If the United States is unwilling to be price competitive, then the
only other alternative is to be prepared to fully exploit our role as a
residual supplier. In the event of a major crop failure elsewhere in the
world, the United States would be about the only country prepared to
make massive sales. We would benefit at least for a year or two. How-
ever, unless the conditions noted above change, we ought to be fore-
warned that any spurt in exports will be temporary, not permanent.
Price and Income Supports. Raising price and income supports is
often proposed as a cure for the financial ills of agriculture. In the
context of current stress, the forthcoming 1985 farm bill has taken on
particular importance. However, expectations for any farm bill should
be modest with respect to its ability to alleviate financial stress for at
least two reasons:
• Prosperity in American agriculture is closely correlated to how
little, not how much, support programs have had to be used. Pros-
perous periods in the last 50 years have included the World War
II era, the early 1950s, and the 1970s. Programs weren’t used
much in any of these periods. It is difficult to identify a prosperous
period when supports were used extensively. Supports have been
most useful in providing an economic “safety net,” not an eco-
nomic rejuvenation for agricultural producers.
• For producers encountering stress (i.e., those having debt∕asset
ratios of 40 percent or more), price or income supports might have
to be increased substantially (30 percent or more) to provide suf-
ficient cash flow to service all debt [8]. This would mean higher
costs to the government and a larger accumulation of commodities
in government storage. The present administration is trying
mightily to avoid either eventuality.
Overall, I believe it is difficult to make a case for higher income
through 1990. Perhaps the best chance would come from weather ab-
errations that cause the United States export share to increase. Hope-
fully, the macroeconomy will treat farmers less negatively than in the
first five years of the current decade. But expectations of assistance
from farm price and income supports should not be overblown, espe-
cially if a transition to a greater market orientation occurs and budget
restraints prove meaningful.
Balance Sheet Adjustments
If incomes can’t be improved, then it may be necessary to consider
debt restructuring or reduction as a public policy option. While there
are no easy alternatives for dealing with excess debt, a “do nothing”
public policy will simply cause the magnitude of the problem and the
cost of adjustment to grow. To do nothing is policy by default. Farm
foreclosures and bankruptcies would increase, as would agricultural
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