Farmers in the squeeze between expenses and returns
Some 45 years ago, MFA president Fred Heinkel was pondering how his farmers could navigate increasing input prices without increased commodity prices. Of course, back then, the U.S. average corn price was $1.16, and the world commodity trade was a different landscape. From the nation’s technocrats and planners, there was a call for increased farm production. Government was for pushing for increased production for different reasons back then, but it brings to mind our nation’s urge to increase biofuels today.
Heinkel’s ruminations were cogent. As price takers, farmers have real control on either side of their ledger. He titled his editorial “The Farmer’s Dilemma,” which, it turns out,
is a real perennial.
Here is Heinkel in the November 1966 issue of Missouri Farmer (the title changed to Today’s Farmer a year later):
As farmers look ahead to next year and try to make planting and feeding plans, they see:
- A public call for greater production
- Tightening up on credit
- Weaker grain prices
- Record-high production costs, going up
The view ahead is certainly unclear and, even where there is some clarity, involves puzzling alternatives.
...The nation is inviting greater farm production yet offers no real incentive to farmers to accept the invitation. Since the announcements of increased grain acres were made, market prices have been declining. This doesn’t look good to farmers.
...Neither does the rising prices paid index. Government statisticians report that production costs went up 5 percent last year—and they continue to climb. Prices paid by farmers are at the highest level in history. While farm income is expected to show a nice increase this year, the consistent rise in expenses against the weaker grain prices recently is serving to cool earlier optimism.
There is little possibility of any reduction in the cost of farm supplies. And with that 5 percent increase last year, it merely means that farm prices in 1967 must also go up just to maintain 1966 income levels.
...[From 1950 to 1966], U.S. farm debt has moved from $12 billion up to about $41 billion. Much of this has been because of substitution of capital items for labor. (It takes a good deal less labor now to raise a bushel of corn or market a hog, but a much higher fixed investment in machinery and equipment as well as more dollars for supplies.)
Heinkel called for a federal lending policy to cooperatives and the Farm and Home Administration that would be directed to farm financing. He also cautioned that inflation should be kept in check as uncontrolled inflation is especially burdensome to farmers.
To encourage production, it would make good sense not only to assure adequate financing for next year’s crop and feeding operations, but also to take steps to hold down interest rates on farm money. If greater production is desired, incentives must be offered for farmers. Then they can afford to supply it.