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February 1983, 
Vol. 65, No. 2
Posted 1983-02-01

Outlook for Agriculture in 1983

by Michael T. Belongia

Michael T. Relongia summarizes the USDA’s estimates for agricultural production and prices for 1983 and analyzes the major agricultural problem area—low grain prices and large grain surpluses. The USDA’s forecasts indicate that farm incomes will remain at low levels in 1983 for the fourth consecutive year. The primary reason for the relatively poor farm income levels is the grain surplus problem that continues to depress grain prices and farm income. In analyzing the sources of the continuing grain problem, Belongia finds that it has been produced chiefly by conflicting incentives in U.S. agricultural programs. In most cases, the intent of the programs has been to raise the relatively low levels of farm prices and income by decreasing production and surpluses. On average, however, the net impact of commodity programs has been characterized by increased production and surpluses, and still lower prices and income. Belongia examines the recent attempts to solve the grain problem, for example, the Farmer-Owned Reserve (FOR) and the Payment-in-Kind program (PIK), and concludes that neither is likely to be successful. FOR’s effects on grain price stability have actually been contrary to its stated objectives; PIK’s success in raising grain prices even marginally above their support levels requires farmer participation rates that seem overly optimistic.