Record grain harvest may hide need for better planning
Total world grain production is climbing toward a record high -- and diverting attention from the long-term problem of food shortages. The US Department of Agriculture (USDA) forecasts a record world grain production of 1,625 million metric tons for the current crop year, 4 percent above the 1980-81 harvest.
Yet agricultural economists warn that history has shown that a surplus can quickly turn into a serious world shortage.
Bumper wheat, coarse grain, rice, soybean, and cotton harvests in the United States are expected to more than offset poor prospects for these crops in some other countries. Because world supplies will be up and demand will be dampened by economic problems affecting most countries, prices for US farm products are expected to remain low.
For one key US crop, corn, the USDA states that "the price forecast for 1981- 82 has been lowered by 10 percent to a range of $2.70 to $3.15 per bushel. This compares with $3.15 per bushel for 1980-81 and $2.52 for 1979-80."
Exports are another indicator of farm-sector health. They have become a significant factor in the US balance of payments. Last fall the USDA predicted farm exports would hit $48.5 billion. That figure later dropped to $46 billion and then to just $44.7 billion last week. This latest estimate, which could continue to drop, reflects the lower price per bushel for US crops. The reduced export earnings are expected despite the continued likelihood of export tonnages reaching a new record of over 170 million metric tons.
The immediate result of reduced farm commodity prices and export earnings is that American farmers may need more government bail-out money than planned. The USDA predicts farm income this year of only $22 billion. This would be up slightly from last year but well below the 1979 figure of $32 billion.
The government's answer is to aggressively pursue opening new markets overseas. The Reagan administration wants to prevent increased stockpiles of surplus farm products adding to the cost of federal farm price support programs just when it is trying to trim farm spending sharply.
Farmers are equally eager to avoid adding to stockpiles whether under government or private control. They feel that stockpiles "overhang" the market and keep prices unrealistically low.
Michigan State University agricultural economist Donald Mitchell argues that new markets both are needed and are opening up for American farm products. He believes that the USDA is right to focus its promotional efforts on countries such as China, Mexico, Taiwan, South Korea, Brazil, and OPEC (oil-producing) countries of the Middle east.
But Mitchell also warns that the US should be actively planning to deal with shortages -- even though the immediate problem is oversupply and depressed prices. Sudden shortages in the past, such as the one which triggered the 1973 US embargo on soybean exports, he says, should serve as warnings.
Mitchell foresees serious shortages developing in "perhaps one or two years over the next 10." With current policies geared to an oversupply, he says, a situation of "tight supplies and extremely high prices" could occur quickly and force a "crisis management" response. "We would perhaps have to limit exports and make political decisions on allocations to individual countries." He foresees the reintroduction of embargoes "to isolate our domestic market from the international market," to prevent drastic price escalation hitting American consumers.
Instead, says Mitchell, the US should take advantage of oversupply and low prices to build reserve stockpiles. He also calls for "explicit rules" to be drawn up in advance so that both US producers and overseas customers know what measures would be triggered by particular levels of reduced supplies.
With careful preparation, Mitchell says, the extreme measure of imposing an embargo could be at least anticipated if not avoided. This would help remove the element of uncertainty that Mitchell believes was the most disruptive part of President Carter's embargo on grain sales to the Soviet Union.