Agriculture: Its global reach in the 1980's;

              AGRICULTURE
its global reach in the 1980s
by Dr. CLAYTON YEUTTER/ President Chicago Mercantile Exchange
Few topics evoke as much interest today as does agriculture. Or, more specifically, food. The scenario begins in the decade of the 40's, when America's farmers were encouraged to produce massive quantities of food to fight a multi-continent war Farm prices rose dramatically, presenting a striking contrast to the incredibly low price levels of the depression laden 30's. For centuries, farmers have responded eagerly to price incen-tives, and World War II was no exception. We fed our own troops, and a lot of others.
American farmers learned their production lessons almost too well in the 40's. Too well for their own good, certainly, as surpluses began to mount in the aftermath of .the Korean War. By the mid-1950's, prices had plummeted, and most farmers under-stood "inelastic demand." But they really did not know what to do about it other than to ask for government help-not a happy solution. Govern-ment "assistance" translated into pro-duction control programs—remember the "soil bank"-and "ever normal" granaries bursting at the seams.
As we moved into the 1960's, everyone was in distress. Farmers did not appreciate having a massive government bureaucracy following their every move. Nor did they much like being on a government dole, even though many of their urban cousins were in the same situation. Consumers were ambivalent for awhile, but then became increasingly hostile. They had by far the cheapest food in the world, but failed to
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appreciate that fact. And, as inflation began to rear its ugly head in the late 60's, food prices began gradually to creep upward. Consumers, in their roles as taxpayers, also discovered that it cost a heap of money to (1) pay farmers not to produce, and (2) store all that excess grain that seemingly would never go away
As we entered the decade of the 70's, everyone rebelled. The result was a dramatic shift in farm policy, with market forces once again being
given a chance to function. To the surprise of many—especially those in the federal bureaucracy—the market worked. With prices permitted to seek their own levels for the first time in many years, we suddenly discov-ered that American farmers were efficient, in fact far more efficient than their counterparts elsewhere in the world. Policy makers of the 50's and 60's should have remembered that from World War II, but appar-ently they forgot.
With a market-oriented farm policy, U.S. agricultural exports began to increase, lust as we started to work 0,ff some of our surpluses, the Soviets entered the world market on a grand scale. All of us will remember those days of 1972 and 1973. The surplus disappeared in one fell swoop, and the world began to worry about food shortages rather than food surpluses.
As is often the case, people in the U.S. and elsewhere overreacted to the "crisis" and the food pendulum swung between excess and shortfall during the remainder of the 70's. Both supply and demand were volatile-supply because of the vicissitudes of weather in many countries (especially the Soviet Union) and of demand because of the new entrants in international trade (the Soviet Union, the nations of Eastern Europe, and, occasionally, the People's Republic of China).
The U.S. Congress passed farm bills in 1970,1973, and 1977, but the basic content did not vary appreciably. All three pieces of legislation had a decided market orientation, backed by strong bipartisan political support.