December 1978
Western Journal of Agricultural Economics
international markets, as we did on occasion
in the past. In fact, it is notable that with the
exception of tobacco, the price corridor con-
cept is now used on precisely those com-
modities for which international markets are
important.
Related to the use of price bands or price
corridors, we also now have a more explicit
reserve policy. In the past, we accumulated
rather large reserve stocks in government
hands almost entirely as a by-product of our
price policies. There was little intent to have
an explicit reserve policy, or to manage
stocks in a buffer-stock fashion. Now there is
an explicit reserve target for wheat and feed
grains, and at least the intent to manage them
in true buffer-stock fashion. In fact, there are
explicit trigger levels at which the stocks will
be released to the market.
Farmers also now have the flexibility in the
programs to shift among crops in response to
changing market conditions. This is in
marked contrast to the past, when use of rigid
acreage allotments and marketing quotas
kept them locked into a given production pat-
tern. This added flexibility which the set-
aside program provides should permit a
more-efficient use of resources.
Another evolution in policy is the decision
to participate in international commodity
agreements. This is not new, of course, since
we have participated in commodity agree-
ments in the past. However, we had turned
our backs on them for some time, and for the
most part took a negative view of what they
could offer.
This Administration has already initialed
an International Sugar Agreement. Its ratifi-
cation has been held up until agreement is
reached on domestic policy. The Administra-
tion has also been involved in protracted
negotiations on an International Wheat
Agreement. Our objectives in such an
agreement are to obtain a greater sharing of
adjustment costs among countries, and to ob-
tain greater stability in the international mar-
ket for wheat, the latter to be obtained
through the joint management of nationally
held reserve stocks.
234
The final evolution of our policy is the im-
position of limits on the size of direct pay-
ments that individual farmers receive from
the government. Although these limitations
have probably had only a minimal impact on
the distribution of income and payment ben-
efits, most observers would agree, I believe,
that this development has improved the
overall equity of the programs, when equity
is evaluated in terms of both the farm pro-
ducer and the taxpayer.
To summarize, both the 1973 and 1977
legislation have given us important steps to-
ward evolving more rational commodity pro-
grams. However, we still have a number of
important policy challenges before us. Let
me address at least four of them.
1. Can we obtain more consistency in our
commodity programs? Put somewhat more
amply, can we obtain a more general discon-
nection of income policy from price policy?
Just enumerating the commodities for which
changes would be required provides a good
indication of the magnitude of the challenge.
To obtain consistency would require changes
in the sugar program, the dairy program, the
tobacco program, and the peanut program.
The current Administration has made an
attempt to obtain changes in the sugar policy,
and now finds itself in an impasse with Con-
gress. The Administration’s goal has been to
introduce the concept of deficiency payments
into sugar policy so as to provide income
support to producers while at the same time
enabling consumers to benefit from the lower
prices in international markets. But a combi-
nation of factors weigh against such a policy.
The cost of production is high in two politi-
cally important states — Louisiana for cane
and Idaho for beets. In addition, there is con-
cern on the part of producers that explicit
deficiency payments will lead to payment
limitations. And finally, the producers of
corn-sweeteners now side with cane and beet
producers, and argue for a general sweetener
policy that includes them, rather than a sugar
policy alone.
It now appears likely that we will take a
step backward from the more liberal sugar