Special Message to the Congress on Agriculture.

To the Congress of the United States:

Management of our agricultural resources to meet the triple goals of increased farm income, lower cost to the taxpayer, and reduced farm surpluses continues to be one of the most difficult problems confronting the Nation. A good start was made last year. Net farm income rose $1 billion, and income per farm increased almost $350. Government stocks of farm products were reduced for the first time in 9 years. Budgetary costs were below those that would have been incurred under the programs that were replaced. All this was accomplished at the same time food prices were reduced below their level a year earlier.

But the emergency programs enacted last year are expiring. There is a critical need for permanent legislation to consolidate the gains of 1961 and to provide a realistic and comprehensive program for agriculture in the years ahead--a program with which we can continue to move forward toward full utilization of our abundance. The drift toward a chaotic, inefficient, surplus-ridden farm economy, though halted last year, will resume unless prompt action is taken. In addition, new problems have developed in commodities not covered by the 1961 legislation. Unanticipated changes in consumer demand have produced still further surpluses. A reversion to the former programs for wheat and feed grains will inevitably bring both enormous surpluses and depressed farm income, seriously injuring a large segment of our economy.

Our increasing productivity

Our rapidly growing capacity to produce far outruns the growth of our domestic and foreign demand for food and fiber. This offers us an opportunity to manage abundance, rather than scarcity, an opportunity that is unique among nations of the world. It is relatively new even for the United States.

Early in this century there was serious question whether agriculture could, with the closing of the land frontier, continue to meet the food and fiber demands of a growing population. The rate of growth in farm output was declining, and food and fiber prices were rising relative to other prices. Public policy emphasized resource conservation and investment, and publicly supported research and education were designed to speed progress in agricultural productivity.

By the mid_1920's, these efforts began to bring dramatic results. Agricultural productivity began to rise and farm employment began to decline. But the full implications of this rapid technological progress in agriculture were obscured--first by the depression, then by the second World War, and then by the Korean conflict. During the depression the overriding problem was the catastrophic decline in demand for farm products, and policy was directed to protecting farm prices and incomes from its consequences. During the war and the Korean conflict, agricultural programs were designed to encourage increases in output to meet emergency demands and to protect farm incomes when these abnormal demands disappeared.

But in the 1950's, agriculture felt the full effects of earlier programs to raise productivity. Farm output increased by more than one-fourth while use of labor declined by one-third. Surpluses accumulated and farm prices were brought under increasing pressure. Prices today are lower relative to other prices than during the first two decades of this century, even though crops are now harvested from 40 million fewer acres. The technological revolution in agriculture continues to increase yield at an accelerating rate. Our ability to produce more than the market can absorb will continue as far into the future as we can safely predict, outpacing population growth. Instead of a shortage of cropland, as many have long predicted, it now appears that by 1980 we will need 50 million fewer acres than we have today.

The commodity programs which were designed primarily to meet the emergencies of depression and war have retained for agriculture itself only a small part of these gains from increasing productivity. Most of the gains have been passed on to consumers. We spend less than 20 percent of our income on food; the Western European spends between 30 and 50 percent of his income on food; and the Russian uses 60 percent of his income for this same purpose. But failure to control production effectively has dissipated some of our potential gains to both farmers and consumers by drawing prime resources into the production and storage of surplus commodities.

The need for action

Most industries are able to adjust to excess supply or reduced demand by variations in their rate of production. The larger the number of individual producing units and the more inflexible their production schedules, however, the more difficult it is to make the necessary adjustments. Our farm production is composed of millions of separate producers with schedules that must be planned a year or more in advance. Acting individually, the farmer cannot shift readily away from commodities in surplus. Nor will lower farm prices automatically assure reduced farm output, unless those prices fall to disastrous levels and remain there. Historically, lower prices have been met by increased output, in a desperate effort by the farmer to make his business profitable and to stay on the land.

Four independent studies, by Cornell University, Iowa State University, the Joint Economic Committee of Congress, and the Senate Committee on Agriculture and Forestry, show how sharp would be the drop in farm prices and farm income if farm programs were abandoned. These studies agree that wheat prices would be sliced almost in half, oats prices 25 percent, barley 28 percent, soybeans 38 percent, grain sorghums 22 percent, and dairy 17 percent. Non-price-supported commodities would also suffer. Livestock commodities would drop 24 percent, egg prices 20 percent, cattle prices 25 percent, hogs 30 percent, and broilers and turkeys even lower than this year.

Nor can the Federal Government be expected to undertake an indefinite program of large and unpredictable budget expenditures to acquire stocks of commodities that we do not need and cannot use. By the beginning of 1961--when the emergency legislation was introduced to reduce inventories-the Commodity Credit Corporation had over $9 billion in loans and inventories. Carrying costs exceeded $1 billion a year.

This large and continuing expenditure did not result in any increased income to the farmer. The 1.5 million efficient family farms which produce 87 percent of our total production are technically progressive, but their return on labor and capital has not kept pace with the rest of the population. Their incomes are highly sensitive to year-to-year fluctuations in farm output, especially when it is unrelated to demand.

The other 2 million or more farm operators who produce 13 percent of all farm products sold have especially low incomes because they own or control too little land or too little capital, and often possess too little skill or managerial ability.

Small town and rural America is dependent for prosperity upon the farmer. An improvement in his standard of living and in his income is immediately reflected in an improvement in the economy of the small urban center in his community. Any program should bear in mind this factor.

Our two goals--improving income and reducing costs--an both be achieved only if farm output can be reduced below needs for several years and then be allowed to increase at a rate equal to the growth in demand. That is the framework of logic and fact in which we now propose a broad new farm program--a program in four parts--each equally important and all interdependent.

Objectives

The new program should use the successful emergency legislation passed last year • to establish guidelines and should also rely upon those proven techniques and methods that have been employed in the past. It should be designed:

1. To make maximum use of our productive abundance. Our agricultural resources can advance the cause of peace and freedom throughout the world; they assure Americans of a high standard of living; they can be an important weapon against poverty and disease.

2. To seek a balance between production and demand that will avoid the waste of private effort and public resources. Rice, peanuts, and tobacco already enjoy well-balanced programs whose principles can be extended to other crops. Properly balanced, agriculture can make a major contribution toward economic stability. The farmer, the consumer and the taxpayer can all share in the benefits; without such balance, all may suffer.

3. To provide for conservation of our land and water resources. Land and water not needed to produce food and fiber should be directed to alternative uses of benefit to the Nation.

4. To inflate and expand programs for the development of human resources and renewal of rural communities. Each year 1 million people move from the farm to the city. Many others seek part-time employment to supplement meager returns from farm labor. The hardship and suffering this often entails should be alleviated, and these workers assisted in their efforts to acquire needed skills, obtain jobs, and further their education.

Abundance, Balance, Conservation, Development-these are our common sense goals--as common sense as A B C D. The program that follows--an A B C D farm program for the '60's--is designed to meet those goals.

This is a program for maximum freedom and flexibility in the operation of individual farm enterprises. Improvements in farming efficiency as well as shifts among enterprises must not only be allowed--they must be encouraged. They are in the long-run national interest; they are consistent with this program's overall objectives.

The new commodity programs recommended could become effective only after they are approved democratically by a two-thirds majority in a producer referendum. Producers of cotton, tobacco, rice, peanuts and wheat have long followed this procedure of choosing jointly to exert a measure of control over the production and marketing of their crops, just as industry groups exercise control over the product of their labor and investment. This democratic procedure can be extended to other farm commodities.

I. Expanded use of agricultural abundance

Last year there was a greater expansion of our food utilization programs than ever before in our history.

Eighty-five thousand more schools, child care centers and camps are receiving fresh milk that previously had no such opportunity. Seven-hundred thousand more children enjoy a hot school lunch. Both the quantity and the variety of food distributed to more than six million needy persons has been increased substantially.

A pilot food stamp program in eight communities has brought such encouraging results that its administrative expansion in a further trial period to many additional communities is justified and is included in the new Budget.

We have also increased our shipments of food to other nations under P.L. 480, thus using our agricultural abundance to combat hunger and contribute to economic development throughout the free world. We have stepped up our emphasis on school lunch programs abroad, thus encouraging both education and better nutrition for the rising generation, on which so much of the future of these new nations depends. We shall continue to expand these programs wherever feasible.

We have markedly increased programs under which U.S. food is used to further projects for social and economic development in emerging nations. Today American agricultural abundance assists such projects in eleven countries, as compared with only two in 1960. And more than three-fourths of the local currency accruing from the sales authorized under Title I in 1961 will be used for economic development programs.

Our overall shipments under P.L. 480 during this fiscal year will reach an estimated 22 percent more than those of the previous fiscal year.

Last year the Congress extended and improved P.L. 480. In order that our Food for Peace program can be made even more effective in the future I recommend:

(1) An amendment of Title II of P.L. 480 to permit shipments of surplus commodities such as dried beans and peas not in CCC inventory;

(2) Provisions to broaden the purpose of Tide IV to include market development; and

(3) A new Tide V to promote multinational programs for food assistance, authorizing the President to negotiate and carry out agreements for this purpose with international organizations and other intergovernmental groupings.

II. I recommend new programs for Iced grains, wheat, and dairy products to achieve the proper balance between production and demand, and modification of the cotton program.

Feed Grains

For 9 consecutive years, prior to 1961 feed grain surpluses increased. The cost of carrying corn and grain sorghum inventories rose to nearly $500 million in 1961, and the total program cost rose to a record level.

The 1961 feed grain program has reversed this trend. The 1961 crop was 800 million bushels smaller than it would have been without the program. The feed grain carryover will drop for the first time in a decade. A program similar to that of 1961 remains in operation for 1962 only. Without new legislation, the programs which failed us in the 1950's will automatically take effect again in 1963.

The feed grain program I recommend is designed to reduce feed grain output to a level that will maintain prices and incomes in the feed grain and livestock sectors of the farm economy without continuous ever higher surplus accumulation. This can be accomplished by establishing a mandatory acreage allotment on all feed grains large enough to meet annual domestic and export requirements, for all purposes under all programs, less that amount which is to be deducted from the carryover stocks to reduce them gradually to a level no higher than that required for stability and security. Producers would share in the national allotment on the basis of past production, adjusted for unusual circumstances. Payments for diverted acreage would, of course, continue to be made to support farm income while surplus stocks are being reduced.

Initiation of this program is proposed for the 1963 crop year, subject to approval by a producer referendum.

Wheat

The problems of wheat production are much the same as for feed grains. Large inventories and high program costs were inherited from the 1950's. The temporary 1962 wheat program is expected to halt the accumulation of wheat surpluses, but the old programs--which have already failed--will become effective again for the 1963 crop unless legislation is promptly enacted.

I recommend a wheat program which will reduce wheat stocks to manageable levels, improve the competitive position of American wheat in world markets, and maintain the incomes of wheat producers. To achieve these objectives, national wheat acreage allotments will be established by estimating the actual requirements each year for milling, seed, and for export, and deducting a number of bushels that will permit us to draw upon our surplus stocks on hand to gradually reduce the carryover to the level required for stability and security. Marketing certificates would be used to assure growers a price support level between 75 and 90 percent of parity on the domestic allotment and up to 90 percent on the export allotment. The national allotment would be apportioned among all growers, including small growers, on the basis of past wheat acreage. The Secretary of Agriculture will have authority to make payments, which will help to maintain producers' incomes, for mandatory diversion of acreage from wheat to soil-conserving uses, and to offer such payments as an incentive for further voluntary acreage diversion.

Initiation of this program is necessary for the 1963 crop year. As in the case of feed grains, it would be subject to approval by a producer referendum.

Cotton

Cotton suffers chiefly from the attempt to adopt a single legislative program to widely divergent crop needs. There is a sharp conflict between the demand for cheap cotton that can compete effectively with substitute fibers and the need for support levels high enough to assure farmers an adequate income; between the interest of textile mill owners--who face stiffening world competition--in low raw material costs and in the interest of the producer in income sufficiently high to cover his costs; and between our nation's desire to expand further our world trade in cotton and to hold down a Federal budget already augmented by cotton export subsidies. These conflicts can best be reconciled by a program which establishes a support price upon allotted acreage but permits efficient producers to grow additional acreage at the world price.

I recommend that the Secretary of Agriculture be given authority to:

1. Establish the acreage allotment at a level which would produce the cotton needed for domestic use and such portion of the cotton exports as he may determine.

2. Authorize growers to exceed their farm acreage allotment by up to 30 percent, with the cotton produced on the additional acreage to be marketed under a plan which will net the grower approximately the world market price.

Dairy Products

Milk and dairy products constitute one of our most important sources of nutrients. They are also one of our most valuable farm products, bringing twice the cash income of the basic crops.

Incomes of dairy farmers were improved by the bill passed by Congress late in 1960 to increase the support price for milk from $3.06 to $3.22 per hundred pounds and by the increase in the support price last March to $3.40 per hundred pounds for the current marketing year.

Unfortunately, milk producers now face a serious setback. An unexpected decline in the consumption of milk during the past year, amounting to nearly 3 billion pounds, will result in government expenditures this year of approximately $500 million to support the prices of dairy products. There is no evidence as yet that this decline in consumption will be reversed in the year ahead. Under the present law, the Secretary of Agriculture is not authorized to set the price support rate for milk above 75 percent of parity unless, "necessary in order to assure an adequate supply." Under this law, in the present supply situation, the reduced support price must be announced for the marketing year beginning next April 1.

Such a reduction in milk price supports will gravely impair the incomes of milk producers. It will not, however, succeed in reducing government expenditures to a reasonable and justifiable level. Even at

75 percent of parity--the minimum level specified in the present law--government costs for supporting prices of dairy products will probably exceed $440 million next year, as production continues to exceed consumption.

New legislation to correct the shortcomings of the present dairy price support laws is, therefore, urgently required, for the benefit of both farmer and taxpayer. I recommend passage by the Congress of legislation which will: (a) maintain the income of the dairy farmers by establishing support prices of up to 90 percent of parity under a supply management program; and (b) reduce the budgetary expenditures for the dairy price support program to the cost of acquiring dairy products needed for domestic welfare and foreign assistance programs, up to a maximum of $300 million per year, plus the costs incurred in the special milk and school lunch programs.

Each milk producer would be assigned a marketing base equal to his marketings of milk in 1961. His marketing allotment for the current year would reflect a percentage of his base proportionate to his share of the estimated commercial demand and the quantities needed for government programs in the national interest. Producers who market milk in excess of their allotments would pay surplus marketing fees on such milk, which would be used to purchase and dispose of the surplus products produced from excess milk.

Milk producers would be provided an opportunity to vote upon this program in a referendum. In the event the milk producers reject this program a support price would be established at such a level as to limit budgetary expenditures to $300 million a year. Authority is also requested to include supply management provisions in Federal milk marketing orders when desired by milk producers in markets regulated under such orders.

While this legislation is being considered and implemented, in order to prevent disruption of markets by reduction of price supports to 75 percent of parity as required under the present law on April 1, 1962, I recommend enactment of a joint resolution authorizing the continuation of price supports on dairy products at the current level until December 31, 1962.

III. Efficient conservation and utilization of land

The scope of agricultural technology promises abundance tomorrow as well as today. For the first time in our history we can confidently predict that our future food and fiber needs can be met with fewer acres of cropland. In spite of a 65 million increase in population by 1980, our farms will be able to produce all we need with 50 million fewer acres than we have in cropland today.

This prospect offers us an opportunity to take advantage of the unused acres for a wide range of recreational, aesthetic, and economic purposes. Land use changes are not only important to balanced production, they can also supply the growing demand for outdoor recreational areas and wildlife promotion, for woodlots and forests, and for grazing. We can transfer cropland to grass and trees--and we can place greater emphasis on wildlife and recreation development in the small watershed programs.

I recommend legislation to encourage a comprehensive survey of land uses, to undertake a research program on the conversion of land to alternate purposes, and to initiate a series of pilot and demonstration land use projects. As the pilot plan is evaluated and a permanent program for land use developed, it will be possible for our supply management efforts to place less emphasis on temporary diversion of acreage from the production of specific crops, and more on the permanent utilization of acreage to fulfill other public needs.

An effective land use program also requires the following additional legislation:

1. Amendment of the Soil Conservation and Domestic Allotment Act to expand the agricultural conservation program to include payments and cost sharing arrangement. s, under long-term contracts, which would permit changes in cropping systems and land uses for the conservation and development of soil, water, forests, wildlife and recreational resources.

2. Amendment of the Bankhead-Jones Farm Tenant Act to include the use of land acquired under that Act for recreational development and wildlife protection.

3. Amendment of the Watershed Protection and Flood Prevention Act to permit the Secretary to share in the cost of any land acquired by local organizations for operation as a reservoir of public fish, wildlife or recreational development.

4. Modification of the Watershed Act to provide for loans for recreational facilities.

5. Expansion of the authority of the Farmers Home Administration to make loans to farmers for recreational enterprises.

Additional legislation for conservation of our renewable resources is also necessary. These recommendations will be included in a message I will send to the Congress devoted to proposals for the maximum utilization of our land resources.

IV. Development and utilization of agriculture's human resources

The Department of Agriculture has launched a series of programs for the development and renewal of rural areas and rural communities. These programs are designed to end rural poverty by offering new opportunities--both agricultural and nonagricultural--to rural people. Activities of the Rural Electrification Administration, the Farmers Home Administration, the Federal Extension Service and other Department agencies are being coordinated under the Rural Area Development program in close cooperation with the Area Redevelopment Administration.

To make the most of the human resources in these rural areas, there is one need that transcends all others--that is education. Education can give them new vistas, new opportunities, new skills in place of the poverty that no price support program will ever remove.

Most of the necessary activities are already authorized by law. However, some additional authority is needed.

In many rural areas, the difficulty of financing adequate safe and sanitary housing and modern community facilities such as water and sewage systems, recreational installations, and transportation, has deterred general community improvement and more rapid industrialization. I recommend, therefore, new legislation to enable the Farmers Home Administration to finance sewage systems and other rural community facilities.

Rural Renewal and Education

In some rural areas the general level of economic activity and family income is so low, and the lack of community facilities so acute, that a complete new development operation is the only sensible solution--a program of "rural renewal."

For these areas, in addition to the nationwide rural area development program, I recommend a new legislative program under the Area Redevelopment Administration, to provide loans and technical assistance to local public rural renewal corporations. These corporations would aid in developing new uses for land and water, create forest industry parks, assist small farmers in farm consolidation and enlargement, and develop needed public facilities, including outdoor recreation. The bill would permit loans to approved public agencies to acquire, develop and dispose of land for these purposes, and provide for other loans to individual farmers to establish recreational facilities and other income producing enterprises. Consideration might also be given to making loans available to rural citizens, both young and old, for vocational and other educational training not otherwise available but essential to their preparation for non-farm jobs.

CONCLUSION

The goals of this program for Food and Agriculture are goals on which there is broad general agreement.

First, we seek to enable efficient farm operators to earn incomes equivalent to those earned in comparable nonfarm occupations.

Second, we seek continued production of food and fiber at reasonable prices in quantities sufficient to meet the needs of all Americans and to combat hunger and contribute to economic development throughout the free world.

Third, since we seek abundance for our children as well as for ourselves, we must conserve and use wisely our resources of land and water.

Fourth, we seek to end rural poverty. Farm children, and many farm adults as well, need improved opportunities for education and training, to equip them to earn an American standard of living in whatever occupation they freely choose to follow.

We will enjoy the fruits of the technological revolution in American agriculture only if we recognize its implications. We must learn to live with an agricultural economy of abundance rather than scarcity. That is the purpose of the approach I have outlined-a comprehensive, long-range program to replace the present patchwork of short-run emergency measures.

JOHN F. KENNEDY