EXPANDING THE FARMERS' MARKET

The purchase and distribution of surplus agricultural commodities by the Agricultural Adjustment Administration contributes to a unified farm program provisions for maintaining and expanding the farmers' market. One phase of this program is the purchase of surplus agricultural commodities for distribution to the needy and unemployed. In this manner, price-depressing surpluses are removed from the ordinary channels of trade and consumption of farm products is increased among those consumers who lack purchasing power. Surplus-removal programs are instituted only after it has been ascertained that the removal of the surplus, or a portion of it, will have a substantially beneficial effect upon marketing conditions and that the programs will definitely encourage domestic consumption.

Another method of increasing the consumption of farm products is the employment of diversion programs designed to create new outlets and new uses for surplus agricultural products. These programs usually operate through agreements between industry groups and the Secretary of Agriculture. Under such an agreement, the industry group is authorized to obtain specified quantities of the surplus commodity involved at a stipulated price, and to divert this commodity to a new outlet or a new use. The difference between the cost of the commodity to the industry group, plus incidental handling charges, and the selling price for diversion purposes is paid from funds made available to the Secretary of Agriculture.

In addition to aiding and improving returns to producers, these programs have, in many instances, prevented waste of needed food supplies and have supplemented the efforts of farmers and handlers to improve marketing conditions under marketing-agreement programs. A number of diversion programs are now in operation, encouraging new uses of surplus farm products and opening up domestic and foreign markets. These programs include a wide variety of measures, such as increasing exports of flour to the Philippines, expanding exports of tobacco and winter pears, diverting substandard figs to byproduct uses, finding new uses for cotton, and diverting prunes to byproduct uses and to export markets.

SCOPE OF REMOVAL PROGRAMS LIMITED

As in the case of the marketing agreements and orders, the extent to which the surplus-removal programs can be put to practical use is limited. Unlike the marketing agreements they are not self-financing but depend upon Government funds. They cannot be relied upon to remove all the surpluses that unrestricted agricultural production would produce in years of favorable weather, nor are they feasible methods of expending farm outlets in a large way. However, they do serve as an effective supplement to other farm programs.

Government purchases have been used effectively not only to remove surpluses but to prevent wastes of needed food supplies. An illustration of this is the cattle-buying program carried on during the droughts of 1934 and 1936 when such a program made available for consumption meat from animals that otherwise would have died from starvation or thirst. Such purchases also have been used to conserve supplies needed by farmers to continue profitable farming operations. An example of this is the seed-grain purchase program in 1936, under which adapted varieties of seed were purchased through Government

assistance so as to make them available for planting in 1937. This tended to prevent excessive prices for seed in 1937.

COMMODITY LOANS

Under the Agricultural Adjustment Act and related legislation. authority is granted to make loans on properly stored farm products. As will be mentioned later, such loans have been used in connection with a plan to carry over surplus corn into deficit years by storing it on the farm.

In 1936, the loans were used to conserve the supply of adapted seed corn, particularly with the view to preventing farmers from paying excessive prices for seed corn in 1937 because of the curtailment of the corn crop in 1936.

8. SPECIAL SUPPLEMENTARY PROGRAMS

There are in effect a number of programs which apply to the special problems of producers of a particular product. These include the programs for eradicating certain diseases among cattle, and the sugarquota program.

There has been a considerable reduction in the number of livestock infected with bovine tuberculosis, Bang's disease, and mastitis. This reduction can be attributed largely to the disease-eradication program in which the Federal Government and the States cooperated. These programs have a distinct effect in promoting efficient farming, since the elimination of infected animals removes inefficient animals from the herd and reduces the cost of production. Another important result of these programs is the improvement in quality of livestock products sold to consumers.

Most of the sugar consumed in the United States is imported, and the sugar-quota program is designed to assure domestic producers of a fair share of the domestic market at fair prices. The quota provisions of the Agricultural Adjustment Act were not invalidated by the Supreme Court decision, although the production-control contracts with reference to sugar were discontinued as a result of the decision. The quota program has been helpful in maintaining sugar prices to producers in this country above world prices, despite the preponderant contribution of imports to domestic consumption.

9. CLOSING THE GAPS IN THE FARM PLAN

The recurrence of drought in 1936, coming as a sequel of the severe droughts of 1930 and 1934, emphasized the need of a national farm policy and a national farm program sufficiently broad to assure farm security under all sorts of conditions. In particular, the Nation needs to build permanent defenses for agriculture against two directly opposite kinds of hazard. One kind of hazard is the danger of price collapse resulting from production in excess of market demands. The other is the danger of shortage of marketable supplies resulting from crop failure.

Agriculture has been the victim of both types of disaster in the last few years. Individual farmers have found that either one seriously impairs their income and threatens the security of their families. The Nation has found that either one may impair national income and national security.

ADDITIONAL MEASURES CONSIDERED

The present conservation program goes part way toward stabilizing agricultural production and assuring farm security. It has elements of preparedness against both extremes of bumper crops and severe drought. Nevertheless this program can be effective only up to a certain point. Additional measures are needed to guard the Nation's supply of food and fiber and the farmers' incomes. No matter how well the acreage of the various crops may be balanced, man cannot control the weather. In the past, bumper crop years have often alternated with years of crop failure. Sometimes there have been a whole series of bumper crops, and again a whole series of crop failures. Instead of letting the farmers' business and the Nation's business be subject to such extreme ups and downs, it seems the part of common sense to store some of the crops produced in the bumper-crop years for use in the years of short crops. Also, it seems the part of common sense to make a start in the field of all-risk crop insurance.

Thus the logical next steps in developing a national farm program would be the supplementing of the conservation program with an ever-normal granary providing for storage of farm commodities and with machinery for crop insurance on an experimental basis.

Conceivably, one possible way of establishing an ever-normal granary would be through the use of crop insurance in kind. However, since it appears that for some time to come crop insurance by itself would not be sufficiently widespread to assure an ever-normal granary, a system of commodity loans probably would be needed to establish it. Under the plans that have been under consideration, loans on staple farm commodities such as corn and wheat would be offered at some established level. These loans would have a double effect. They would assure the accumulation of reserve supplies of these commodities. They would also establish a level below which the prices received by farmers would not ordinarily go.

But, in order to assure that farmers and the entire Nation would not suffer from a repetition of what happened under the Federal Farm Board, some provision would have to be made for appropriate action when the granary begins to run over. It would be neither fair nor wise to make the farmers the victims of a policy carried on in the Nation's interest. Also, a financially sound policy, from the standpoint of the United States Treasury, would call for safeguards against price collapse so that the Government would not lose heavily on commodity loans in case prices should decline after they were made. Under such circumstances, then, provision should be made for storage of fertility in the soil to supplement storage of grain in the bin.

A third step that has been proposed to meet such an overflow situation is the modification of the conservation program to provide much more definitely than at present for influencing the acreage of certain crops. The conservation aspects of the program would not need to be weakened at all, but grants or contracts offered by the Government might be made contingent upon the adjustment of acreage of specific crops as well as upon the adoption of the conservation practices.

If supplies in the granaries increased too much, the level at which commodity loans were made probably should be lowered, so as to avoid the accumulation of greater quantities than were necessary or wise.

A combination of the conservation, commodity-loan, and cropadjustment programs likely would suffice to take care of all ordinary situations arising. But if favorable weather should bring a series of bumper crop years, surpluses might accumulate in such quantity that all these measures put together would not keep farmers' prices from collapsing.

To meet that kind of emergency, there should be provision for a fourth type of program giving positive commodity control. Possibly the use of the taxing principle, as in the old Bankhead or Kerr-Smith Acts affecting cotton and tobacco, would be the answer.

APPLICATION WOULD BE VARIED FOR DIFFERENT COMMODITIES

Application of such a farm program would have to be varied to fit the various commodities. The four steps outlined would not necessarily be taken for each commodity in the order they have been given. In cotton, for example, the loan program might be the final step rather than the second one-otherwise cotton might be prevented from flowing freely into export trade.

This program could be dovetailed with any measures for rehabilitation of low-income farm families, buying of submarginal land, relief of farm tenancy, and various forms of farm credit. It would be to the interest of the Government to assure any farmers who borrow from the Government an opportunity to repay their loans through having markets for their produce at fair prices.

With provision for the program described, agriculture and the Nation would be constantly in a state of preparedness against disaster arising either from crop failure or price collapse, and would be in a position to go forward on a sound and healthy basis. Such a program, if operated sensibly and adapted to the varied situations that are sure to arise, should serve agriculture and the Nation for many years to

come.

H. R. Jolley

Administrator.

AGRICULTURAL CONSERVATION 1936

CHAPTER 1

THE AGRICULTURAL CONSERVATION PROGRAM IN 1936

In the past, sound, soil-conserving farming practices have been slighted in the effort to maintain or increase incomes through increasing production. Soils have been depleted, capital values wasted, and prices driven downward.

In part, the programs carried out under the Agricultural Adjustment Act in 1933-35 were designed to remedy this situation, but these programs were essentially commodity programs; and although they tended to check soil exploitation by raising incomes and by encouraging the shifting of land from intensive to extensive uses, agricultural conservation was incidental to production control. But the Soil Conservation and Domestic Allotment Act reverses this situation and makes Nation-wide agricultural conservation the primary objective. Under the Agricultural Adjustment Act, attention was centered upon reducing the acreages in specified basic commodities in order to reduce or adjust supplies and improve or maintain prices. In working out a program under the Soil Conservation and Domestic Allotment Act, the changes in acreages and farming practices which are needed in the interest of agricultural conservation, and the effect of these changes upon internal farm organization and farm management, are the chief criteria; and acreages of specific crops are directly affected only as balanced cropping systems are adopted. The conservation program deals with the individual farm rather than with basic commodities as did production-adjustment programs under the Agricultural Adjustment Act.

As a result of this shift from the commodity to the farm or conservation approach, an entirely new set of problems is raised and regional adaptation of the program becomes more important. There appear such questions as what crops are soil-depleting and soil-conserving and to what extent; what practices are most needed; how the operation of the program can best be measured; and how the conservation program can be flexible enough to result in the economic use of land with the maximum degree of conservation in each area or region, while remaining simple enough to be administered at a reasonable cost. These new problems involve regional differences in the agriculture of the United States.

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