Budget cutters may snip away at US farm programs

Do you like honey? You'd think the federal government does: In 1983, it bought slightly more than half of all the honey produced in the United States. Uncle Sam is not enamored with the sweet stuff, it's just that he's trying to prop up its price. The cost to taxpayers for this program? An estimated $88.8 million in '83.

Did you know wool is a strategic commodity?

In 1954, Congress found that wool was so heavily used in military uniforms that it was vital to the national interest. It set up a program to encourage wool production. But instead of climbing, demand for wool fell -- from 10 percent of US fiber use to about 2 percent today. Government largess continues, however, to the tune of $93.5 million in '83. For the average pound of wool sold that year the producer got 61 cents from the market place and another $1.15 in government payments.

Increasingly on Capitol Hill, there is a feeling that something has gone wrong with farm programs. In 1981, Congress passed a farm bill projected to cost about $11 billion over its four-year life. The actual cost is turning out to be at least four times that amount -- five times, if the value of the 1983 payment-in-kind (PIK) program is included.

Is federal spending on agriculture out of control?

``There's a lot of skepticism whether anyone knows what that cost will be,'' says Lynn Daft, a Washington-based consultant on agriculture.

Despite this burst of money from the federal spigot, the farm economy is withering. Many farmers are teetering on the brink of bankruptcy; others are seriously thinking of getting out before they lose their shirts along with the tractor.

In fiscal 1983, even excluding the value of PIK, the $18.9 billion spent on farm programs represented 80 to 90 percent of farmers' net farm income that year.

In farming country, there is frustration with the US Department of Agriculture (USDA) and its programs.

``It's a bureaucracy that has carved out certain niches for itself,'' complains an owner of a western Illinois farm. ``Marketing is the biggest problem that we have. And there's no one at USDA or the extension [service] that is doing a . . . thing about it.''

Though some programs -- for wool and honey, for example -- seem to be getting some scrutiny in Congress, the big cuts are going to have to come from modifying support programs in the major crops and in dairy, congressional sources say.

An Iowa corn farmer, for example, gets two types of direct support.

The first is the commodity loan rate, which effectively sets a floor price. (It is currently $2.55 a bushel for corn.) If the market price falls below that price, the farmer has the option of exchanging some or all of his crop for a government loan worth $2.55 for every bushel of corn he turns in. If market prices stay low, he can keep the money and forfeit his crop to the government. If market prices rise, he sells the corn and repays the government.

There appears to be substantial support in Congress for lowering these rates in grain. In recent years, the rates have been above world market prices. The result: US commodity exports have fallen and the government is worried about acquiring burdensome surpluses of forfeited grain.

Some farm groups -- such as the American Farm Bureau Federation and the National Association of Wheat Growers -- have backed such a move. But they have been unwilling to accept cuts in the second form of government support -- target prices.

Since 1973, the Iowa corn farmer who participated in the loan program has also been eligible for a deficiency payment. This payment is the difference between the loan rate ($2.55 a bushel for corn) and the target price (currently $3.03 a bushel). Paying the farmer the difference (48 cents in this case) was intended to bolster farm income without affecting the market price.

But concern over budget deficits this year is having such an overriding impact on farm policy debate, congressional sources say, that there will be great pressure to modify target prices.

The administration plan would make farm programs more market oriented and targeted to the midsize producers. It would phase out target prices, tighten the cap on deficiency payments from $50,000 to $20,000 and then $10,000, and limit for the first time the size of commodity loans to $200,000. One estimate of savings: $5 billion to $6 billion over the next three fiscal years, nearly half the estimated $12 billion to $14 billion that farm programs at current levels would cost for the next several years.

The move toward market-orientation appears to have wide appeal among lawmakers, but even Senate Republicans doubt Congress will pass cuts as drastic as the administration proposes.

There's ``not so much disagreement with the direction of administration policy, but the rate of change -- how fast do you move now?'' a congressional budget specialist says. Republican senators, who are taking the lead in proposing cuts in farm programs as with the rest of the budget, have to be concerned with the 1986 election. Twenty-two Republicans will be up for reelection in the Senate.

A less drastic approach appears to be coming from Senate Agriculture Committee chairman Jesse Helms (R) of North Carolina. He too would put agriculture on a more market-oriented path and probably clamp down on payments per farmer, according to an aide, but he is not as opposed as the administration to the target-price concept.

Meanwhile, on the other side of the aisle, Tom Harkin, Iowa's new Democratic senator, plans legislation that would move agriculture toward more government control.

``Farm programs do not have to cost [a lot of] money if they are correctly legislated and administered,'' he says.

Along with at least three governors and three congressmen from the Midwest, Senator Harkin plans to propose a long-term retirement program of fragile lands and a mandatory marketing quota where farmers would only be allowed to sell a certain portion of their normal production base.

One possible outcome is that these forces would check each other, sources say. Congress may well end up doing nothing radical, doing ``some damage control'' on the farm-policy side and on the spending side, says Gene Moos, agricultural aide for House majority whip Thomas S. Foley (D) of Washington.

Moreover, lawmakers appear cautious about drastically cutting farm programs at a time when the farm economy is so depressed.

Immediate cuts in fiscal '86 will be difficult anyway, congressional sources say, because much of it will be locked in to deficiency payments for the 1985 crop.

One source of potential savings for '86, however, could be the dairy program. Over three or four years, cuts in the dairy program might draw down expenses from the $1.5 billion a year in 1983-84 to something like $3 million to $4 million, one congressional staff member estimates. The administration has proposed replacing the current dairy program with one using deficiency payments with limitations. -- 30 --