A24-Uncaster Faraiinf, Saturday, Dactmbar 6,1986
Worldwide View Given At National Ag Conference
(Continued from Page Al)
year an additional U.S. $2-3 billion
will be spent on surplus disposal.
Even in 1984, taxpayers and
consumers together were sub
sidising farmers in the E.C. by up
to U.S. $4O billion a year. The
subsidy is now significantly
higher. These subsidies are costing
non-farm European families more
than U.S. $9OO a year each.
Japanese taxpayers were
subsidising farmers at the rate of
U.S. $10.5 billion in 1985, but as
consumers they were paying many
orders of magnitude higher than
this. Since 1985, costs of Japanese
farm programs have escalated
further, because of lower com
modity prices and the rapid rise in
the value of the yen.
Consumers are paying food
prices in Japan that are estimated
to be around 60 per cent higher
than would be the case if the fall in
world prices and the yen ap
preciation since 1980 had been
reflected in internal agricultural
prices.
Despite all these costs, farmers
in most countries face serious
income and financial problems.
Bankruptcies continue unabated,
and the farm income outlook
remains depressed. The situation
is as bad or worse in the heavily
subsidising countries as it is in
those without such an elaborate
support apparatus.
Quite apart from the subsidy
costs to taxpayers and consumers,
National Milk Producers Let Dairy Policy Simmer
(Continued from Page Al)
Helms of North Carolina and
Patrick Leahy of Vermont, John
Melcher of Montana, and
Congressmen E. (Kika) de la
Garza of Texas, Steve Gunderson
of Wisconsin, James Jeffords of
Vermont and Charles Stenholm of
Texas.
In his address to Tuesday’s
opening session, Secretary of
Agriculture Richard Lyng re
emphasized the administration’s
commitment to allowing current
dairy legislation in the 1985 Farm
Bill time to work.
“Leave major public dairy
policies as they are right now for a
few years,” urges Lyng. That
included a firm thumbs down to
suggestions for a second herd
buyout and supply management
proposals.
Lyng credited the program ef
fectiveness citing decreasing
production, climbing milk prices
above the support level, low feed
costs, rising commercial disap
pearance and reduced CCC pur
chases of surplus products.
The Secretary expressed the
administration’s strong opposition
to milk production quota
proposals, predicting they would
have disasterous affects on
commercial consumption and
strait-jacket dairy farmers. He
warned the producers to avoid “a
race for base,” predicting con
tinued support price slashes if milk
output spurts upward.
“It’s our best chance in years to
minimize the hand of the govern
ment on dairy farmers by
restraining production,’’
suggested Lyng.
In a congressional panel
deliberating dairy policy,
Congressman Gunderson told
producers that the industry must
be absolutely unified. “If they
come back to congress with
proposed changes in dairy policy
as the only commodity cutting
government support cost while
farm prices are increasing, dairy
can expect a hands-off attitude
from Washington to allow more
time for production to balance with
demand.”
Congressman Jeffords projected
that unless producers “get their
act together” mandated Gramm-
Rudman budget cuts will further
farm programs adversely affect
national income growth, domestic
employment and income
distribution. The E.C. alone is
estimated to have lost up to a net 1
million jobs in manufacturing and
services as a result of agricultural
protection.
The most serious indictment of
international agricultural policies
has been their effects on other
countries, on world trade, and on
international political harmony.
There has been a dramatic
decline of farm incomes in
countries dependent upon
agricultural exports. These
countries make up a large part of
the developing world. Even in a
developed country such as
Australia, real farm incomes have
declined by nearly 50 per cent
since 1983-84 and export earnings
have fallen sharply.
In a world m which many
developing countries are burdened
with large debts and high interest
rates, the crisis in world
agricultural trade is contributing
to disillusionment with the in
ternational economic system.
If existing policies remain in
place, it will take a long time for
significant improvement in farm
incomes and agricultural trade to
eventuate. Stocks will remain
burdensome well into the 19905.
Farm liquidations will continue
and international tension will
remain high.
Richard W. Goldberg, Deputy
slice support levels.
Cuts already scheduled will drop
the support price oh Jan. 1, 1987
from 111.60 to $11.35. That 25-cent
cut will be partially offset in the
assessment funding herd buyout
under the Dairy Termination Plan.
A further 25-cent support price
cut scheduled for Oct. 1, 1987 will
also be offset as the remaining 25-
cent DTP ends.
Jeffords suggests the industry
may be reaching a turning point
and a scheduled Oct. 1,1988 50-cent
support price cut to $10.60 may not
be needed if CCC purchases can be
held under five billion pounds.
Unlike the administration, the
Vermont congressman supports
consideration for a re-run of the
herd buyout program. He says the
buyout combined with successful
milk promotion efforts and the
earlier milk diversion program are
responsible for bringing produc
tion more in line with demand.
“I want to see farmers benefit
from technologies like bovine
growth hormone,” says Jeffords,
“and a buyout would get rid of
cattle that would otherwise
produce more and result in lower
prices.”
Congressman Stenholm touched
on the industry’s most debatable
issue, claiming “supply
management is not a bad word in
my vocabulary everyone has a
different interpretation.”
Four separate interpretations
were offered during a heavily
attended panel discussion Wed
nesday on supply management
options.
“Let it work it has better
potential than ‘experiments,’” was
the advise of Clyde Rutherford,
president of Dairylea cooperative
and the nation’s dairy policy
commission.
The DTP, Rutherford said, is a
supply management alternative
already showing positive results.
An estimated |1.5 billion have
already been cut from government
dairy spending with a projection of
$4 billion in savings on CCC
product purchases over the five
year period in which buyout
program participants may not
milk dairy cows.
A quota program dubbed “Save
the;. .Family Farm Act” was in
jrafoged in the past session of
Under Secretary, International
Affairs and Commodity Programs,
U.S. Department of Agriculture
said, “The present U.S. Ad
ministration has three specific
goals for U.S. agriculture. To
freeze the present level of direct
and indirect subsidies that directly
or indirectly impact on trade and
eventually phase them out. To
apply no new import barriers and
to phase out existing barriers. And
to harmonize food, plant and
animal health regulations.
“We anticipate some upturn in
the volume of U.S. agricultural
exports during fiscal 1987,”
Goldberg said. “Population in
creases and improvement in some
sectors of the world economy
especially in the Pacific Rim
should bolster world demand. And
because of the 1985 farm bill, U.S.
exporters are now in a position
where they can compete more
successfully for world markets.”
Export values will remain near
last year’s level as lower prices for
program commodities offset the
larger sales volume.
Imports are expected to show
very little change from last year’s
level of $20.9 billion.
We will continue to run a positive
balance of about $6 billion in our
agricultural trade.
While we are unlikely to see a
return to the steep growth rates of
the 19705, modest increases in
agricultural exports are possible
now that the U.S. is once again
Congress by lowa Senator Tom
Harkin. That plan was outlined
during the panel discussion by
Harkin’s legislative aide George
Palmer. Harkin’s proposal would
implement a production-base
program with a support price
increase for quota production near
70 percent parity based on a five
year historical average of
production.
A price penalty of up to 75 per
cent on above quota production
would transfer surplus production
costs to expanding operations.
Capitilization or selling of quota
bases would be prohibited under
Harkin’s proposed bill.
Elwood Kirkpatrick, National
Milk vice president and of
Michigan Milk Producers, offered
a two-tier pricing approach as
faster and more equitable to
farmers with more promise of
long-term price stability. A two
tier program would take effect
only if CCC purchases exceeded
five billion pounds. Producers
would receive full price for a
percentage of a historic production
base and a lesser price for
production over that level.
The two-tier plan is not con
sidered a quota program since it
would be activated if government
purchases reach the triggering
five billion pound level. Kirk
patrick recommended the two-tier
approach as simplier to ad
minister, uniform to producers
allowing no capitilization of bases
and a method of permanent
restraint on CCC purchases.
The final option outlined by
University of Wisconsin Economist
Truman Graf is for a voluntary
program of target price deficiency
payments and assessments also
operable if CCC purchases exceed
the five billion pound level.
Support price would hold at
$ll.lO. Producers voluntarily
cutting production by 5 to 10
percent would qualify for
deficiency payments from $11.15 to
$11.50 per hundredweight on
remaining production. Costs would
be funded by producers who choose
not to cut production and who
would pay a 55 cent per hun
dredweight assessment on all
production.
Under the proposed deficiency
payment plan, a producer with 28
more price-competitive.”
Robert L. Thompson, Global
Trends in Agricultural Supply and
Demand said, “Wide-ranging
supply and demand developments
combined in the 1970 s and 1980 s to
increase both the importance of
the U.S. in the world market for
farm products and the importance
of the world market to the well
being of U.S. agriculture. To
provide any sort of insight into
global trends in agricultural
supply and demand, it is essential
to briefly review the events of the
past two decades.
In the 19705, developments in
supply and demand worked both to
expand world agricultural trade
and to increase the U.S. share of
the market at an unprecedented
pace. World trade expanded four
fold while U.S. exports increased
six-fold. By 1980, more than one
third of our cropland was com
mitted to producing for export
while 2-of-every-5 tons of the farm
products traded were produced in
the U.S.
Many of the same factors
worked in reverse in the 1980 s.
Growth in world agricultural trade
essentially stopped, and U.S.
exports dropped one-third. This 55-
million-ton drop in U.S. exports,
following on the heels of the 1970 s
100-million-ton run-up, lies at the
heart of many of the problems we
face in agriculture today. We are
in the midst of a far-reaching
restructuring of the sector.
Complicating this is the limited
cows shipping 1,000 pounds per day
would qualify for an estimated
annual deficiency payment of
$5,318. On 56 cows shipping 2,000
pounds per day, annual payment
would reach the doubled figure of
$10,636. And an 84-cow herd with
3,000 pound per day production,
$15,954. Producers would sign up
for such a program only one year
at a time.
Target deficiency payments
offer a voluntary program with
payments partially funded by non
participants with no base, low cost
ability of the world market to react
to swings in global supply and
demand without having the sharp
price adjustments transmitted to
the countries linked to the market.
While the 1985 Farm Bill helped,
we need to be vigilant to ensure
that U.S. agriculture remains
internationally competitive.
Fertile soil and favorable climatic
conditions account for only part of
American agriculture’s com
parative advantage. Much more
rests on the cumulative in
vestments that have been made in
agricultural research and ex
tension over the past century.
These investments have given
American agriculture one of the
fastest rates of growth in
productivity of any sector of the
U.S. economy.
Unfortunately for us, many other
countries have caught on to the
source of our growth. While our
rate of investment in agricultural
research has stagnated in the past
15 years, many other countries
have substantially increased their
agricultural research and
development investments. This is
closing the productivity gap bet
ween the U.S. and other countries’
agricultures. So one might say that
we now find ourselves on a global
technology treadmill and that we
must keep investing to maintain
productivity growth to maintain
our position of predominance
relative to other agricultural
exporting countries.
(Turn to Page A 39)
to government, higher return to
participating dairymen and are
triggered only by over production.
This proposal is the only one to
address the touchy regional
production issue. In markets
where Class 1 utilization is 70
percent or greater, assessments on
non-participants could be dropped.
And a deficiency payment to en
courage production could possibly
be added to the price paid non
participants to encourage milk
production in deficit areas.