NEW DEVELOPMENTS IN FARM PRICE AND INCOME POLICY PROGRAMS: PART I. SITUATION AND PROBLEM

provided by Research Papers in Economics

NEW DEVELOPMENTS IN FARM PRICE AND
INCOME POLICY PROGRAMS¹

Part I. Situation and Problem

IVallace Barr, Extension Economist
Ohio State University

A. Introduction

Agriculture is out of balance with the rest of the economy. The
imbalance arises because the adjustments made in the use of resources
in agriculture have not kept pace with changing supply and demand
conditions. Numerous factors influence the slowness of agriculture to
adjust use of resources to the changing economic conditions.

Some of the major factors on the supply side within agriculture
which impede adjustments include: (1) the competitive nature of
the agricultural industry with its millions of farm units and their in-
dividual decisions; (2) the nature of fixed costs in agriculture; (3)
risks and uncertainties revolving around prices, new technology, yields,
health of operator, etc.; (4) lack of knowledge of alternative oppor-
tunities within or outside of agriculture; (5) lack of training resulting
in relative immobility; and (6) inertia or the reluctance to change to
new methods or new employment.

Other restraining factors include: (1) government programs and
(2) other social, family, or institutional influences. On the demand
side one of the major considerations is that a given percentage in-
crease in the market supply of farm products prompts a greater per-
centage drop in the price of food products or vice versa. These factors
will continue to impede needed resource adjustments in agriculture.

B. Changing Structure of Agriculture

An average of about 1 million people have migrated from agri-
culture to the nonfarm segment in recent years. The number of farms
has been declining about 100,000 annually as seen in Table 1. Man
hours worked have declined 2 percent per year since 1940. The table
also shows that cropland harvested is about the same as in 1910 but
has declined since 1952. Capital inputs in agriculture have been in-
creasing about 2.3 percent per year since 1940 replacing some of
the labor resources. This combination of resources is increasing output.

¹The several parts of this report were prepared by the individuals shown. The
other members of the work group who reviewed the preliminary draft and assisted in
the development of the final report were: Bushrod Allin, G. W. Campbell, Jr., Willard
W. Cochrane, Eber Eldridge, Foy Helms, Virgil D. Kennedy, L. F. Miller, C. Kyle
Randall, Warren L. Trock, E. D. White, and G. B. Wood.

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