ELIMINATING FARM SUBSIDIES WON'T LOWER RETAIL FOOD COSTS

A recent press release from a Washington, D.C., consumer activist group charges that subsidies paid to dairy farmers, peanut producers and sugar growers add $4.5 billion to food costs each year. This group advocates an immediate end to sugar and peanut subsidies and a more gradual phase-out of dairy supports. (There are more family farms involved in dairy productions, thus they are treated in a more gentle manner.) These programs may well cost our country several million tax dollars each year but not billions in the marketplace as indicated by this group.

In truth the value of the raw materials (farm gate prices) in finished food products is minimal. the actual value of the wheat in a loaf of bread is about one or two slices in the whole loaf. The cereal box costs more than the grain in the box of cereal. Have you ever noticed how fast bread prices will rise in the retail markets when wheat prices increase and how slowly (if at all) they decrease when the farm price of wheat decreases? Admittedly, milk, meat and poultry have a higher percentage return to farmers and ranchers in relationship to the price of the finished retail product.

The dairy price support does add a small amount to the retail price of milk, but not nearly to the degree that the consumer advocacy group would have us believe. Changes do need to be made in the dairy support programs but should be done gradually. Remember, the support price also guarantees consumer a stable supply of milk and other dairy products.

In the case of sugar, most of the initial cost to the federal government is in the form of loans to sugar producers and/or processors. By law all of these loans (plus interest) must be repaid tothe government each year. The real problem with the sugar program is that the Department of Agriculture must carefully control the imports of sugar from other countries so that the domestic market price for raw sugar doesn't drop below the loan price. Thus the loans on raw sugar are always repaid. In addition, the European Common Market support prices on sugar, mainly from sugar beets, are very high, and the European Community pushes subsidized sugar out on the world markets, which depresses prices. The General Agreement on Trade and Tariffs, however, will require a gradual reduction of sugar support prices over 10 years in the EC subsidy program, but they are starting at a much higher support level than we are in the United States. Should we dump our sugar growers into this type of artificial situation?

If the U.S. sugar program were immediately discontinued, there might be a year or two of lower world raw sugar prices, and then supply and demand would take over. Some growers would go out of business, and ultimately the price of raw sugar would increase as would consumer prices. Some studies show raw sugar prices returning close to current levels if all subsidies were removed.

The case of U.S. peanut production involves many more family farmers growers than does sugar cane and also involves a world ground nut market that would immediately depress the price of U.S. peanuts at the farm level if support prices were dropped and import restrictions were lifted. Peanut growers in third-world countries aren't subjected to minimum wage and environmental regulation and, thus, have much lower production costs. Most U.S. peanut growers would discontinue production of peanuts. The support price on peanuts is 34 cents a pound. Compare that to the price of peanuts in your retail markets and ask yourself who is making all the money on peanuts.

If a reduction in farm price supports is necessary to reduce federal government spending, nearly all farmers and ranchers are ready to do their part. It should be done gradually over a period of seven to 10 years and should also include some means to prevent dumping of subsidized, price-depressing agricultural products from other countries onto world markets. GATT does provide snap-back provisions if there is commodity dumping on world markets, but it remains to be seen how effective enforcement of these anti-dumping provisions will be. Let's look at a gradual, balance approach to reducing U.S. farm subsidies that will keep farm and ranch families on the land and reduce our overall federal spending at the same time.

Peter C. Myers Sr. of Sikeston is a former deputy secretary of agriculture and in currently president of Adopt A Farm Family of America, a Christian outreach to farm and ranch families.