Letter to the President of the Senate and to the Speaker of the House Transmitting Legislative Proposals for Farm Commodity Programs

Dear Mr. President: (Dear Mr. Speaker:)

We have set forth five basic policy objectives for our programs in agriculture and the rural community:

--An abundance of food and fiber at reasonable and stable prices for the people of the United States;

--A workable balance between supply and demand at lower costs to the Government;

--Opportunity for the efficient family farmer to earn parity of income from farming operations;

--Parity of opportunity for all rural people, including new opportunity for small farmers; and,

--Effective use of our agricultural resources to promote the interest of the United States and world peace through trade and aid.

The legislative proposals for farm commodity programs which are transmitted herewith have been prepared within the framework of these policy guides. We seek no banner to wave for partisan advantage; we seek to find in this most difficult area the means by which American agriculture and the family farm can share in our rich and growing economy as fully as they contribute to it.

For more than three decades, and particularly since the end of World War II, the United States has experienced a staggering revolution in the techniques of farming. Science and technology, applied to agronomy and animal husbandry, have brought the American people a greater abundance of food and fiber than the citizens of any nation in history have ever known. Prior to the Second World War, farming productivity was increasing at only half the rate of industrial growth; but since 1945, it has increased at twice the speed of industrial growth.

As a result, food expenditures today take a smaller part of the family income than ever before. Less than one dollar of take-home pay out of every five is spent for food, and the proportion continues to decline.

However, the enormous advances in agricultural efficiency have left the farmer working harder and enjoying it less. Prices for his products are 5 percent lower today than 15 years ago. Only a small fraction of our farmers earn parity of income--returns comparable to earnings for similar work and investment. Many farmers do not even earn the minimum wage.

This inadequate return to the farmer is a consequence of the revolution of abundance in agriculture. If productivity in industry had increased in the past decade at the same rate as in agriculture, the 1963 level of industrial output could have been produced with 8 million fewer workers than were actually employed.

Commodity programs are the primary instrument which the farmer and the national economy use to cushion the force of the "output revolution." So long as the advance in agricultural technology continues to outpace the growth of population at home and the markets abroad, farm commodity programs will continue to be an indispensable element of national economic policy.

Even with commodity programs, the farms which require substantially more labor than the farm family can provide have declined in number in the postwar period; only the family farm with adequate resources has grown in number and in the volume of output. All others have declined.

The sensible policy for commercial agriculture is not to do away with commodity programs, but to improve them so that agriculture will provide an opportunity to earn a parity income for that growing group of farm families on farms large enough to be efficient.

In a real sense, the legislative proposals transmitted herewith do more than modify and extend commodity programs. They seek also to apply the forces of a vigorous marketplace to the needs of commercial agriculture so that we can turn more of our attention and more of our tax dollars to revitalizing rural life and rooting out the poverty which is all too prevalent in rural America.

The proposals provide, particularly in the case of wheat and rice, that the farmer should look to the marketplace for the dollars which will bring him closer to parity of income.

There was a time when the cost of food at the farm translated nearly dollar for dollar into retail food costs. That is no longer the case. Today, when marketing charges account for nearly two-thirds of retail food prices, even a significant rise in farm prices has far less impact than do changes in nonfarm cost. A 50 cent increase in the price of a bushel of wheat for example will increase the cost of a loaf of bread by little more than one cent.

The modifications in commodity programs also take into account world markets. Price and income support programs should not prevent the American farmer from competing effectively in world markets. The market prices for commodities under the proposals would be near world levels, as are the prices for feed grains and soybeans now.

We propose to compete fairly and vigorously for the fast growing markets in the world. From 1958 to 1964, while the dollar value of farm products sold domestically rose by less than a billion, the dollar sales of food and fiber exports increased by nearly $2.5 billion. The new commodity proposals will help to keep us competitive in world markets, sharing fully in future growth of food and fiber trade.

We also seek to find less costly means to achieve needed adjustments in production. Thus, the proposal for a Cropland Adjustment Program is designed to remove up to 40 million acres of cropland through long-term contracts. We now have over 55 million acres of cropland out of production annually, most of it under the year-to-year diversions features of individual commodity programs. In the first year, with only 8 million acres in the program, we estimate the savings from the Cropland Adjustment program compared with annual programs will be about $35 million.

The Cropland Adjustment Program, combined with the individual commodity programs, will provide the best and least costly means of bringing production into balance with domestic needs and export opportunities. Thus, the policies for commercial agriculture contained in this legislation are so constructed that all parts acting together provide an effective means of bridging the gap between the farmer and national prosperity while they provide all our people with continued access to food and fiber abundance.

Title I of the draft bill would extend for two years, with amendments, the voluntary wheat marketing certificate program enacted by the Congress last year for the 1964 and 1965 crops of wheat. This program has reduced government costs, and has given wheat farmers added flexibility especially valuable where crop alternatives are limited. In order to provide adequate support to the incomes of wheat producers while further reducing costs to the government and increasing our reliance on the market, the maximum level of price support which the Secretary could provide for wheat processed for use as food in the United States would be increased from 90 to 100 percent of parity. The Secretary could permit producers voluntarily to divert up to 50 percent instead of 20 percent of their allotted acreage from production, and the Secretary would be given additional discretion in establishing diversion payment rates. Other major provisions would be continued. The wheat program enacted in the Agricultural Act of 1962 would be inoperative until the 1968 crop.

Title II of the draft bill would extend for another two years the voluntary feed grain program first enacted on an emergency basis in 1961. This program has raised the income of feed grain producers, reduced surplus stocks by nearly 30 million tons, given farmers maximum flexibility of operation within a framework of price supports, and has provided needed stability for the livestock industry. The feed grain program would be amended to give the Secretary discretion to establish acreage diversion and price support payment rates at levels designed to meet the objectives of the program. In addition, the production of soybeans could be encouraged under new authority.

Title III of the draft bill would provide for two years for major amendments in the method of making price support available to producers of rice. The proposed marketing certificate program would follow the principle of the wheat marketing certificate program first enacted by the Congress in 1962 and reenacted in 1964, of providing substantial income support from domestic consumption, while supporting market prices near world levels. The Secretary would be authorized to provide price support through the mechanism of both loans and marketing certificates on the quantity of rice produced for the domestic market, in a range of 65 to 100 percent of parity. Price support for rice produced for export would be provided to producers only through loans. The level of price support loans would be related primarily to world market prices. Marketing certificates would be issued to farmers on a graduated scale in order to provide small producers somewhat higher average unit returns than larger producers. Provisions for acreage allotments and marketing quotas for rice which have operated for many years would remain in effect. The proposed revision in the method of supporting rice prices would make it possible to continue to support the incomes of rice growers while reducing government expenditures and placing more reliance on the domestic market to return adequate incomes to growers. The Secretary would be authorized to take such actions as he determined to be necessary to assist the industry in making the transition from the current program to the proposed program. Existing provisions of law with regard to price supports for rice would be suspended until 1968.

Title IV of the draft bill would provide for a two-year extension and for further amendment of the Wool Act of 1954, as amended. This act has operated successfully to help stabilize wool production and bolster incomes of wool producers. Funds are provided out of customs receipts on imported wool and wool products. Amendments are proposed which would authorize the Secretary to take into account the production and the prices of lambs in determining the level price support for wool, and would remove the present requirement that the Secretary set wool price supports at levels which would encourage the production of up to 360 million pounds of wool in the United States. In addition, provision is made for graduating incentive payments according to the quantity of wool produced in order to provide higher returns to small producers.

Title V of the draft bill would provide a long-term cropland adjustment program to supplement the annual acreage diversion programs in achieving and maintaining a supply-demand balance for farm products. It is expected that substantial savings would be realized under this program compared with annual diversion under the feed grain and wheat programs. The program is designed not only to supplement the commodity programs, but also to enable elderly farmers to retire from farming while continuing to live on their farms, to assist farmers who want to reduce their farming operations in order to shift to other employment, to conserve natural resources and add to the beauty of the countryside, and to improve the quality of rural and urban life. This program would amend the Soil Bank Act to authorize the Secretary to enter into 5 to 10 year contracts during the period 1965-70 for the diversion of cropland to conservation uses. The Secretary could provide for such payments as would be necessary to encourage producers to enter into such contracts. Provision would be made also for the Secretary to cooperate with other Federal, State and local agencies in permanently shifting cropland into public uses such as parks or recreational areas. Grazing or other agricultural uses of land contracted under this program would be prohibited except in case of emergencies. Local communities would be protected by a limitation on the percentage of the cropland acreage in any area that could be contracted. We are convinced that a long-term cropland adjustment program can provide not only substantial savings to the Government, and new opportunities for rural people, but also for long-range remedial action which will benefit the farm economy.

Title VI of the draft bill would give the Secretary of Agriculture authority to provide for the lease and sale of acreage allotments under the production adjustment programs of the Department of Agriculture. Such transfers would be limited to family-sized farms in the state of origin of the allotment. Small farmers who decide to stop farming or who have stopped farming can realize the value of their allotments while retaining their farms under this title. Operators of family-sized farms who wish to continue and to expand their farming operations could have the opportunity to increase their acreage of allotment crops.

We are continuing to study and to discuss with producers and the industry the means by which the cotton program can be improved so as to reduce the cost of the program and the level of cotton stocks while keeping cotton competitive with other fibers and in world markets.

Enclosed is a more detailed summary of the provisions of the proposed bill.

I urge that the Congress give these proposals prompt consideration.

Sincerely,

LYNDON B. JOHNSON