COMMODITIES: Up on the Farm

When Congress began battling over an election-year farm bill seven months ago, the situation of the U.S. farmer was one of uncertainty. Prices of most farm commodities had hit bottom, the parity ratio had fallen to 80%. Traders, realizing that the largest U.S. farm surplus in history was jamming storage bins, sold short or shied away from the exchanges, and futures prices were shaky. But now the attitude of the farmer has changed from uncertainty to the beginnings of cautious optimism.

By last week, farm prices were 10% above January levels and the parity ratio had climbed to 85%. Wheat, corn, oats, rye and other commodity futures were rising. Department of Agriculture economists revised an earlier forecast, predicted that net farm income in 1956 will be higher than last year’s.

The optimism stems from a new kind of operation of the old law of supply and demand−with overtones of Government action. The Agriculture Marketing Service estimates that farmers will harvest 24% less oats, 3% less corn, 10% less barley, 21% less sorghum grain, 5% less hay than they did in 1955. Main reasons are drought and cold weather, which not only cut yield per acre but also prompted farmers to plow their damaged crops under and join the Federal Government’s soil bank. Since the soil-bank plan was inaugurated in late May, more than 10.7 million acres of farmland have been taken out of production.

One major crop that will be bigger (by 2,200.000 bu.) this year than last is wheat, but the wheat farmer also can look forward to higher prices. The Department of Agriculture has announced that, effective Sept. 4, it will stop cut-rate sales of wheat from Government stocks and thus force exporters to buy on the open market. This could boost market prices to nearly 100% of parity.

The same general pattern applies in the cattle market. Since mid-July beef cattle and calves, which constitute the largest single source of U.S. cash farm income, have been bringing farmers higher prices. All grades and weights slaughtered in Chicago last week brought a top price of $26.27 compared to $22.50 in the same week a year ago. The prices are up because lower production and premature marketing have resulted in a short supply of beef. Stockyard experts predict that the price trend will continue upward into November.