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Study Advises Against Changing Farm Law

April 22, 1987

WASHINGTON (AP) _ Moves in Congress to change the farm law in order to pump more money into the beleaguered agricultural economy would be too costly and would send false signals to foreign competitors, a private study said Wednesday.

″If given time, the (current law) is expected to work,″ said Wharton Economics Inc. ″However, it will take time and does require continued government involvement - acreage reduction, programs to stimulate exports, and outlays of $20 billion to $25 billion per year.″

Some farm organizations, labor unions, church groups and others want Congress to change the farm law, officially the Food Security Act of 1985, from its market-oriented character to a tougher attack on surplus production and low market prices. Higher government supports and sharp acreage cutbacks would be included.

The law calls for lower federal price supports on major crops such as wheat, corn and cotton so that U.S. commodities can be more competitive in the world market, thus boosting exports and farm income.

Critics say exports continue to lag and that a massive infusion of aid and supply control is necessary to save family farming. Bills to do that have been introduced by Sen. Tom Harkin, D-Iowa, and Rep. Richard Gephardt, D-Mo.

The study was prepared by Wharton Economics for the Burlington Northern, Santa Fe and Union Pacific railroads, and Scoular Grain Co. of Omaha, Neb.

″A major policy change now would signal foreign agriculture producers that they do not have to adjust to the current economic signals of lower prices,″ the report said. ″Foreign producers need to see stable policies in the U.S. before they adjust planting decisions.″

The report added: ″ The key to the expected success of current legislation is slower growth in the expansion of foreign production. This will not happen if we continue to imply that we may return to policies that would raise world grain prices.″

But Cy Carpenter, president of the National Farmers Union, said the report appeared to present an ″idealistic scenario″ regarding the effects of current U.S. policy on foreign competitors such as Canada, the European Economic Community, Argentina and Australia.

Carpenter said he had not seen the Wharton report. He commented after a portion was read to him during a telephone interview from his office in St. Paul, Minn.

″The idea that the current farm program will work if given time has no evidence to support it, either, in terms of the situation faced by farmers,″ Carpenter said.

As for the contention that lower U.S. prices will cause foreign competitors to produce less, he said, ″There is no evidence that this policy can work unless it accepts the elimination of production agriculture in some of the major producing countries.″

Besides the Harkin-Gephardt bill, which could authorize mandatory production controls at the discretion of farmers, the Wharton study examined so-called ″decoupling″ of farm programs, which would enable farmers to plant what they choose and still be eligible for federal benefits while programs are gradually phased out.

The study also rejected decoupling as ″no more than a simple welfare program″ that would protect the income of farmers while letting them continue to produce.

Costs of farm commodity programs rose to a record of $25.8 billion last year, the Agriculture Department says, and are expected to be almost as high this year.

According to the Wharton projections, the nine-year cost of operating the current farm law, 1987 through 1995, will be $155.6 billion, an average of $17.3 billion a year. The annual cost would decline gradually after 1988 to $7.9 billion in 1995.

Under the Harkin-Gephardt plan, federal spending for the nine years would total $205.3 billion, an average of $22.8 billion a year. After declining to $19 billion in 1988 from $24.6 billion this year, the annual costs would rise thereafter to $26.8 billion in 1995.

Decoupling was projected at $217.6 billion over the nine years, beginning at $24.6 billion this year, rising to $40.9 billion in 1988 and then declining to $5.6 billion in 1995.

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