do something
foolish that would really hurt the entire
country.
John: Dr. Yeutter?
Dr. Yeutter: I really believe, Alan, that
the Secretary of Agriculture has enough tools
in his kit to provide an acceptable level
of food price stability for consumers, doing
the kind of things that Congressman Foley,
outlined without going beyond that into a
formalized kind of grain reserve with large
holdings of government stocks.
And I really believe the better route to go
is the route that's available now, rather
than to go beyond, because consumers are taxpayers
too.
And certainly one can provide an almost infinite
degree of food price stability, but it bears
a cost.
And if we get involved in a very extensive
grain Reserve Program with large government
stocks, consumers are gonna have to pay for
that and with higher taxes in substantial
amounts.
And it seems to me that's in the best interest
of consumers to achieve an acceptable level
of price stability without incurring those
kinds of inordinate cost.
John: Congressman Foley.
Congressman Foley: Dr. Schnitger first?
John: I'm sorry, Dr. Schnitger.
Dr. Schnitger: I'm glad we've got embargoes
and reserves linked finally in the same conversation
because they're intimately linked together.
I think embargoes the last few years have
been the most divisive, single action affecting
both the farmer and the consumer community.
Nobody wants to embargo exports of grain and
soybeans, and nobody needs to, if we have
a well managed reserved.
Again, we came close to disaster on this issue
during the presidential campaign in the fall
of 1976.
Both candidates said in remarks that we would
never again embargo exports, and the next
morning, both pulled back and said, "Well,
maybe in a real emergency, we have to."
So we've got agreement.
You can even talk to the farmers these days
about this issue without being shut off the
platform.
So I think the point is that if we don't have
any stocks at all, or if we'll have stocks
and let them get away from us too quickly,
then an embargo in an emergency is a possibility.
But if we do well with our stocks, we can
avoid a disastrous embargo.
John: Congressman Foley.
Congressman Foley: I think that there's a
problem that bothers farmers and producers
a little bit.
And obviously, we have to have a better communication
with consumers.
And I'm very much against this old concept
of the teeter totter, that when the interests
of farmers go up, the interests of consumers
go down and vice versa.
But there is a little bit of a psychological
feeling in the United States among consumers,
that because we experienced very, very stable
food prices from the end of World War II until
the beginning years of the 1970s, particularly
1973 and 1974, that food stability should
be a kind of a consumer right.
That everything else might be going up in
an inflationary the cycle of the economy,
whether it's a steep inflation or a moderate
inflation, but somehow food is to be exempted
from that.
And that is an unrealistic expectation, we
would hope to have lower levels of inflation
and more stable prices than we've had in the
past, certainly, and nothing like the run-up
that occurred in 1973 and 1974.
But psychologically, consumers go to the food
markets and pay cash and buy a couple of times
a week.
And we don't have the psychological insulation
of extending the payments on cars from 24
months to 30 months to 48 months, doing some
of the things that moderate the cost in other
items in the budget because of credit or other
conditions.
You can't really expect that food prices are
gonna go down or stay exactly the same if
every other item of the national economy is
going up by 3% or 4% or 6%.
Peter: This Public Policy Forum on U.S. foreign
policy has brought you the views of four experts
in the field, it was presented by AEI, the
American Enterprise Institute.
It is the aim of AEI to clarify issues of
the day by presenting many views in the hope
that by so doing, those who wish to learn
about the decision making process will benefit
from such a free exchange of informed and
enlightened opinion.
I'm Peter Hackes in Washington.
Announcer: This Public Policy Forum series
is created and supplied to this station as
a public service by the American Enterprise
Institute, Washington, D.C.
For a transcript of this program, send $3.75
cents to the American Enterprise Institute
1150 17th Street, Northwest Washington, D.C.
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