Agriculture Secretary John Block on Monday slashed federal price supports for the 1986 corn and wheat crops by 25 to 30 percent, the maximum allowed under a new farm bill, but the move still could lead to new records in taxpayer spending on farm programs.
Aides said the record spending could come because an unprecedented number of farmers are likely to sign up for separate income subsidies designed to protect them from low prices.
They said such a massive sign-up could push total annual farm spending to $20 billion or more–well above 1983`s record $18.3 billion and earlier predictions of about the same amount under the new bill.
To keep costs from soaring even more, Block, who plans to resign next month, also used his maximum power under the bill to increase the amount of land that farmers must take out of production to qualify for the subsidies.
Such action will reduce federal purchases of surplus crops, analysts said, but it also could lead to modest cuts in income for many farmers.
At a news conference in Washington, Block also released highlights of the rules that will govern major new dairy and conservation programs. But he said he still had not set price support levels for soybeans, rice and cotton.
Block`s aim in slashing the corn and wheat supports was to lower the price of U.S. grain overseas and halt a six-year slide in export sales. Backed by many farm economists, he insisted in debate last year that the cuts were needed to get farmers back in touch with market realities and set the stage for a recovery in the depressed industry.
Prodded by several key legislators who shared that view, Congress voted to require Block to make immediate cuts of 15 to 20 percent. In approving the new five-year bill, signed by President Reagan last month, it also gave Block the politically volatile option of expanding the cuts by up to an extra 10 percent.
To protect farmers from the cuts, however, Congress rejected Block`s drive to lower target prices–the rates that determine income-subsidy levels
–and voted to freeze them for two years.
The income subsidies make up the difference between market prices and the higher target levels, so freezing the rates will force the government to increase subsidy payments to offset the price cuts.
Consequently, some analysts felt that White House budget officials might refuse to let Block use the optional authority, even though he had quickly pledged to do so. Adding to the concern were rules that exempt the bulk of the income subsidies from a $50,000 cap on payments to individual farmers.
The action to make the maximum cuts lowers the price-support level for corn by 25 percent to $1.92 a bushel from $2.55 in 1985. It cuts the wheat support by 27 percent to $2.40 from $3.30.
Because the price support cuts are likely to drive down market prices, Agriculture Undersecretary Daniel Amstutz said, administration officials are expecting ”very heavy” farmer participation in the subsidy programs.
A record 71 percent of corn farmers signed up last year, as did 75 percent of the qualifying wheat farmers. David Lyons, an aide to the department`s chief economist, said officials believe the participation rates could hit 85 to 90 percent this year.
Lyons said that prospect and continued deterioration in the farm economy have forced department officials to increase official projections of the three-year cost of the programs to $55 billion from the $52 billion cited when Reagan signed the bill.
”And if we have a big crop this year, the cost could be even more than that,” he said. ”It could be $20 billion a year for three years.”
To help keep the costs in check, Block also decided to use optional authority to increase the acreage set-asides required by Congress.
He set the amount of corn acreage that a farmer must idle without compensation at 17.5 percent, compared to 15 percent required by Congress and 10 percent under last year`s programs. He called for an unpaid wheat-acreage set-aside of 22.5 percent, compared to a legislatively mandated 17.5 percent and 20 percent last year.
Several analysts said the increases in unpaid set-asides will cut many farmers` total income by leaving them with fewer bushels to sell than last year. Insiders said such potential negative fallout was one reason the White House had Block announce the new program rules rather than leave the chore to his successor.
