Agriculture: Issues of the Past Resurface

The past year marked a return to conditions in the agricultural sector that closely parallel those prior to 1973. Agricultural production rose to a record high, boosting "reserves" to levels comparable to the "surpluses" experienced in the late sixties and early seventies. Increased output dropped net income per farm — adjusted for inflation—to levels more typical a decade ago. Lower earnings coupled with record-high production expenses and debt-servicing obligations rekindled concerns about farmers' "tight cash flows" similar to past concerns about the "cost-price squeeze." A "farm strike" late in the year enhanced public awareness of the deterioration in farm income but probably will have no more impact on prices than past "withholding" efforts. New legislation in 1977 propelled the federal government back into a major role in supporting farm earnings at potential costs likely to surpass previous highs. The return of government has brought a number of programs—such as "set-aside acreage" and "extended Commodity Credit Corporation (CCC) loans"—that embody features similar to programs of a few years ago. These parallels may ultimately be judged as the bridging of a time span during which the farm sector experienced a major debtfinanced boom in capital expenditures and land values that may result in particularly difficult adjustments in the years ahead.