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Asir
F.9t,s
Federal Reserve Bank of Chicago -

•

-

January 31, 1958

THREE REPORTS bearing on farm policy have been
released by the Administration in recent weeks. Committees of the Congress are engaged in studies of these--...
reports and in developing additional information to help ;
guide them as they tackle the myriad tentacles of this
perennial problem.

THE BUDGET proposal, submitted to Congr1ss`.,
January 13, estimated Federal outlays on behalf of
agriculture and agricultural resources in the current
fiscal year ending June 30, 1958, at $4.9 billion. This-t.'
is somewhat more than the $4.6 billion spent in fiscari
1957.
Agricultural expenditures in the current year
account for about one-fourth of total Federal expenditures for all purposes other than national security and
interest on the public debt. This compares with a little
over 20 per cent in 1953 and 1954.
Looking ahead, to the year ending in mid-1959,
agricultural outlays are estimated to decline somewhat„
to about the 1957 figure of $4.6 billion. And changes
in farm programs are recommended which, in 1960 and
beyond, are estimated to result in "significant reductions" in budget expenditures on behalf of agriculture.
Biggest item in the agricultural budget, of course,
is the outlay on programs to support prices of farm commodities. This category of expenditure has been running
around $3.5 billion annually for the past three fiscal
years. Indicated outlay for fiscal 1958 is $3.6 billion;
for fiscal 1959, $3.3 billion.

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The important role of Government programs in the
current agricultural situation is indicated by a comparison of outlays to support farm prices with farm cash receipts from marketings. The latter figure has held
close to $30 billion in recent years. Hence, Government
outlays in support of farm prices and income have been
equal to 11 to 12 per cent of farm sales of commodities.
Controversy has arisen relative to some of the
figures which purport to measure the "cost to the Treasury" of farm price and income supports. It is suggested,
for example, that the cost of disposing of surplus commodities should be assessed in part to domestic health,
education and welfare programs and to foreign assistance. Such changes in budget accounting would have
the effect of redistributing Federal expenditures but, in
the absence of basic changes in the programs, would not
affect total outlays.
THE PRESIDENT'S FARM MESSAGE to Congress
on January 16 proposed a number of modifications "to
deal with the effects of the technological revolution in
agriculture." In general, the recommendations were
oriented toward a speeding up of agricultural adjustment to be achieved in part by providing a greater range
of 'discretion to the Secretary of Agriculture in setting
acreage allotments and levels of price support. The
Secretary would be advised in these important decisions

FEB'21 '1

ultural
ette_r
Number 441

byv-4J1biriattisarr bdard. Of special interest to Midwest
• a proposal. that acreage allotments
.,..farmers-ig
for corn be
eliminated.
THE ECONOMIC REPORT of the President released
January 20 also devoted some space to agriculture. It
notes that "American agriculture is basically strong,"
that "farm families have notably improved their levels
of living" and that this improvement has "continued
even when income from farming alone was declining."
Further, it states that "many of the Federal programs
undertaken on behalf of farm people have made important
contributions to this long-term progress." The report
concludes that farm programs are "in need of reconsideration" in three areas: the disposal of accumulated
surpluses, the operation of agricultural price supports
and direct measures of production adjustment.
Current stocks and output "continue to require
emphasis" on disposal programs, but these "must not be
allowed to stimulate the production of continuing surpluses" through a required escalation of price support
levels as stocks are reduced. An additional $1.5 billion
is requested to finance sales for foreign currencies and
emergency food assistance to foreign countries, and it
is proposed to continue domestic distribution to schools,
institutions and needy persons.
The operations of price support and related programs
have proved costly to the Treasury, due largely to the
failure to achieve "appropriate adjustments of output
by growers." The report states that "there is little
support, among farmers or in the Congress, for controls
that would be severe enough to implement current price
objectives, except possibly for tobacco." It is suggested, therefore, as in the President's Farm message, that
the Secretary of Agriculture be given discretionary authority to move in the direction of larger acreage allotments and more flexible (presumably lower) price supports in an effort to find a workable solution to the problem of adjusting agriculture's output to available markets with an acceptable level of farm income.
Many other changes in current programs are proposed, oriented primarily toward facilitating agricultural adjustment. The problems are numerous and difficult. Whether the Congress and the Administration can
fashion an attack that will prove more effective than past
efforts is the challenge of the moment.
Research Department