NFO-19 (AV10427): Midwest Farm Report: Agriculture and the National Economy

[music] welcome to the midwest farm report brought to you by members of the National Farmers Organizations and their friends of this area today we have two national board directors of the NFO Mr. Gene Potter of Illinois Mr. Al Herman of Ohio here to discuss the NFO and its position in today's economy now here's Gene thank you there's been a great deal of discussion about the NFO program and the objectives and how this is going to be carried out today Al and I would like to discuss for a few moments with you the economic justification of such a program why it's really necessary and how that it will work into our present economic structure and the results of such a plan I think for a moment we should review a little bit of the past and what leads us into the position we are today what makes something such as this necessary now today in agriculture we are attempting to operate or to market our production in a competitive economic system or attempt to market it as if we were operating in such a system now as we look in the history we can see that in the beginning when farmers produced their production they hauled it to market and sold it that when you had a large number of buyers at the marketplace that we had a competitive situation but this actually began in theory to break down from the very time that the consumers quit trading with the producers directly when they started even buying at the first general store although this was theoretical and it didn't at that time have too much effect on the price level in agriculture of course and it was operational we could in agriculture return a fair profit for a good number of years even until following World War II when we had approximately a hundred thousand independent grocers that retailed the majority of the food in the country but today we find this situation changing we no longer have such a condition with which we operate in so it makes it necessary for some type of a structure to cope with our marketing problems today and with this I think that we should think a little bit about what solutions have been offered in the past and what the Al would you like to discuss for a minute some of the things that we have have been offered and just exactly what they have been able to do and what they haven't been able to do yes I'll go into that briefly over the past some years many proposals have been advanced to meet these problems in agriculture now we might say that these proposals fall into five general categories government programs cooperatives the cry or the call for more efficiency on the part of the farmer we might also say that the suggestions were advanced that there would be fewer and larger farms and then we get into the last category that the so called law of supply and demand now we all know that the government programs were brought into being because there was a definite letdown in the agricultural economy however I think we would have to agree that these government programs have not worked out to the satisfaction of the farmer and certainly not to the satisfaction of the general taxpayer I think we can pass them over today only a skeleton remains of these government programs and it seems that with the Bureau of the Budget adopting the position that they did recently that these programs probably will cease to be in the near future the other proposed advanced we're in the nature of cooperatives farmer cooperatives these however are somewhat limited in their application it seems that they're more bound by the restrictions that have been self-imposed than anything else they operate under of course the Capper-Volstead Act but I doubt whether they have really answered these have the solution to the farm problem with the present time this more efficiency of course this idea of more efficiency has been advanced for some time I think we will have to agree that this is a good thing of course we need to be efficient on the farms but there's a limit and when the efficiency has advanced to the point where you've practically reached the end of what you can do and your prices have not increased then you must realize that there is some other factor that is entered into this I think this brings us up to a subject that you would like to discuss the so-called law of supply and demand Gene well thank you al this possibly is a pet peeve of mine and I hope that we can bear with this for a moment realizing it is somewhat dry but these are some of the hard facts that we have to consider when we're talking about a marketing structure now as I mentioned earlier in the brief review of the past we are supposed to do today to operate in a competitive structure and by very definition this competitive structure is one which the suppliers none of which are large enough to affect the total supply and the demand or those purchasing the supply none of which are large enough to affect the total demand now let's look for a moment at what we have in agriculture today and I think there's no doubt in anyone's mind that as far as the supply is concerned that I as a producer if I never produced a steer or raised a bushel of corn that it would not affect the total demand or affect the total supply you're the same can be said for the largest commercial feedlot in this country that anyone in New York City could still go to the store and the housewife couldn't tell the difference in the quality of meat in the showcase so we cannot as individuals affect that of the total supply but let's look at the other side of the picture for a moment as far as the demand is concerned take your largest meat packer that packs 18 percent of all the red meat in the country last year and your second largest with around 12 percent with your major retail chains of which today or your chain interest retail better than 3/4 of all the food in the country with a handful retailing half of this there's no doubt in anyone's mind if you took Swift and Company off of the market in a given day or any large Packer that it would affect the total demand but on the other hand we can see that no individual producer can affect the total supply so by very definition we no longer have a competitive economic system and supply and demand as Al has mentioned here as it is offered as a solution or a price determining factor has to operate in a competitive economic structure to return a fair income to the producer now let us never overlook the fact of course that we must take into consideration the demand for any given supply at a price but I'm not speaking of this in the broad sense when I speak of supply and demand being unpredicted a I'm speaking of it in the narrow sense as a price determining mechanism which has to operate in a competitive economic system well Gene could I interject something here I'd like to make the observation to the law of supply and demand merely as a natural law which in effect says that a product is moved from the producer to the consumer work it is sold at some price and this doesn't necessarily have to be a price that would cover the cost of the most efficient producer this law of supply and demand has been greatly over touted yet it will not produce as I said a minute ago an adequate price in most cases to even the most efficient producer do you agree to that i think this is true and there is something also that we should consider and it is very important I think at this point and a good number of times those who think of a collective bargaining program and agriculture wonder if we have actually considered this and we realize that when you operate under the structure we are today that the producer takes no responsibility for offering and even flow to the market for producing a quality product or for taking care of any temporary overproduction we realize that anytime you consider putting a price that these are three of the basic requirements that any organization pricing a product must accept the same requirement that General Motors or DuPont or any major corporation in this country accepts when they put a price on their production we also have to accept this in agriculture and I think that a thorough understanding of this fact would make a lot of us more receptive to the idea of collective bargaining in agriculture realizing that we not only have to produce this production we and put a price on it but with this advantage we have some obligations and one of these of course is the fact that we offer an even flow to the market one of the most important today in our Marketing System we pay highly for this freedom to market as we choose we pay it in the price and if we're going to remove that lower price and substitute a higher price then we have to offer an even flow to the market this can be done by voluntarily coordinating the marketing efforts of the individual producers throughout the area as they voluntarily decide desire to sell as far as a quality product this has been to some extent established by your grade levels as far as the USDA is concerned but the producer must then realize that when he is pricing this production offering a certain grade for sale that he has to attempt to produce this and you thirdly must take the responsibility for any temporary overproduction which the program and any collective bargaining program must have incorporated in this plan I'd like to revert just a moment to this law of supply and demand and and the things that are necessary to overcome its present operation we must recognize the fact that today the huge let's call them the chain stores have built up a huge volume buying power now this is not going to disappear overnight in our opinion the only way that we can successfully combat this type of economic what do we call it economic monstrosity is to build up our bargaining power of our own the farmer must build a bargaining power now in order to do this he must organize this is entire this is absolutely necessary in order to offset this huge volume buying power don't think we can dwell on that too much this was brought to my attention but what you said a minute ago Gene about the impossibility of the average farmer or any farmer for that matter no matter how large he is of offsetting the huge volume buying power of the change this is true of course you mentioned we we must do this well I certainly hope that we do but of course there are some alternatives which maybe we should look at for a moment none of which are very desirable as far as we as producers in agriculture today are concerned but there are some other alternatives of course you can progress to a socialized type of Agriculture which would in its own way solve some of these problems but we in the National Farmers Organization are not in favor of such a program and I'm sure that the majority of the producers in agriculture today are not in favor of agriculture being regimented and strictly controlled by government programs I don't think the taxpayer and the consumer is in favor of this type of program I think a consumer when he pays his grocery bill he'd rather pay for it in their grocery store than on his tax bill there are of course another possibility that we continue this so-called free-type marketing that we're doing today a new term that's become prevalent in the last few months another term for supply and demand or a competitive economic system this can continue if farmers are complacent enough not to take action themselves if continued unhampered I'm sure that instead of having three and a half million farmers as we have today that the programs are established not established but the idea and philosophy forward by the Committee for Economic Development the idea is that the economic advisors to the president administration proposed will definitely offer some type of a solution but what is this and what will happen well if we remove two and a half million farmers of the three and a half that we have today you'll end up with a million producers in agriculture of course of these you'll have a similar breakdown you'll have a small percentage producing a large percent of the production and as this continues to progress no doubt that there will be organized selling in agriculture but the question is do we do it today as family type producers or do we wait a few years and allow someone else to do it when we're working for them as employees or something such as this and as far as the consumer is concerned from this standpoint the consumer today is buying his food cheaper than he ever has in the history of this country or anywhere in the world and there's no doubt that we within this organization are in favor of this but we also have to consider that I'm sure when a small percentage or a small number of people produce the production in agriculture that they're not going to be merciful on the consumer and at that time the price will raise there will be a price in agriculture but the question today who's going to do it are we going to do it as individual farmers is the government going to do it or our large corporate interests going to establish this price I think we would say that vastly more more preferable solution would be let's do it by organizing through NFO, NFO's announced purpose of course is to help save the family type farm I think this certainly would be more appealing to the average farmer than to this socialized agriculture statement which you made makes me shiver I don't like it at all I you don't know I don't we market what have we accomplished under a free market if it were to be any more free of course when we say a free market we also mean absolutely no restrictions on imports right well I think this is certainly part of it not specifically from a supply and demand standpoint but it's certainly an implication I think al that there's something else that can be added here when we talk about justifying what any movement is I don't think that you can justify a social movement necessarily just to preserve the status quo or to preserve the good way of life which some people in agriculture tend to believe it is and I certainly there must be a lot of us that do or we wouldn't still be here but there is an economic justification for this as far as efficiency of production and we've heard a great deal about this in the past and as we look for a moment at the different methods of production in agriculture we only not only can look in this country but you experiments and different types of economies that are operating around the world today and in the past I don't think there's doubt in anyone's mind that's the most efficient productive unit in agriculture anywhere in the world is the family-type operation and those who are involved directly in this realized that it isn't an 8 to 5 job and for a producer to do the best job he needs to have a direct interest in this and when you move from this to where hired employees are doing the producing then you lose a great deal of your efficiency realizing of course that in particularly in today's marketing structure where a large corporate interest can do a better job of buying a better job of selling or means on any given day maybe a get a few cents more or a hundredweight buy his supplies a few cents less that as he is compared to the other productive units he is doing a better job but as far as the economy or the his addition to our society his production per man-hour of labour is not as high he is able to keep his cost down but his production per man-hour of per man-hour his production for per dollar of investment is not as high because of the lack of interest of those involved and even though this is a human factor and sometimes we tend to discount it it's proved to be very significant in the production of agriculture not only in this country but all over the world and we've seen other types of systems tried and a gradual reversion back to where the producer has a direct interest in the production gene do you think we should get in just a short time into the requirements of a modern day marketing system successful modern-day marketing system I think that it certainly would be a good idea from the standpoint that we need to understand this producer just what will be necessary to fulfill these requirements we're talking about a few moments ago we men the first point we must establish bargaining power I think this is easily understood nothing can be done without bargaining power at the present time it's all on the other side the farmer has no bargaining power and this must be established another point there must be one centralized bargaining Association to bargain for all commodities I don't think we can continue to do this commodity by commodity it hasn't proven very successful do you have any comments on that well yes I this is quite obvious and I think particularly in those who do not understand the these requirements in agriculture look at this and it's quite obvious that you cannot raise the price of any given commodity without raising the general price level of all commodities and so that there won't be shifting back and forth and the man that is the most efficient in any commodity continues to produce it so I think it's quite obvious that this is true you said that very well another point is that we must secure contracts with the processors without contracts any games made would be only on a temporary basis I think we've had ample examples of this in the past in various areas that I could quote I won't say them at this time gains have been made which lasted over a relatively short time so contracts with processors must be secured in order to accomplish the retention of any gains made another point would be there must be a system devised to take care of excess production give me this is quite true and I think possibly that we should expand on this for a moment how good many of us are concerned and have been in the past about raising the general price level in agriculture which we are discussing this causing an overproduction any given commodity or agricultural production in general now I think there's a strong argument that can be forwarded form the standpoint that an increase in price will not increase production particularly in the short run and those of us who do operate farm units realize that we have a certain a number of fixed costs and as our price goes down our fixed costs remain the same if your price per unit goes down then you have to produce more units to cover your fixed cost now this of course is a short-run thing and it is not the only consideration but I think it's a quite strong consideration that a lot of us have overlooked so in this standpoint by increasing the price does not necessarily follow that you will have an increased in increase in production but let's assume that we do then we have to be prepared to take care of this and very few examples of course you can use secondary markets channel this production to markets that would not consume this ordinarily you can take livestock for instance market livestock at lighter weights and cut down your tonnage it isn't the head of livestock that's sold it's the ton of beef pork mutton lamb or what it might be this to be concerned so I think that we definitely have to realize this is a responsibility that's right gene another point is that we must try to promote cooperation between producers we all know that in the past the farmer hasn't cooperated with his neighbor farmer any too well this is almost a saying you know they talk about the individual farmer well there must be then we must promote this cooperation in order to be considered for instance as a reliable source of supply and unless we have a reliable source of supply we certainly will not have an effective modern-day marketing system yes this this cooperation situation we can agriculture FOr a good number of years and some still believe that those are now your she was the strong individualist and he needs no one else this has been agriculture's downfall we know do not compete in the way that some consider we compete with against one another since the farmers machinery has been enlarged and become self-sufficient he thinks that he needs no one well there's one job that you do need your neighbor for yet and that's to put a price on that production you may not need him to plant the crop or to harvest it but you need him to put a price on it which is the most important part of your operation whether some of us realize it or whether we don't that's right entirely right another point is that we must offer or the processor list offer inducements for quality products this is entirely necessary at the present day there are incentives in force in some in most products but these incentives are not in our opinion great enough in order to establish a more even supply yes and there's another point here that is quite similar as far as producers we are quite distantly removed from the consumer as such and our education as producers breaks down at times now we have learned to be quite efficient in an agriculture we improve our productive methods but there is a gap in education as far as educating the producer as to what the consumer really demands what the consumer needs this is another situation which as organized as a group you can accomplish as individuals this just is no way in the world to do it it takes a group action like a good number of things in this marketing situation you want to get into this challenge we spoke about challenged agriculture it certainly is a challenge in more ways than one and I think that we should accept recognize and accept it so I think we must organize and let's say let's organize into therefore for the purpose of bargaining together selling together and pricing our agricultural production together and then of course we must use holding actions when necessary to get the processors to sign a sufficient number of contracts you haven't thing to add to that well only a summary in a generalization possibly out I think that too many times a reflection of this strong individualist in agriculture that we tend to believe we are we think too much I mean as an individual for individual means our individual ends sometimes this is being a little theoretic and over emotional possibly but I think it's something we should consider the fact that we have a challenge not only for your family and the economic future of productive units in agriculture but for your economy as a whole and as your political and social structure is based on the economic welfare of any economy then you have a social responsibility and there have been a good number of people in the past who have indicated that agriculture is the mainstay in the basic base of any economy we've progressed from this in this country as you industrialized a lot of other situations become seemingly more important but basically 70% of your raw material production comes from agriculture today we are still the largest as far as increasing the gross national product in this country in real income so we do have a real social and moral responsibility to improve the health so speaking of agriculture in this country that's right gene this also provides a challenge to NFO we feel since we've outlined the program under which this can be accomplished it's a challenge to NFO to provide the leadership to farmers to finish the job thank you thank you very much [music] the Midwest farm report has been brought to you today by members of the national farmers organization and they're friends of this area for further information attend local meetings in your area or contact the national farmers organization Corning Iowa [music]