AGRICULTURE: The Price of Parity

Here the Red Queen began again. “Can you answer useful questions?” she said. “How is bread made?”

“I know that,” Alice cried eagerly. “You take some flour . . .”

In its midyear report last week, the President’s Council of Economic Advisers hailed the prospect of bumper crops as the one strong force which “should be of signal aid in checking of inflation.” But was it? Thanks to the farm bloc and the Government crop-support program, the answer seemed likely to be no, at least for months to come.

The abundance promised by agriculturists last week caused another sharp drop in all grains, brought them close to their support level. Though grain prices, on an average, are still three times those of prewar, the Government is required to stabilize them at that high level by grain buying and loans to farmers. Moreover, as industrial prices rise the support level will rise too: the complex parity formula ties farm-support prices to industrial prices. In effect, the Government may soon be required to force up grain prices from their present levels.

Set the Price. The Department of Agriculture is already tangled up in the Alice-in-Wonderland economics of the support program in another farm product: after spending $40 million to support potato prices last year, the department asked farmers not to increase their potato acreage this year. But farmers increased production with better fertilizers, insecticides, irrigation. They felt sure the high support prices would go even higher. By last week the Government had already paid out $17 million for surplus potatoes—and the bulk of the crop is yet to come in.

Unlike last year, when the department let 22 million bushels rot, while consumers groused at high prices, the Government is determined to put this year’s potato surplus to use. It is going to do it no matter what the cost. So it is sponsoring a new industry: the manufacture of potato flour.

Pay the Price. The Government is buying surplus potatoes at around $1.55 a bushel, and selling them to distillers and food processors at a give-away price of 9¢a bushel. (The Government pays the freight, which averages another 40^ a bushel.) The. only condition is that the buyers turn the potatoes into flour. To help feed occupied Germany, the Army has promised to pay about $7 a hundred pounds for as much as 448 million pounds of potato flour, about 30 times the normal annual output. With a highly profitable market thus assured, dozens of companies have started making flour.

The catch is that a bushel of potatoes makes only ten pounds of flour. All told, the flour will cost the Government close to $25.60 a hundred pounds. That is five times what it has to pay for wheat flour. Meanwhile, the retail price of potatoes stands at $2.60 a bushel, twice the 1941 price.

“Where do you pick the flower?” the White Queen asked. “In a garden or in the hedges?”

“Well, it isn’t picked at all,” Alice explained. “It’s ground . . .”

“How many acres of ground?” said the White Queen. “You mustn’t leave out so many things.”