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AN E IG H T H D IS T R IC T P E R S P E C T IV E
Summer 1983

Federal Reserve Bank of St. Louis

PIK: An Expensive Experiment
In the six months since the payment-in-kind (PIK)
program was announced, a variety of data has in­
dicated that:
• a one-year program will not reduce holdings
of reserve grain substantially;
• the program will be very expensive to tax­
payers; and,
• despite a variety of incentives to curtail pro­
duction, harvests for the 1982/83 crop year
will be among the largest ever.
At midyear, it appears likely that the reality of PIK
will fall far short of the optimistic forecasts it fostered




Many of the problems associated with PIK’s first
year stem from record yields for the winter wheat crop
just harvested and the record corn yields expected to
prevail this fall. After a 19 percent decline in winter
wheat planted acreage, this year's harvest is expected
to be 1.9 billion bushels. The total (winter and spring)
wheat harvest is expected to exceed 2.3 billion bushels
largely because average yields of 40.2 bushels per acre
will surpass the previous record by over three bushels
per acre. Similar results for corn are expected: an
estimated yield of 120 bushels per acre could produce a
6 billion bushel corn crop even though planted acreage
was 28 percent lower than in 1982. The previous record
yield for corn was 114 bushels per acre.
With crops of this size and declining export volume,
stock levels will not be reduced substantially this year.
As of April 1, the United States held 6.4 billion bushels
of corn and 1.9 billion bushels of wheat in reserve
stocks; these figures are 24 and 20 percent, respective­
ly, above the levels of a year ago. To give some perspec­
tive to the current size of grain stocks, April 1 U.S.
holdings of corn and wheat were approximately equal
to the volume of production expected this year. Of
these stock holdings, 69 percent of the corn and 47 per­
cent of the wheat was stored on farms.
With smaller-than-expected reductions in production
and reserve stocks this year, another year of PIK for
wheat is planned and an extension of PIK for corn
appears likely. Budgetary constraints, however, may
impose some obstacles to program extensions. The
cost of 1983 farm price and income support programs
is now estimated at $21.2 billion, compared with the in­
itial 1983 budget estimate of only $2.9 billion. The cost
of farm programs averaged less than $4 billion over the
12 years between 1970 and 1981. The current estimate
of 1984’s price and income support programs is $9.3
billion, but that may be a low estimate in view of this
year's 600 percent difference between projected and
actual costs. Furthermore, this budget estimate does
not include the $12 billion cost of grain given to
farmers under PIK authority and the forgiveness of
Commodity Credit Corporation (CCC) loans. Even
though it now appears that PIK will have little effect

SUMMER 1983

FEDERAL RESERVE BANK OF ST. LOUIS

on grain surpluses this year, the growth of farm pro­
gram costs may complicate efforts to extend PIK into
1984.
One remaining legislative approach to reducing
grain production and the growth of grain stocks is a
freeze on loan rates and target prices. By supporting
commodity prices and farm income above market­
clearing levels, both of these instruments give farmers
an incentive to increase grain production. And,
because aggregate grain demand has been growing less
rapidly than production, a side-effect of price support
programs has been the promotion of stock accumula­
tion. Freezing price supports at 1983 values could
bring them closer to competitive market values. A
more narrow gap between market prices and price sup­
ports, then, would not only tend to curtail production
growth but also would reduce the costs of storing in­
creased volumes of surplus grain. Although the ad­
ministration has proposed freezing target prices for
the 1984 crop year at 1983 levels, the Senate
Agricultural Committee has not yet voted on the pro­
posal. If such a freeze were adopted, 1984 target prices
for corn and wheat would remain at $2.86 and $4.30
per bushel for corn and wheat, respectively.

Eighth District
Farmland Values Decline
Several factors have contributed to declines in the
values of U.S. farmland in recent years. As infla­
tionary expectations have diminished, land has
become less of a speculative investment. Further
declines in grain prices combined with efforts to reduce
output have reduced the demand for land as a farm in­
put. Values of U.S. farmland decreased 6 percent, on
average, last year. After adjusting for inflation, the
real value of U.S. farmland has declined in each of the
last three years.
For the year ended April 1, however, values of
Eighth District farmland declined more than the na­
tional average. Because the largest declines were in
Corn Belt states, Missouri, Illinois and Indiana were
affected most adversely with declines between 11 and
13 percent; the smallest drop in Eighth District land
values occurred in Kentucky where prices fell only 3
percent. In no Eighth District state did average
farmland values appreciate last year.

USDA Revises Export Forecast
The USDA continues to make downward revisions in
its forecasts of agricultural exports for 1983. The most
recent revision estimates total tonnage to be 149
million metric tons, a 4 percent decline from the
forecast made only last February. Data in the table
below show the composition of agricultural exports in
1982 and 1983.

In dollar terms, agricultural exports for this year are
estimated to be $35.5 billion, a $3.6 billion decline from
last year and an almost $8 billion decline from 1981’s
record level. Two-thirds of this year’s decline in ex­
ports can be attributed to lower sales to the Soviet
Union and Western Europe.
—Michael T. Belongia

Commodity Breakdown of U.S. Agricultural Exports, 1982-83
Fiscal Year 1982
Commodity
W h e a t an d flo u r
C o rn
O th e r c o a rs e g ra in s
S oybeans
S o yb e a n ca ke a nd m e a l
C o tto n an d lin te rs
A ll o th e r p ro d u c ts
U.S. to ta ls

Millions of
metric tons
45.50
49.60
8.57
25.48
6.27
1.56
21.12
158.10

Billions
of dollars
$ 7.62
5.96
1.09
6.48
1.45
2.16
14.33
$39.09

Fiscal Year 1983
Millions of
metric tons
39.50
49.50
6.20
25.30
7.30
1.20
20.00
149.00

Billions
of dollars
$ 6.50
5.90
0.90
5.90
1.60
1.80
12.90
$35.50

SOURCE: Agricultural Outlook, Economic Research Service, U.S. Department of Agriculture, June 1983

Agriculture—An Eighth District Perspective is a quarterly summary of agricultural condi­
tions in the area served by the Federal Reserve Bank of St. Louis. Single subscriptions are
available free of charge by writing: Research and Public Information Department, Federal
Reserve Bank of St. Louis, P.O. Box 442, St. Louis, Missouri 63166.



FEDERAL RESERVE BANK OF ST. LOUIS

SUMMER 1983

EIGHTH DISTRICT AGRICULTURAL DATA

Percent Change
March

Prices and Costs1
CONSUMER PRICE INDEX (% change)
Nonfood
Food

1983
0.1%
0.6

April
1983

May
1983

Average
for 1982

0.6%
0.4

0.6%
0.3

0.3
0.0
0.0
3.3

0.6
0.0
2.6
2.2

0.4
-0 .3
0.7
-0 .2

2.5
-0 .4
4.2
-1 .9

2.9
-5 .3
4.2
1.5

0.8
0.0
2.7

2.0
-0 .8
5.2

0.4
-0 .8
1.6

0.0
0.4
-0 .5

7.8
3.7
12.7

-1 .6
-4 .5
2.5

FEEDER CATTLE
Wholesale price - Kansas City ($/cwt.)

$69.19

$69.13

$67.63

$64.82

FEEDER PIGS
Wholesale price - So. Missouri ($/cwt.)

$52.36

$45.19

$33.88

$51.14

PRODUCTION COSTS FOR FARMERS (% change)
All inputs
0.3
Fertilizer
-0 .4
Agricultural chemicals
1.6
Fuels and energy
- 3.9
PRICES RECEIVED BY FARMERS (% change)
All products
Livestock
Crops

BROILERS
Wholesale price - 9-city (cts./lb.)

41.90c

40.90c

N.A.

TURKEYS
Wholesale price - New York, 8-16 lb.
young hens (cts./lb.)

56.00c

54.18C

56.60c

0.3%
0.2

Year-To-Date2 Same Period
1983
Year Ago
1.3%
1.4

8.5%

3.8%
2.4

-0 .2 %

-2 8 .6

-4 1 .4

43.97C

-2 .6

-4 .0

60.75c

4.4

-3 .7

CORN
Wholesale price - St. Louis ($/bu.)

$ 2.99

$ 3.11

$ 3.13

$ 2.57

24.9

11.9

SOYBEANS
Wholesale price - N.C. Illinois ($/bu.)

$ 5.86

$ 6.13

$ 6.13

$ 5.83

10.9

-3 .9

WHEAT
Wholesale price - No. 1, hard winter Kansas City ($/bu.)

$ 4.18

$ 4.21

$ 3.76

$ 4.00

-5 .5

-1 0 .9

LONG-GRAIN RICE
Wholesale price - Arkansas ($/cwt.)

$17.50

$17.97

$18.50

$17.72

0.5

6.3

11.9

6.9

COTTON
Wholesale price - all markets (c/lb.)

66.30c

61.48c

66.72c

60.09C

Percent Change
U.S. Exports
Corn (mil. bu.)
Soybeans (mil. bu.)
Wheat (mil. bu.)
Milled rice (thou, metric tons)
Cotton (thou, bales)

January February
1983
1983

March
1983

Average
for 1982

Year-To-Date2 Same Period
1983
Year Ago

175.4
86.3
151.6
3.3
462.0

162.0
87.2
157.3
4.4
386.0

N.A.
84.4
N.A.
N.A.
513.0

161.2
78.0
132.0
6.3
532.7

$8,289
2,319

$4,439
979

$3,594
760

$6,154
1,302

-6 0 .2
-6 2 .7

- 14.2
- 13.3

5,655
871

5,856
886

6,121
853

5,756
929

18.0
5.1

6.0
-4 .6

-7 .2 %
-6 .4
57.3
5.7
29.9

9.7%
6.8
5.8
-3 7 .0
-4 4 .5

Receipts
CROPS (millions of dollars)
United States
District (seven-state total)
LIVESTOCK (millions of dollars)
United States
District (seven-state total)




3

EIGHTH DISTRICT AGRICULTURAL DATA

Marketing Year
Crop Production3

1980/81

1981/82

1982/83

CORN (October 1 - September 30)
Acres planted (mil. acres)
Production (bil. bu.)
Yield (bu. per acre)
Ending stocks (bil. bu.)

84.0
6,645
91.0
2,286

84.2
8,202
109.8
3,434

81.9
8,397
114.8
2,115

SOYBEANS (September 1 - August 31)
Acres planted (mil. acres)
Production (bil. bu.)
Yield (bu. per acre)
Ending stocks (bil. bu.)

70.0
1,792
26.4
318

67.8
2,000
30.1
266

72.2
2,277
32.2
395

WHEAT (June 1 - May 31)
Acres planted (mil. acres)
Production (bil. bu.)
Yield (bu. per acre)
Ending stocks (bil. bu.)

80.4
2,374
36.8
989

88.9
2,799
35.9
1,164

87.3
2,809
36.1
1,550

RICE (August 1 - July 31)
Acres planted (mil. acres)
Production (mil. cwt.)
Yield (cwt. per acre)
Ending stocks (mil. cwt.)

3.4
146
44.1
16

3.8
183
48.2
49

3.3
154
47.4
65

COTTON (August 1 - July 31)
Acres planted (mil. acres)
Production (mil. bales)
Yield (net bales per acre)
Ending stocks (mil. bales)

14.5
11.1
0.8
3

14.3
15.6
1.1
7

11.3
12.0
1.2
8

1 The consumer price index and its components are seasonally adjusted. All other data are not seasonally adjusted.
2 Percent change from December 1982, based on the most recent month available.
3 Annual data for crops are based on each crop’s marketing year. SOURCE: Crop Production, Statistical Reporting Service,
Crop Reporting Board, USDA.





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102