U.S. farm law may slash farmers’ incomes

Press, 18 February 1986, Page 37

U.S. farm law may slash farmers’ incomes

NZPA-AP Washington The nation’s new farm law will do little to reverse problems now facing American agriculture, according to a private study that says farmers will see their net income drop 18 per cent in the next three years.

The new law, while helping increase the volume of farm commodity exports through the end of the decade, will make only a marginal improvement in dollar sales because of the substantially reduced prices for the goods, the analysis found.

The 18 per cent decline in income under the new policy will seriously exacerbate the farm financial situation, said the report by the Food and Agricultural Policy Research Institute at the University of Missouri and lowa State University. The report said net farm income would drop from $U526.6 billion ($49.74 billion) in 1985 to SUS2I.B billion ($40.76 billion) in 1989 under the new law, despite the infusion of near-record Government subsidies intended to insulate farmers from the shock of falling prices. While export volume

grows by as much as 25 per cent because of lower, more competitive prices, the total value of those exports will be down next year and recover by 1989 to only 6 per cent above present levels, the report said.

A substantial and sustained turnaround in world and domestic markets will have to occur if net farm income is to improve appreciably, according to the study.

The situation is relatively bleak, said Stan Johnson, a member of a group that analysed the long-term 1985 farm law enacted by Congress and signed by President Reagan in December. Johnson and others discussed the findings at a forum sponsored by Resources for the Future, a policy research group. Already, as the impact of the new law begins to dawn on farmers, political pressures are growing to change it. Several bills have been introduced to alter the way income subsidy payments are figured, and one participant in the forum predicted an epidemic of legislation as the year wears on.

Analysis of the law did not include the potential effects of the new

Gramm-Rudman deficitreduction law, which will have a disproportionately heavy effect on farm programmes. The mandatory cuts under that law, if they take effect, could pare another 10 per cent to 30 per cent off subsidy payments.

The new balanced-bud-get law fails to address the conflict between the need to reduce Government spending and the political desire to support farmers’ incomes, the economists concluded. They said it does not solve United States agriculture’s fundamental problem: the ability to bury itself in excess production.

The Agriculture Department’s chief economist, Mr Robert Thompson, while agreeing that farm financial woes will remain serious in the near future, contended the new law “gives us the tools to turn that around.”

Cutting the Federal Budget deficit, as painful as it may prove for those who benefit from farm programmes, is in the long run of more benefit to farmers than any other economic sector because it will bring down interest rates and the relative value of the dollar, said Mr Thompson.