Future Directions for Agricultural Policy: Discussion

Abstract

Bullock has presented useful and interesting statistics that describe the problems that have arisen under government programs in recent years. One of his main arguments is that the economic realities of today's agricultural sector are inconsistent with the underlying assumptions for, and objectives of, existing legislation. Let us briefly examine the basis for this argument and his suggestions regarding appropriate future directions for agricultural policy. I felt some unease about accepting uncritically the U.S. Department of Agriculture cost, price, and income figures appearing in the paper. More discussion about how the production costs were computed--e.g., showing how land costs were taken into account-and whether the income statistics are likely to be revised substantially would have been helpful. Also, it was not clear to me what was meant by the statement that programs using a support price based on average farm production costs will provide strong incentives for expansion by the larger farms that control the dominant share of productive capacity of U.S. agriculture. While such a statement is doubtless true, one might infer from it that support prices under current legislation are based directly on average farm production costs. Such an inference would be less than fully accurate for several reasons, one of which is that target prices for feed grains and wheat were unhooked from a direct tie to a cost-of-production mover under the Agriculture and Food Act of 1981. But enough of these minor objections. Bullock, in my judgment, effectively supported his main argument with the following points, which are fully developed in the paper: (a) The discrepancy between production costs of large and small producers makes it impossible to achieve income support objectives for small farmers with support prices that do not overly stimulate production by large, low-cost producers. (b) Payments for supply reduction must be focused on the large, low-cost producers if they are to reduce output effectively. Such payments appear unjustified from a social welfare standpoint. (c) The per capita disposable incomes of operators have approached somewhat closely those of nonfarmers in the past ten years. Hence, there is little basis for arguing that farmer incomes need to be supported to raise them to levels nearer those of nonfarmers.