To the Congress of the United States:
There are produced, in the United States, some 250 farm commodities. The law has required that prices of twelve of these be supported at prescribed minimum levels. It is this requirement, together with the level of required support, that has created our farm surplus problems. Farmers who produce cattle, hogs, poultry, fruits, vegetables, and various other products the prices of which are not supported--as well as those who produce crops the prices of which are supported at discretionary levels--have generally experienced growing markets rather than a buildup of stocks in warehouses.
Three of the twelve mandatory products (wheat, corn, and cotton) account for about eighty-five percent of the Federal inventory of price-supported commodities though they produce only twenty percent of the total cash farm income.
The price-support and production-control program has not worked.
1. Most of the dollars are spent on the production of a relatively few large producers.
Nearly a million and a half farms produce wheat. Ninety percent of the expenditures for price support on wheat result from production of about haft of these farms--the largest ones.
Nearly a million farms produce cotton. Seventy-five percent of the expenditures for cotton price support result from production of about one-fourth of these farms--the largest ones.
For other supported crops, a similarly disproportionate share of the expenditure goes to the large producers.
For wheat, cotton, and rice producers who have allotments of one hundred acres or more, the net budgetary expenditures per farm for the present fiscal year are approximately as follows:
Though some presently unknown share of these expenditures will eventually be recovered through surplus disposal, the final cost of the operation will undoubtedly be impressively large.
Clearly, the existing price support program channels most of the dollars to those who store the surpluses and to relatively few producers of a few crops. It does little to help the farmers in greatest difficulty. For small operators the Rural Development Program approach, which helps develop additional sources of income, has clearly demonstrated that it is a far better alternative.
2. The control program doesn't control.
Mandatory supports are at a level which so stimulates new technology and the flow of capital into production as to offset, in large part, the control effort.
Despite acreage allotments and marketing quotas, despite a large soil bank program and despite massive surplus disposal, government investment in farm commodities will soon be at a new record high. On July 1, 1959, total government investment in farm commodities will total $9.1 billion. Investment in commodities for which price support is mandatory will total $7.6 billion, of which $7.5 billion will consist of those crops designated by law as basic commodities: wheat, corn, cotton, rice, peanuts, and tobacco. And these stocks are increasing rather than diminishing.
We already hold such huge stocks of wheat that if not one bushel of the oncoming crop were harvested we would still have more than enough for domestic use, export sales, foreign donation and needed carry-over for an entire year.
3. The program is excessively expensive.
When the 1958 crops have come into Government ownership, the cost, in terms of storage, interest and other charges, of managing our inventory of supported crops, for which commercial markets do not exist at the support levels, will be running at a staggering rate, in excess of a billion dollars a year. Unless fundamental changes are made, this annual cost will rise.
This sum is approximately equal to the record amount being spent in fiscal 1960 by the Federal Government on all water resource projects in the United States including power, flood control, reclamation and improvement of rivers and harbors.
During the present fiscal year, the net budgetary outlay for programs for the stabilization of farm prices and farm income will be $5.4 billion. $4.3 billion of this is for commodities for which price supports are mandatory. While some unpredictable part of this outlay will be recovered in later years through sales for dollars, sales for foreign currency and through barter, the cost will be great, especially when compared with the net income of all farm operators in the United States, which in 1958 was $13 billion. Budgetary expenditures primarily for the support of farm prices and farm income are now equal to about forty percent of net farm income.
Not a bushel of wheat nor a pound of cotton presently is exported without direct cost to the Federal Treasury.
Heavy costs might be justifiable if they were temporary, if they were solving the problems of our farmers, and if they were leading to a better balance of supplies and markets. But unfortunately this is not true.
These difficulties are not to be attributed to any failure on the part of our farm people, who have done an outstanding job of producing efficiently. They have in fact responded to the price incentive as farm people--and other people--traditionally have.
Our farm families deserve programs that build markets. Instead they have programs that lose markets. This is because the overall standards for the programs that they have are outdated relationships that existed nearly half a century ago. This was before sixty percent of our present population was born.
At that time it took 106 man hours to grow and harvest one-hundred bushels of wheat. In recent years it has taken not 106 but 22. Since then the yield of wheat has doubled. Similar dramatic changes have occurred for other crops.
It is small wonder that a program developed many years ago to meet the problems of depression and war is ill-adapted to a time of prosperity, peace, and revolutionary changes in production.
The need to reduce the incentives for excess production has been explicit in the three special messages on agriculture which I have previously sent to the Congress. The point has repeatedly been made by the Secretary of Agriculture in his testimony and in his statements to the Congress. The Congress has moved in the right direction but by an insufficient amount. There has been a general tendency to underestimate the pace at which farm technology has been moving forward. Hence there has been a tendency to underestimate the production-inducing effect of the prescribed minimum price support levels.
I recommend that prices for those commodities subject to mandatory supports be related to a percentage of the average market price during the immediately preceding years. The appropriate percentage of the average market price should be discretionary with the Secretary of Agriculture at a level not less than seventy-five and not more than ninety percent of such average in accordance with the general guidelines set forth in the law. Growers of corn, our most valuable crop, have already chosen, by referendum vote, program changes which include supports based on such an average of market prices.
If, despite the onrush of science in agriculture, resulting in dramatic increases in yields per acre, the Congress still prefers to relate price supports to existing standards, the Secretary should be given discretion to establish the level in accordance with the guidelines now fixed by law for all commodities except those for which supports presently are mandatory.
Either of these changes would be constructive. The effect of either would be to reconcile the farm program with the facts of modern agriculture, to reduce the incentive for unrealistic production, to move in the direction of easing production controls, to permit the growth of commercial markets and to cut the cost of federal programs.
As we move to realistic farm programs, we must continue our vigorous efforts further to expand markets and find additional outlets for our farm products, both at home and abroad. In these efforts, there is an immediate and direct bearing on the cause of world peace. Food can be a powerful instrument for all the free world in building a durable peace. We and other surplus-producing nations must do our very best to make the fullest constructive use of our abundance of agricultural products to this end. These past four years our special export programs have provided friendly food-deficit nations with four billion dollars worth of farm products that we have in abundance. I am setting steps in motion to explore anew with other surplus-producing nations all practical means of utilizing the various agricultural surpluses of each in the interest of reinforcing peace and the well-being of friendly peoples throughout the world in short, using food for peace.
Certain details regarding the needed changes in law, particularly with reference to wheat, are appended to this message in the form of a memorandum to me from the Secretary of Agriculture.
Difficulties of the present program should not drive us to programs which would involve us in even greater trouble. I refer to direct payment programs, which could soon make virtually all farm people dependent, for a large share of their income, upon annual appropriations from the Federal Treasury. I refer also to various multiple price programs, which would tax the American consumer so as to permit sale for feed and export at lower prices.
To assist the Congress in discharging its responsibility, the Administration stands ready, as always, to provide the appropriate Committees with studies, factual data and judgments. Continuation of the price support and production control programs in their present form would be intolerable.
I urge the Congress to deal promptly with this problem.
DWIGHT D. EISENHOWER