Lancaster Farming. Saturday. May 12. 1973
20
The American Farmer
Efficiency is Key to Survival
(Editor’s note: This is the fifth
and final article in a series on the
American farmer. The articles,
furnished by DEKALB
Agßesearch, Inc., were written
to help increase the public’s
understanding of the American
farmer and the importance of
agriculture to our economy.)
Efficiency is the name of the
game The gap between costs and
prices represents profit It’s this
gap that every farmer tries to
keep as wide as possible
The farmer has little control
over the prices he receives. He
can protect himself by hedging in
the futures market, but this
market, in itself, reflects a totally
free supply-demand situation.
Another alternative is to contract
for sale of his crops, but when he
does this he often trades off op-
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portunity for top profits in favor
of security.
Since the market doesn’t
respond to the farmer’s wish, the
most practical means of assuring
himself of a profit is to keep his
production costs as low as
possible. This is hard to do when
the costs of his inputs keep rising.
For example, between 1957-59
and 1969, farmers were faced
with a 77 percent increase in
hired wage rates, a 33 percent
increase in the price of motor
vehicles and a 106 percent in
crease in taxes.
Faced with a situation like this,
farmers have been forced to seek
efficiency - or else stop playing
the game!
Even with recent increases in
prices of agricultural com
modities, the average income of
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the American farmer is still
below that of his urban neigh
bors. In 1972, disposable income
per farmer was still only 78
percent of that enjoyed by non
farmers. It’s ironic that this is the
way the American farmer is
rewarded for his increase in
productivity an increase that
far exceeds the increases in
productivity of both his blue
collar and white-collar neigh
bors.
The cost-price squeeze is
making it difficult for young
farmers to get started. A recent
study in Illinois found that nearly
20 percent of the farm boys who
entered farming during the
period 1945-54 failed to make it in
that vocation.
Food prices have been drawing
headlines recently. But, com
pared to income and increased
prices of other products, food is
still a bargain.
Given recent increases in food
prices, it is a fact that these
prices are lower now, in
proportion to expendable income,
than ever before in history. For
example, consumer income in
creased 63 percent in the 1960’5,
while the food expenditures were
up only 31 percent during the
same period. Income less food
expenditures was up $960 or 73
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percent Still, someone has to
absorb the blame when prices do
climb
The farmer is seldom the cause
of such increases, and he seldom
benefits from an increase He
receives an average of 40 cents
out of each dollar spent on food at
(he grocery- store -- the
remainder goes for processing
and marketing. Compare this 40
cents to the 50 cents he received
from each food dollar in 1947-49.
Because of the many steps
involved in food production,
perhaps no one segment can be
saddled with the blame when food
prices rise. But keep in mind that
the farmer does not willfully
cause food prices to increase. He
does not set the price on his>goods
at the marketplace. What he sells
for a profit today may bring him
a loss next week because of the
simple economic law of supply
and demand. How many other
segments of our economy are
willing to settle for that kind of
security?
His Future
What about the future of the
American farmer?
He’s likely to continue to
decrease in number unless the
rules of the game change. The
relentless pressures of economies
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of scale, increasing technological
complexities, high “start up”
costs, and his minority political
position combine to suggest that
farms of the future will be fewer
and bigger. But lie’s not going to
be driven off by big, vertically
integrated conglomerates. He’s
too tough a competitor, too
flexible, too dedicated, for them'.
He’s important to America. He
has made it possible for
Americans to eat the best food at
the lowest price in the world, and'
he is by far oiir biggest producer
of foreign exchange. He’s tired of
being' criticized because
government production controls
are necessary to avoid disastrous
overproduction. Instead of being
appreciated because he produces
food at the lowest cost in the
world, he hears demands for
price controls when the price of
his product starts moving up
ward for Ithe first time in 20
years.
The United States faces a
national policy choice: to con
tinue to encourage him, to help
him survive as the world’s most
efficient food producer; or, by
shortsightedness, to force him
into the control of marketing
conglomerates through the
(Continued On Page 21)
Phone 717-548-2376
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