AGRICULTURE: Faith, Hope, & Parity

In Washington last week the farm bloc started playing patty cake with parity again. The Russell-Pace rider to the minimum wage-increase bill was purely & simply a scheme for inflating the parity price formula by the addition of farm wages. To the farmer it would mean a solid 33% boost. March’s parity wheat prices, for example, would be upped from $1.58 to $2.10; the nation’s overhead food bill would go up $4.5 billions.

Everybody understood such figures, but few U.S. citizens knew much about the thing that the farm bloc was trying to manipulate. What is parity?

Agricultural economists hurried to explain it once again. “Parity,” one- said, “means a price for the farmer’s product which will give it an exchange value, for things the farmer needs to buy, equivalent to that in a specified base period. The base period used as a par is the five prewar years 1909-14.”

In plainer English, this means that if a farmer got $100 for 100 bushels of wheat in 1909-14, and could buy a new stove and suit of clothes with that $100, his returns today should enable him to buy the same goods with 100 bushels of wheat.

Who pays the freight? The U.S. taxpayer, through the Department of Agriculture, which makes parity payments in cash (i.e., subsidies) whenever the combination of loans and marketing quotas fails to pull farm prices up to parity.

Tattered Target. At the heart of parity prices stands the perennial farm bloc target: the parity formula itself. Patched and scarred after 14 years of ceaseless gunfire, the formula still continues to support farmer’s purchasing power.

First step in using the formula is to determine a base price for the 1909-14 period. This is done by averaging farm prices reported to the Department of Agriculture during these years. For example, cotton averaged 12.4¢ a pound; wheat 88.4¢a bushel; corn 64.2¢ a bushel.

Second step is to calculate an index of current prices paid by farmers for the necessaries of life as well as for items used in production, like plows and tractors. Taxes on real estate and interest charges are added. In the month of March 1946, this procedure gave an index of 179, meaning that farm-commodity prices had to be 179% of the 1909-14 base prices to have the same purchasing power as in 1909-14.

Third step is to adjust the 1909-14 base period prices by the index of prices paid by the farmer. Thus the parity price for cotton in March was 1.79 times 12.4¢ , or 22.2¢ a pound; parity price for wheat was 1.79 times 88.4¢, or $1.58 a bushel; for corn, $1.15.

With such a formula, parity prices will rise of their own accord, need no urging.

Examples: the parity price for corn, 97¢ in September 1942, touched $1.06 a year later and is now at $1.15. The parity price of wheat rose from $1.34 to $1.58, cotton from 18.85^ to 22jf.

Superparity Prices. With one eye on this procedure, non-farmers ask: What more does the farm bloc want? The answer : superparity prices. These they hope to get by a combination of tried & true tactics. Already, by shifting some commodities to base periods more favorable than 1909-14, they have won some super-parity prices; of the 157 products now covered by parity prices, only 61 are still tied to the 1909-14 period. Important changelings: tobacco and potatoes.

In the Russell-Pace rider the farm bloc is busy at another battle-worn technique: adding new costs to the parity formula. In 1935 interest and taxes were grafted on, raising the cost side of the parity index from 125% to 130%. At that time no farmer wanted to include farm labor costs: it would have dropped the index four percentage points. Today it is another story; wages are on the up, and they can drag parity up, too.