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The United States The farm lands of the United States have a production potential for most commodities greatly exceeding local requirements. This factor, coupled with the unhindered operation of supply and demand, renders farm incomes extremely elastic. It is generally true of all countries that when produce prices fall mortgage indebtedness remains fixed and prices of farm requisites seldom fall to anything like the same degree as produce prices. Thus producers become extremely vulnerable in time of depression. The need for price support of farm commodities led to the organization of the Commodity Credit Corporation (CCC) in 1933. This organization was managed and operated by the Reconstruction Finance Corporation until 1939, when it was transferred to the United States Department of Agriculture. In 19-18 Congress provided the CCC with a permanent Federal Charter and wide powers. Its functions of immediate interest are (1) the power to support prices of agricultural commodities through loans, purchases, payments, and other operations ; and (2) to purchase and dispose of surplus agricultural commodities. The CCC is capitalized at only $100,000,000, but is authorized in addition to borrow up to $4,750,000,000 on the credit of the United States Government. A major difficulty in any form of price control, and particularly in agriculture, is that of assessing the cost of production of individual commodities, especially in the mixed farming enterprises generally characteristic of overseas countries. If it is assumed that such costs can be assessed, it must then be determined on what basis prices will be fixed —i.e., average, highest, or lowest costs within the group, &c. As in Sweden, no attempt is made in the United States to assess costs of production of individual items. The general basis of fixation is a system of farm-prosperity analysis leading to a determination of the purchasing-power of the farming community in relation to that of other sections of the community. This analysis is based on an index calculated for prices for farm requisites in relation to prices received for produce. The base period selected for most commodities is the average 1909-14, a stable period of relative prosperity and reasonable stability during which the prices of farm cost items were considered to be equitable in relation to produce prices. The index of prices received is divided by the index of prices paid and the result is called the parity ratio. During the base period both indexes equalled 100, and in order to arrive at the prices thought desirable for each individual commodity, the average base-period price of this commodity is multiplied by the index of prices paid and the result is the parity price, which in effect represents a return for the commodity giving it purchasing-power equal to that of the base period. In practice, there are numerous complications with consequent necessary adjustments. For instance, the relative cost of production of different commodities has changed considerably since 1909-14 (that of wheat has nearly halved relative to that of animal products), and price relationships are calculated on a more recent basis and then reduced to the level of the base period. To calculate the index of prices paid by farmers, prices of no less than eighty-six commodities covering general living-costs and of eighty-nine items used in production are collected and weighted and interest and taxes are also included. This index is calculated on a monthly and yearly basis. The parity price thus arrived at is the basis used for determining the vital feature of the system and the levels of support prices, which vary from 60 to 90 per cent, of the parity price, depending on the nature of the product. For purposes of application, farm crops are divided into two classes, basic and non-basic. The six basic commodities are maize, wheat, cotton, tobacco, rice, and peanuts ; and the non-basic include potatoes, eggs, butterfat, and wool. Others may be added to or taken off the list.

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