30W EFFECTS 0F THE SOEL BANK ON CORN AND WHEAT CROPHNG FRACTKES EN FOUR MECHEGAN FARMENG AREAS Thesis for flu Dwmo of M. S. MECHIEAN STATE UNIVERSE“ James Bergen Roof 1958 1| mm"; minim!" in Ji' 1011M iii it; lull ‘ LIB R A R Y L" Michigan State — University ’ I.” _. :M-m-N-z. 0.4m -_-. -n ‘ 3 "M" ‘.._.. MSU LIBRARIES Al“. RETURNING MATERIALS: PIace in book drop to , remove this checkout from your record. FINES wiII be charged if book is returned after the date stamped be10w. v flame war,” SOME EFFECTS OF THE SOIL BANK ON CORN AND WHEAT CROPPING PRACTICES IN FOUR MICHIGAN FARMING AREAS By James Bergen Roof A THESIS Submitted to the College of Agriculture of Michigan State University of Agriculture and Applied Science in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE Department of Agricultural Economics 1958 James Bergen Roof ABSTRACT The purpose of this study was to analyze some of the actions and adjustments which farmers have made with reapect to the Soil Bank Act. With this purpose in mind, 364 farms in four import- ant economic areas of Michigan were visited during the summer of 1957. Farmers were asked questions in an effort to provide an answer to the following problems: (1) What types of farms and farmers were using the Soil Bank? (2) How was the Soil Bank affecting farmers' cr0pping practices? and (3) Ias the Soil Bank creating a different pattern of land use than was created by previous control programs? The 109 Soil Bank participants were compared to 255 non-participants with respect to various different charac- teristics of the farm and farmer. No significant differ- ences were found with respect to size of farm, the ownership status, and age of the Operator. However, significant dif- ferences were found with respect to the type of farm and the proportion of his total income the Operator earned from farming. However, intensive livestock Operators and full- time farmers appeared relatively more reluctant to partici— pate in the Soil Bank. Within the sample, 55 farmers or 15 percent Of the sample participated in the wheat acreage reserve. A total of 83 farmers or 23 percent of the sample participated in 11 James Bergen Roof the corn acreage reserve. The decrease in corn and wheat acreage from 1956 to 1957 for the sample was affected by the acreage which the Soil Bank participants placed in the acreage reserve. Non—participants did not decrease their acreages of corn,and wheat producers who were non— participants decreased wheat acreage by only eight-tenths of a percent. Corn and wheat producers who participated in the Soil Bank did not significantly substitute plant nutrients on their remaining corn or wheat for the land removed from pro- duction. More important was the fact that both participants and non-participants increased their use of plant nutrients from 1956 to 1957, serving to partly offset Soil Bank in— duced acreage reductions by increased yields. It was tentatively concluded that one of the reasons why the Soil Bank did not reduce the acreage of wheat and corn in the nation enough to raise prices and significantly reduce surpluses was the fact that payment rates were not high enough to attract intensive livestock and full time farmers. It was also tentatively suggested that, although Soil Bank participants did not significantly appear to sub— stitute capital inputs to production for land inputs removed through the Soil Bank, all groups of farmers are increasing their use of capital inputs in the form of more plant nutri- ents. This increased productivity will continue to offset any acreage reduction or control program. Approvedgégu/U>§43 14%CflqL 1‘11 ACKNOWLEDGMENTS The author wishes to eXpress his gratitude to his major professor, Dr. Lawrence Witt, under whose guidance and direction this study was made. Special thanks are due Drs. Dale E. Hathaway and Charles L. Beer for their assistance and suggestions. Appreciation is also expressed to the other members of the Agricultural Economics Department for their helpful suggestions, and to the author's wife, Erika, and Mrs. Gordon R. Anderson for typing this manuscript. The author assumes full reaponsibility for any errors that may be present in this manuscript. TABLE OF CONTENTS CHAPTER I. II, III. IV. V. INTRODUCTION . . . . . , , . , , . . . . . . . The Surplus Problem . . . . , . . . . . . . Background of the Soil Bank. . , , . , , , . The Soil Bank Program . . . , . . . . . . . Provisions of the Soil Bank . . . . . . . . Administrative Interpretations , , , , , . . REVIEW OF LITERATURE , . , . . , , . . . , . . PROCEDURE AND METHOD . . . . . . . . . . . . . The Sample , , , . . , . . . . . . . . . . . Analysis . . . . . . . . . . . . . . . . . . CHARACTERISTICS AND COMPOSITION OF SOIL BANK AND NON-SOIL BANK PARTICIPATING FARNS_AND FARMERS . . . . . . . , . . . . . . . . . . . Size Characteristics . . . . , , . . . . . . Type of Farm Characteristics , . . , . . . . Location Characteristics . . . . . . . . . . Characteristics with Respect to Beepondents' Source of Income . . . . . , . . . . . Farm Ownership Characteristics , , , . . . . Age Characteristics. , , , , , , , , . , Summary , . . . . . . . . . . . . . . . . . MICHIGAN WHEAT AND CORN CROPPING PRACTICES UNDER THE SOIL BANK . . . . . . . . . . . . . PAGE a: kn F‘ +4 11 14 17 33 33 38 39 40 42 44 47 51 52 54 56 CHAPTER , . , _ , . _ _ PAGE Wheat Acreage Trends . . , , . . . . . . . . . 57 Wheat CrOpping Practices . . . . . . . . . . . 67 Summary of Wheat Acreages and Practices. . . . 69 Corn Acreage Trends . . . . . , , . . . . . . 71 Corn Acreage Reserve Payments . . . . . . . . 78 Input Substitution by Corn Acreage Reserve Participants . . . . . . . . . . . . . . . 80 Summary of Corn Acreages and Practices , , . , 82 VI. SUMMARY ANDCONCLUSIONS . . , , , , , . . . . , 84 Summary . . , , , , . , . , . , , , , , , , , 84 Conclusions_ , , , , . , . , , , . , , . . . . 89 BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . 92 APPENDICES A. Excerpts from the Questionnaire Used_for_ This Study . . . . . . . . . . . . . . . 95 B. Explanation of the Chi-square Tests of_ Significance Used in This Study . . . . 101 C. Conversion Rates for Livestock to Standard Animal Units . . . . . . . . . 103 vi LIST OF TABLES TABLE. } PAGE I. Types of Farms, By Percent, in the Four , Farming Areas . . . . . . . . . . . . . . . 36 II. Farm Size Related tO_Soil Bank Participation . . . . . . . . . . . . . . . 41 III. Intensity of Livestock Operations aszelated, to Soil Bank Participation . . . . . . . . 43 Iv. Types of Farms in the Sample Related_to Soil_ Bank Participation . . . . . . . . . . . . 45 V. Soil Bank Participation Related to Number of Livestock Farms in the Four Economic_ Areas . . . . . . . . . . . . . . . . . . . 46 VI. Preportion of Total Income from Farming Related to 8011 Bank Participation . . . . 48 VII. The Relationship of Income Earned from Farming and Intensity of Livestock, Production . . . . . . . . . . . . . . . . 49 VIII. Percent of Total Income Earned from Farming, and Type of Farm Enterprise, Related to Soil Bank Participation . . . . . . . . . . 50 IX. Age of Respondent Related to Soil Bank_ Participation . . . . . . . . . . . . . . . 51 vii TABLE, x. XI. XII. XIII. XIV. XV. XVI. XVII. XVIII. Wheat Acreage Trends and Percentage Changes for Soil Bank Participants and Non- Participants in the Sample, in Michigan, and in the United States . . . . . . . . . Wheat Acreage Reserve, Wheat Acreage Trends, and Percentage Changes in the Four Sample. Areas 1954-1957 . . . . . . . . . . . . . Wheat Acreage Change 1956 to 1957 Compared to, Percent of Income Earned from Farming . . Reasons Why Farmers Changed_Their Wheat. Acreage, 1956 to 1957 . . . . . . . . . . Corn Acreage Trends and Percentage Changes for Soil Bank Participants and Non- Participants in the Sample, Michigan, and_ the United States, 1952—1957 . . . . . . . Relationship of 8011 Bank Corn Acreage Reserve Participation to Corn_Acreage. Reduction 1956 to 1957 . . . . . . . . . . Corn Acreage Reserve Participation in Relation to Type of Farming in each Area . Corn Acreage Change 1956 to 1957 Compared to Percent of Income Earned from Farming . . Reasons Why Farmers Changed Their Corn Acreage, 1956 to 1957 . . . . . . . . . . viii PAGE 58 61 62 66 73 74 76 77 79 LIST OF FIGURES FIGURE PAGE 1. Production Surface Obtained from_a_TwoeVariable , Input Function . . . . . . , . . . . . . . . . 25 2. Location Of Sample Townships . . . . . . . . . . 35 ix CHAPTER I INTRODUCTION Since 1920, land resources devoted to agricultural production have increased only slightly. Yet, through the use of new technology, more use of capital, and better management, the productivity of American agriculture has increased faster than has the demand for most of agricul- ture's products. various estimates suggest that for the aggregate of agricultural products, there exists a price elasticity of demand of about -.25, that is, a one percent change in supply changes the aggregate price paid to farm- ers by four percent in the Opposite direction. This in- elastic demand is coupled with an elastic supply response, and has resulted in free market prices for farm products which have generally been too low for most people to accept. The Surplus Problem Farm interests and Congress have long been aware Of American agriculture's capacity to overproduce and of the resulting tendency of this capacity to lower prices and farm income--even, as now, in the face of relative non- agricultural prosperity. Pr0posed solutions have included no action (free market), tax exemptions for farmers, pro- duction controls, marketing quotas, price supports at -1- -2- varying percentages of different parity formulas, various labor displacement schemes and combinations of these. Per- haps for political reasons, production controls and price supports have been applied the most often. Production control policies operate under the assumption that by limiting the land input to production, a decrease in output will be effected. With an inelastic price elasticity of demand, a small decrease in output shOuld provide impetus for a favorable rise in the price of farm products. Price supports have been made available to those farmers who limited their use of land in growing various supported commodities. The history of these price support programs shows that substitution ratios among inputs are not fully under- stood. With prices fixed at high levels, farmers offset acreage limitations by increasing their intensity of pro- duction on remaining acres or by substituting plantings of non-supported commodities on the restricted acreage. The results of 25 years of attempts to raise prices are almost eight billion dollars worth of surplus commodities held by the Commodity Credit Corporation, farm prices which are still too low to be generally acceptable, and expenditure of some $4 billion per year on agricultural programs. The Soil Bank program grew out of a recognition that society is unwilling to accept the consequences of abundance and will not allow prices to fall to levels that will allow -3- agricultural products to clear the free market. It is a further expansion of the theory that control of land inputs will control production. The Soil Bank is an action pro- gram designed partly as a short run attempt to alter the supply function of certain basic commodities‘considered to be in surplus and partly as an attempt to provide a long run alternative use for productive resources which will help alleviate the overall surplus problem. Such an action type government farm program as the 8011 Bank will tend to affect different segments of the ag- ricultural community in different ways. It will also find acceptance in varying degree by different types and classes of producers. During the summer of 1957, after the Soil Bank had been in effect for one year, 364 Michigan farms were visited. Questions were asked in an effort to provide an answer for each of the following problems: (1) What types of farms and farmers were using the 8011 Bank? (2) How was the Soil Bank affecting farmers' crop- ping practices? (3) was the Soil Bank creating a different pattern of land use than was created by previous control programs? Background g£_the Soil Bank The original Agricultural Adjustment Act of 1933 was similar in several ways to the Soil Bank Act. The A.A.A. provided supplementary payments for farmer's products if ~4- they would limit their use of land in the production of 15 basic commodities1 to previously established allotments. The Act further provided, in part, as follows: Such agreement to curtail...production shall contain a further provision that such...producer shall not use the land taken out of...production, for the production for sale directly or indirectly of any other nationally produced agricultural commodity or product.2 Payments to farmers were derived from taxes on food processors and were based on what were then thought to be “reasonable" prices defined as parity- The formulation of parity ratios has a history unto itself, but at that time it was designated as agriculture's position relative to 1910-1914. The objective of the original act was to eventually establish and maintain a level of production at which prod- ucts would move in the free market at “reasonable" prices. By 1934, the Commodity Credit Corporation was estab- lished in conjunction with the A.A.A. of 1933, and a loan program for corn growers was in effect. Loans were made to farmers at 55 percent of parity prices if they would rather store than sell. Later, most commodities were made eligible for loans. The original intent of the A.A.A. was not to lThese commodities included: wheat, cotton, field corn, hogs, rice, tobacco, milk and its products, rye, flax, barley, grain sorghums, cattle, sugar beets, sugar cane, and peanuts. 2Agricultural Adjustment Act, Public Law 10, 73rd Congress, lst Session, Title I. _5- guarantee farmers a satisfactory price directly through the support program. Rather, it was designed to help farmers carry surplus stocks until changed conditions brought about by production controls or other causes would enable them to move accumulated C.C.C. stocks to market in an orderly fashion. In 1936, the Supreme Court ruled that federal pro- duction controls were unconstitutional along with the proc- essor's tax. The Soil Conservation and Domestic Allotment Act Of 1936 served as an emergency substitute by providing an annual appropriation of 500 million dollars to be spent to encourage farmers to practice soil conservation. How- ever, large surpluses of wheat and cotton were produced in 1936 and by 1938, pressure was On Congress to reestablish some form of production control. The Agricultural Adjustment Act of 1938 established essentially the same type of program which still exists. For farmers desiring paid supports, restrictions of crop plantings were reduced to include only the crop or crops for which the farmer would receive a support payment. The U.S.D.A. was required to provide support loans only on corn, wheat, and cotton, although the C.C.C. was authorized to make loans on other commodities. Three other provisions of the act included: (1) continuance of acreage allotments with payments based on acreage in the allotment, (2) market- ing quotas with penalties for non-compliance if accepted by -6- a two-thirds majority of producers determined by special referendum, and (3) continuation of marketing agreements whereby farmers and producers can exercise control over the marketing of certain products. Since 1938, the number and kinds of commodities under support loans and support prices and the parity formulas used to determine the support prices have varied, but the same general framework has been in use down to the present day. Farmers have responded by increasing production in 1955, 56 percent over 1930, and this in the face of an in- crease of only 35% in pOpulation.3 It has been pointed out that in the period 1949 through 1956, except for the period influenced by the Korean war, agriculture was geared to pro- duce an average of eight percent more total product than was demanded through normal consumption channels, including exports, at generally acceptable prices.“ By intensifying the use of non-land inputs in production and by substituting non-“basic“ crops for those ”basic" crops removed from pro- duction, the farmer has kept well filled the larder of the 3Theodore w. Schultz, Agriculture and the Application 3; Knowledge, from the program for a conference Sponsored by the W. K. Kellogg Foundation, Battle Creek, Michigan, June 1956, p. 56. “John F. Stollsteimer, "Effects of Government Loan and Purchase Programs Upon Domestic Market Supplies of Farm Products in the Post War Period.“ (Unpublished M.S. Thesis) Michigan State University, East Lansing, Michigan, 1957, p. 108, Table 26. -7- Commodity Credit Corporation. Even war periods, with their resultant increases in demand, have provided only temporary periods of balance. In some reapects, the war years served to intensify the problem by allowing an accumulation of more productive resources than were needed in post war years. In 1955, Congress was ready to attempt a new approach to the surplus and price problem. J. Carroll Bottum has concisely summarized the alternatives that lay before Con- gress at that time: (1) let lower prices shrink production, (2) use some form of production or marketing controls across the board, or (3) draw land out of crops by making payments either for non-use or a lower economic use——commonly referred to as soil bank approach. Some might wish to add transfer payments to agricul— ture or price supports as a panacea. While these may ease the income situation for agriculture, they are like aspirin: they ease the pain but are not the cure. Low prices will adjust agricultural production in the long run, but the process is slow. We know that when a supply of one commodity is large and the price is low relative to others, the farmer will adjust more quickly than when he has to adjust total production. This is the problem of shifting resources within agri- culture. However, if all commodities are in over supply and there is no commodity to shift to, there is a problem of shifting resources out of agriculture. This is a much more difficult shift and takes longer. Some mar- ginal land and some farms must shift out of crops as a result of unprofitable returns. This shift requires several years. The question is, 'Does agriculture and society want to go through the price and income hard- ships of this course of action unaided as compared to the other alternatives?‘ If the control is taken and it proves effective, then controls must limit production or marketing of all ~8- major commodities or at least of all major harvested crOps. We have had enough experience with controls to know the problem of setting up individual crOp limita- tions. Too much substitution is possible in agricul— ture to solve the overall supply problem by reducing only certain crops. The total problem must be treated. The third alternative involves drawing certain acres of harvested crOps out of production and shifting them into grass, fallow, or trees through rental or acreage reserve payments. In most cases, the land will go to grass. The grass may or may not be used, depending upon the plan. A fixed percentage of land taken out on each farm would not correct the long-time production problem unlesg the acreage were held out of production indefinitely. The Soil gpnk Program From the observation of a fall in farm prices and a concurrent rise in farm costs, farm groups and Congressional and state legislators in 1954 began pressuring the adminis- tration for a new remedy to curb the worsening situation. Senator Hubert Humphrey (Dem., Minnesota) presented an Acreage Reserve Bill to the Senate in 1955. This bill was rejected by True Morse, the Under Secretary of Agriculture, because he felt it would pay farmers for not producing and would be too difficult to administer. In October of 1955, the governors of the midwestern states met to formulate an action program for consideration by the administration. 5J. Carroll Bottum, The Soil Bank as a Solution to the Farm Price and Income Problem, 85th Congress, lst Ses- sion, Joint Economic Committee Print, Washington, D. 0., November 22,1957, pp. 701, 702. -9— PrOposals of other interested groups, particularly The American Farm Bureau Federation, were also aired and pre- sented to Congress and the administration. On January 9, 1956, President Eisenhower presented the soil bank prOposal in a special message to Congress. Before the Agricultural Act of 1956, known as the Soil Bank Act, was finally passed, a wide divergency of political forces were brought into play to help shape the final legislation. The Farm Bureau emphasized the Acreage Reserve prOposal. Farm Bureau President, Shuman, stated: The basic purpose of the surplus reduction and Soil Bank Plan, as we conceive it, is to bring about at the earliest feasible date a balance between annual supply and effective demand and to make more rapid progrgss toward the liquidation of current surplus stocks. In contrast to the Farm Bureau's position, the Farm- ers Union feared that four year's use of the acreage reserve provisions would place agriculture in a position of being unable to re-expand production to meet domestic and export requirements in 1960. They further stated: we are convinced that it (the Soil Bank) is grounded on the false premise that the mere physical existence of stocks in the inventories of the Commodity C§edit Corporation is a farm income depressing factor. 6American Farm Bureau Official Newsletter, January 16, 1956, p. 11. 7U.S. Congress, House, General Farm éegislation, Part I., Hearings Before the Committee on Agriculture, 84th Congress, 2nd Session, Washington: Government Printing Of- fice, 1956, p. 7. -10- The Grange felt that too much blanket authority would have to be given to the U.S.D.A. for administration of the acreage reserve. They further insisted that the acreage reserve provisions should provide “adequate incentive to ...(1) 'buy' a substantial adjustment between currently available markets and current agricultural supply; and (2) put dollars of purchasing power in the hands of the rural families of America (which we believe is highly desirable in the face of the situation that now confronts us)."8 There was some disagreement among the major farm or- ganizations concerning the best method of buying acreage reductions in the Soil Bank. The Farm Bureau urged that “...producers who voluntarily decide to underplant any allotment...receive a payment in the form of negotiable cer- tificates‘valid for the purchase of C.C.C. stocks.9 The Farm Bureau felt that it was equally important for the coun- try to work toward the elimination of the surplus stocks of commodities held by the C.C.C. and that this goal should be pursued in connection with cr0p acreage reductions. The Grange felt that payments should be “sufficiently attrac— tive to try to reduce government stocks...and also add some money to the pockets of farmers."10 6 8;Q;§,, Part 2, statement by Herschel D. Newsom, p. 15. 9Ibid., statement by Charles B. Schuman, p. 415. 10Ibid., statement by Herschel Newsome, p. 617. -11- Melvin P. Gahlbach, chairman of the Soil—Bank Asso- ciation of Lincoln, Illinois, was, in 195#, one of the first persons to present a soil bank plan to a congression- al committee. In his testimony in 1956 he stated: Our pr0posal was never intended to unload govern- ment-held surpluses onto the farmer or onto the market, but instead, to effectively adjust production below current needs to make use of present held surpluses at their full value.11 The first attempt to put a Soil Bank program into effect was a House bill, H. R. 12. President Eisenhower vetoed the program replying that parity supports of 90%, parity for wheat, cotton, corn, and peanuts, mandatory price supports for feed grains, and a multiple price plan for wheat and rice would increase the amount of government control and the amount of government-held surpluses. The President signed the second bill which became known as the Soil Bank Act, on May 28, 1956.12 Provisions of the Soil Bank Act The Soil Bank is divided into two parts, the Acreage Reserve and the Conservation Reserve. The Conservation Re- serve contracts run for three, five, or ten years depending on the type of conservation practice to be used and the llIbid., p. 324. 12Public Law suo, 84th Congress, Chapter 327, 2nd Session, HR 10875. -12- condition of the land at the commencement of the contract. The Conservation Reserve is specifically designed to en— courage farmers to shift their acres from production of non-allotment cr0ps to soil conserving practices such as grass, trees, wildlife cover or water storage. Any farmer may participate on land that has been tilled, or has been in a regular rotation in the year immediately before the contract is signed. The farmer may also contract land that has tame hay or silage harvested from it within the two years immediately before the contract is signed. Up to 80 percent of the cost of establishing permanent conservation uses plus an annual payment for contracted acreage averag- ing eleven dollars an acre in Michigan is returned to par- ticipating farmers. A farmer must contract a minimum of two acres if trees are to be planted, or five acres for other types of cover.- The maximum payment for any one farm is $5,000. This study is more concerned with the Acreage Re- serve part of the 3011 Bank Act. Within the sample of 36h farms which were used to evaluate the Soil Bank, only three farms participated in the Conservation Reserve. The ratio (.82%) corresponds with a ratio of 1.73% Participation for all Michigan farms. The Acreage Reserve is a short-run program providing payments to farmers for underplanting their allotments of "basic" crops, corn, wheat, short staple cotton, rice, and -13- tobacco. The payments are of such a size as to compensate farmers for the average net income they would have received had they planted the "basic“ crOps on the reserved acres. Payments are made in the form of negotiable certificates which may either be cashed at a bank or redeemed in a sur— plus commodity, if any are available, from the Commodity Credit Corporation at 5 percent more than the face value of the certificate. Payments on each individual farm are de- termined by multiplying the base unit rate of the crop ($1.20 a bushel for wheat, $.90 a bushel for corn) times the normal yield per acre and then by the number of acres a farmer will put into the program. A farmer may place in the acreage reserve 20 acres of corn or 30 percent of his allotment, and 50 acres of wheat or 50 percent of his allotment, whichever is higher. In addition, a farmer participating in the Acreage Reserve can plant his allotment of a “basic“ crop minus the acreage put in reserve, but must comply with all acreage allotments applying to his farm. One exception to this rule is wheat. Any farmer may produce as much as 15 acres of wheat and still be eligible for 8011 Bank payments on other “basic“ crops. However, a provision similar to one found in the Agricultural Act of 1938 allows a farmer to increase his acreage of non-basic crops as long as he keeps idle the designated acres for the Acreage Reserve. ~1h— Administrative Interpretations The administration by a federal agency of such a large government undertaking as the Soil Bank program may prove to be a strategic factor in affecting the impact of the program on the public. Congress allowed a wide vari- ance in specific procedures in administering the Soil Bank in several instances. In 1957, a limit of $750 million was set on payments to producers who participated in the Acreage Reserve. These funds were alloted to counties over the United States. Within these funds, county A.S.C. committees accepted agree- ments from farmers on a "first come, first served" basis. If county funds were all obligated before the end of the sign—up period, a list was prepared of those farmers who desired to take part in the program, but whose applications were received too late for inclusion under the initial al- lotment. Unused funds from other counties and states could then be channeled into areas which had a higher demand for participation in the Acreage Reserve. This particular administrative interpretation of the Soil Bank.Act allowed for the possibility of a concentration of funds available for use by a certain type of farmer or farmers in a certain area. Conceivably, a redistribution of income from non-farm sources and between areas of agri- culture could take place using tax monies as a vehicle of transfer. Certain farmers or areas could benefit from this -15- program more than others. For instance, it might be hypoth- esized that the Soil Bank program instead of merely working to cut back price depressing surpluses and bring supplies in line with demand, may also serve to keep people on farms who have better alternative Opportunities off the farm. One hypothesis of this study is that farmers who earn a consid- erable pr0portion of their income off the farm avail them- selves more readily of 8011 Bank payments than those who earn most or all of their income from farming. It should be noted that Michigan, which offers considerable off-farm job Opportunities in rural areas, used an additional $2 million allocation of funds in 1957 to meet the demand for corn acreage reserve contracts. These funds came primarily from intensively farmed corn belt states such as Iowa and Illinois which did not fully use their initially allocated funds. During the development of the Soil Bank legislation, considerable attention was given to provision of adequate safeguards for the interests of tenants and sharecrOppers. The Secretary of Agriculture was given wide discretion in protecting these interests through his local A.S.C. commit- tees. 8011 Bank payments are to be shared in the same manner as the income from cr0p production would have been shared had the crops been grown. It should be noted, how- ever, that a landlord could terminate the services of a tenant and then put his land in the Soil Bank. The burden -15- of proof of the landlord's intent to force a tenant off the farm in order to participate in the Soil Bank lies on the local A.S.C. committee and would be difficult to sustain. This provision has not proved troublesome in Michigan where most farmers state that there is plenty of land available for rent. The architects of the Soil Bank Act were h0peful that farmers would redeem their Soil Bank payment certifi- cates in surplus commodities. A five percent bonus on the face value of the certificates was offered as an inducement for commodity redemptions. In 1957, however, free market grain prices were below the support prices. This enabled farmers to redeem their certificates in cash and buy on the open market more advantageously than by redeeming certifi- cates directly for commodities. The C.C.C. reported that few farmers redeemed certificates in 1957. Had the free market price for grain been equal to or above the support price, it is possible that many farmers would have taken their 8011 Bank payments in commodities, greatly reducing the quantity of surplus commodities held by the C.C.C. Such an action would, however, have tended to reduce free market demand and prices. CHAPTER II REVIEW OF LITERATURE The Soil Bank was introduced as an additional proce- dure designed to reduce surpluses and raise farm incomes. The method employed by the Soil Bank consists of limiting the land input in production. This idea finds its origins in the original Agricultural Adjustment Act of 1933. To better understand why this type of program was undertaken again and what impact it may have on agriculture, three questions should be asked: First, why is there a surplus problem? Second, why was the Soil Bank Act offered as a so- lution to the problem? And third, what is the theoretical economic framework from which was derived a belief that a 'soil bank" type program would work? The first question is much too complex, beyond a few comments, for an answer here. However, account will be taken of the second and third ques- tions. Sherman Johnson has said that technological innova- tions made available through research, evolving in a favor- able environment, and financed by high wartime and postwar prices for products, have provided a source of overproduc- tion.13 Johnson cites the two most important environmental 13Sherman E. Johnson, “The Meaning of Technical Change in the Farm Economy of North America" (paper prepared for discussion at the Ninth International Conference of Ag- ricultural Economists, Otanierni, Finland, August 20, 1955.) -17- -18... factors as (1) education and (2) sufficient income to take advantage of new Opportunities. He then notes that the adaption of new technologies has meant higher investment costs and higher cash Operating expenses, resulting in higher I'break-even points" in farming. This in turn means that farm income is more vulnerable to lower prices and crop failures.1u Johnson introduced the idea that advances in tech- nology frequently accelerate imbalances in agricultural production although he does not fully explain this concept. Earl Heady begins to explain this imbalance by demonstrat- ing the supply function for agricultural production.15 He first states that the supply function for individual farm products is highly elastic because: (1) the production function approaches an elasticity of 1.0 on individual farms; (2) large changes can be made in the quantity of re- sources used on any one crop without significantly changing the total quantities used in agriculture; (3) skills of labor and the services of capital resources have great adaptibility between products; (A) the production possibil- ity curve is one with great flexibility for transfer of re- sources between products; and (5) shifts of resources between 141bid., p. in. 15Earl C. Heady, "The Supply of U.S. Farm Products Under Conditions of Full Employment," American Economic Review, May 1955, pp. 228-38. -19- products does not always bring on any change in uncertainty. Thus, on a particular farm there are wide Opportunities for input and product substitution. Heady then notes that the short run aggregate supply function is relatively inelastic. Although output does reapond, in a small way, to price changes under conditions of full employment, planned changes in the use of inputs between years have never been over 2.5 percent. This leads Heady to conclude that factor/product price ratios do not readily influence aggregate agricultural output in the short run. He does say that output becomes responsive to prices in the long run as more resources are brought into agricul— ture. Glenn Johnson has gone further to explain the nature of the surplus and income distribution problem. He states that the nature of the market for factors of production in agriculture has created a partially irreversable supply function.16 Dr. Johnson notes that for most agricultural resources, market prices are different between acquisition costs and salvage value. Therefore when production in- creases, over the long run, resources are best used in least cost combination, purchased of course at their acquisition 16Glenn L. Johnson, “Some Contributions of Micro- Analysis to Agricultural Policy," (paper given before a seminar for Cooperators in the Tennessee Valley Authority Agricultural Economic Research activities, Knoxville, Tennessee, March 9, 1956, mimeograph.) -20— cost. With a contraction in product prices, these imper- fectly priced resources remain worth more in production than on the "resale“ market, at least for a time. He then cites war and the accompanying price supports used to call forth enough production to meet demand as a major incentive for the purchase of production resources. At war's end, demand, and hence product prices, fall. But the marginal value productivity of productive resources re- main above their salvage values giving rise to production of more commodities than will clear the market at accept- able prices. Many other agricultural economists have commented on the origin of the surplus problem. Schultz has emphasized the higher quality of the inputs used in production, par- ticularly where the human factor is concerned.17 Cochrane has given importance to increasing technology and to supply inelasticity as being sources of the surplus problem.18 The references discussed in the paragraphs above, however, seem most pertinent to the problems covered in this thesis. The second question at the beginning of this chapter asks why a soil bank type program was offered as a solution 17Theodore W. Schultz, ”Reflections on Agricultural Production, Output, and Supply," Journal g§_Farm Economics, August 1956, pp. 758-62, sepecially p. 752. 18Willard W. Cochrane, "Conceptualizing the Supply Relation in Agriculture,“ Journal‘gprarm Economics, December 1955, pp. 1161—76. _2]_.-. to the farm problem. Glenn Johnson divides proposed solu— tions to the problem into two parts: competitive production adjustments and non-competitive productive adjustments. Competitive adjustments include: attempts to reach static equilibrium by cutting out government controls or at least modifying them to provide flexible price supports (thus presumably squeezing out resources), improving farm income by expanding demand, increasing the net income of farmers by lowering their costs through better farm management, and by preventing further expansions of production by curtail— ing aid to farmers in the form of new technology and farm management practices through research. Johnson indicates that market expansion and cost lowering policies have been unsuccessful. If society were to use static equilibrium adjustment methods and/or curtail the availability of tech- nological advances and good farm management practices to farmers, careful examination of societal values would be needed. Some of these values might include: should adjust- ment include a painful squeezing out of inefficient farm- ers; and should political hindrances be disregarded in order to further economic efficiency. Johnson says that the values held by society will not permit these adjustment methods. Non-competitive adjustments include public educa- tion, incentives to leave farming, public credit, and publicly supported research on one hand and monopolistic -22- restrictions on output and marketing on the other. MonOpo— listic restrictions include marketing quotas, acreage al— 1otments, soil bank, and loan programs. Rural leaders and politicians, after having made value judgments which go beyond or bypass the attainment of economic efficiency, have Offered the Soil Bank as a solution, conferring certain mo- nopoly powers on agriculture. This solution appears to be based on a particular conception of the relation of agri- cultural production to land as an input factor. The monOp— oly implicit in the Soil Bank is the concept of distributing public tax monies to agriculture, allowing agriculture to decrease land inputs--and presumably production. This gives agriculture as a group the power to restrain trade and raise prices. The third question under consideration asks for a theoretical framework illustrating the Operation of the Soil Bank. Dr. Earl Heady discusses the explicit condi- tions under which output can be decreased or revenue in- creased under various aspects of controls in an article in 23;; Review 9; Economics m Statistics.19 At the time this article was written, acreage control.programs allowed land withdrawn from the production of controlled crops to be 19Earl C. Heady, "Resource and Revenue Relationships in Agricultural Production Control Programs, " The Review of Economics and Statistics, Vol. XXXIII, NO. 3, August 1951, pp. 2284h0_ w... -23- planted in non—controlled crops. Therefore, most of Dr. Heady's analysis allows for this substitution to occur. However, he does illustrate the condition prevailing on farm firms where One product Specialization occurs to the extent that no substitution is possible. This case paral- lels the Soil Bank, because land removed from the produc- tion of a control crOp may not be used for production or sale of any grain or forage crop. He outlines the alter- natives Open to a participating farmer as follows: If production is continued under a one-crop system after control programs are applied, output will be lessened on individual farms if the farmer is not able to (l) reallocate given labor and capital re- sources on fewer acres or (2) substitute more labor, capital and other non—land resources for land re- sources, to an extent which offsets the reduction in land output (e.g. the acreagg left out of production under the control program). 0' Figure I illustrates the logic implicit in an acre- age control program of the soil bank type. Heady uses this chart to illustrate the control Of one factor on a single product farm. The curves IP, I'P', and I"P“ are iso- produCt lines suggesting how various combinations of land and other factors (labor and capital) could be used in pro- ducing a given output of crOps. It may be supposed that, given the initial factor inputs of 0L2 land, and 002 capi- tal and labor, withdrawal of Lng units of land from ¥ 20Ibid., p. 229. —2u. production would also result in withdrawal of 0102 units of non-land resources from production. Heady then points out that ...out ut would then decrease (a) in the same pro- portions fas the decrease in factor inputs) if the production function is linear, (b) by greater propor- tions if the elasticity of the production function is gizagfgsghzntl.f, and (Egabylsgallfr proportions if y s ess n . . Heady explains that the most probable adjustment in this case will be such that while the input of land is re- duced, the total input Of labor and capital may remain near previous levels resulting in a more intensive cultivation of land remaining in cultivation. The difference in out- come is illustrated in Figure I. If the reduction in land inputs Lle were to be accompanied by a proportional de- ' crease in capital and labor C102, output would drOp from IP to I"P". If capital and labor inputs remain at CZ, out- put will only drop to I'P'. Heady suggests that decreasing returns to scale and to single factors Operate in agricul- ture and that this would further reduce the shift of the isO-product curves when land inputs are decreased. This analysis has several implications for the Soil Bank. Farmers are given cash payments for the land removed from farm production. They might conceivably use these pay- ments as additional productive capital and increase capital- 21Ibid., p. 236. -25- Figure I. PRODUCTION SURFACE OBTAINED FROM A TWO-VARIABLE INPUT FUNCTION I'I I' I L2 L1 P \ P. \ Pu -26- labor inputs to 03 leaving them on the same iso-product line as they were before the introduction of the Soil Bank program. They might also accept Soil Bank payments and, with less land to cultivate, find off-farm employment. This might reduce the capital—labor inputs to Cl reducing output to I'P". The empirical analysis in this thesis gives some indication as to how Michigan farmers are using these pay- ments. The Soil Bank has been in effect now for over a year and a half. Although there has not been enough time yet for much empirically based critical evaluation of the act, a number of groups and persons have rendered comments and judgments. Many organizations and groups within the fields of agriculture are affected by the provisions of the Soil Bank Act. The American Bee Journgl carried an article pointing out the implications of the Soil Bank on beekeepers.22 Forestry finds itself particularly affected by the pro- visions Of the Conservation Reserve part of the Soil Bank.~ W. S. Swingler discusses the increased need for seed stock and trained foresters in an article in the Journa1.g£ Forestry.23 An article in Farm Management is typical of 22"What the Soil Bank Means to Beekeepers," American Bee Journal, October, 1956. 23W. S. Swingler, “Forestry in the Soil Bank," Journal 9; Forestry, November, 1956, pp. 707-09, M -27- the material found in popular farm magazines. It points out the responsibilities that go with participation in the Soil Bank including weed and insect control. The article urges farmers to take a close look at the costs of maintain- ing reserved acres in order to determine if the Soil Bank Offers good income possibilities.2n Much of the material published on the Soil Bank con- sists Of guides for the farmer, describing their best use of the Soil Bank as an income alternative. Michigan State University and many other land grant colleges have published pamphlets, handbooks, etc., for use by county agents and extension personnel to explain the Soil Bank to farmers. Some of these publications make use of the partial budget method which estimates the effect on net income of making management decisions involving the Soil Bank. Several leading agricultural economists have viewed the Soil Bank Act in retrOSpect and passed judgments, favor- able and unfavorable. Dr. 0. B. Jesness stated: My reaction to the soil bank approach is that it has much merit in principle but its application has been such that it has fallen far short of achieving its objective, namely adjustment of production. The acre- age reserve was intended to hold out of use temporarily some highly productive land to enable CCC to move its excess stocks into use. The conservation reserve, ..., was intended to achieve a longer-run balance in capacity to produce. quA Manager's Responsibility: Soil Bank Deposits,u Farm Management, December, 1956. -28- Among the difficulties of the soil bank is the fact that it has been accepted as an income booster, a form of crop insurance, and a conservation measure to such an extent that its adjustment goal has been lost sight of by many. Sufficient emphasis has not been placed on getting a dollar's worth of adjustment for each dollar of the public's money expended. The application has been general rather than specific. Our surplus problems are in specific lines, especially wheat and cotton, and in specific classes of wheat and in partic- ular areas and regions. A program to achieve its end must be highly selective with reapect to crops, areas, farms and farmers rather than to be available to Tom, Dick an? Harry without regard to the adjustment re- sults.2 Another vieWpoint was given by Don Paarlberg, Under Secretary for Agriculture, in a discussion found in Th9 Journal 9: Farm Economics.26 Paarlberg pointed out that advancing technology and high level price supports have called forth the surpluses. He further says that the Soil Bank,coupled with realistic levels of price support, re- search in developing new products and markets, upgrading of diets, and programs to lighten the impact of technology on . disadvantaged individuals are all being coupled together in order to bring agriculture into balance. J. Carroll Bottum in the Farm Policy Forum27 estimated 25Letter from Dr. 0. B. Jesness, Department of Agri— cultural Economics, University of Minnesota, St. Paul, Minnesota, January 16, 1958. 26Don Paarlberg, "Shortcomings in Current Explana— tions of National Farm Surpluses,“ Journal gprarm Econom- ics, December, 1956, pp. 1708-16. 27J. Carroll Bottum, "The Soil Bank Approach," Farm Policy Forum, Summer, 1956, p. 20. .‘o‘ . e..- II..- VIA 2“: ‘e. pl ‘0 It. ...4 hi! -29- that no noticeable effect on aggregate production will ap— pear until 25 to 30 million acres of non—roughage crOps are taken from production. He maintained that the first 25 million acre shift out of non-roughage crOps would be counterbalanced by: (l) the fact that grass, legumes, and fallow crOps are complementary in the long run to the production of grain and fiber, (2) new technology which could Offset the reduction of crOp acreages at the rate of 5 million acres a year, (3) lower than average producing acres of land being shifted into the Soil Bank. Bottum further pointed out that a program which brought about adjustments just short of a useful goal (30 million acres) would be pointed to as a failure.. Willard Cochrane stated that the Soil Bank is no policy for the faint-hearted-—6O to 80 million acres would be needed to cut aggregate output four to five percent.28 This is the current rate of overproduction at present sup- port levels. Cochrane further states that the Soil Bank rental bill to the U.S. Treasury might then run from $1 billion to 81% billion per year-—yoar after year. 28Willard W. Cochrane, “An Appraisal of Recent Changes in Agricultural Programs in the United States,“ Journal 9;.Farm Economics, May, 1957, p. 295. hl—-—-—- -30. Currently, considerable interest is being shown by Congress in the enlargement of the Conservation Reserve. Cochrane states: ...if proponents and administrators of the soil bank idea get to mixing soil conservation goals and increased productivity for the future in with their immediate plans for reducing production, as a sOp to the supposed tender public conscience, the soil bank idea may well and in a fiasco. It is impossiblg to reduce production and expand it simultaneously. 9 In 1954, a survey taken from the same sample used in this thesis gave some indication of the results of produc- tion control programs.30 The controls used in 1954 in- cluded wheat marketing quotas and corn allotments. The results from this study indicated that cash grain farms were more successful in offsetting production controls than were livestock producers. It was also suggested that the impact of production controls on farms may be quite differ- ent, depending upon the enterprises around which the farm is organized. Preliminary results from studies being made by the U.S.D.A. of Soil Bank farmers have produced some findings which should be compared with those reported in Chapter IV of this thesis. It was suggested that (1) Soil Bank 29Ibid. 30Dale E. Hathaway, "The Effects of Agricultural Pro- duction Controls in 1954 on Four Michigan Farming Areas," Quarterly Bulletin, Michigan Agricultural Emperiment Sta— tion, East Lansing, Michigan, Vol. 37, No. 4, May, 1955. -31- participants average older in age than non—participants, (2) a larger prOportion of participants have non-farm jobs than non-participants, (3) many farmers are using thevCon— servation Reserve to get crOp land not well adapted for crOps shifted to permanent cover crops, (b) some farmers faced with difficulty in hiring farm labor are putting part of their farms into the Conservation Reserve, (5) most non- participants say that much higher payment rates would be necessary to make participation profitable, and (6) land put into the Soil Bank appears to be as valuable and pro- ductive as land not being reserved. An empirical study of the Soil Bank was completed recently in Wisconsin.31 The findings from this study pointed out that many farmers participating in the Soil Bank are using the Soil Bank payments to overcome the tran- sitional problems of insecurity in the shift to industrial employment. Another conclusion from this study indicated that about 68 percent of those Soil Bank participants who had rented land to others in 1956 decreased the amount rented to others in 1957.. Some of the characteristics of the 189 Soil Bank participants who responded in the Wisconsin survey follow: 31A. Allan Schmid, "The Soil Bank: An Appraisal of the Experience in Rock County, Wisconsin," Agricultural Economics Pamphlet 23, University of Wisconsin, Madison, Wisconsin, 1957. -32- Several characteristics of the Soil Bank partici- pants are tied up with the fact that one-half of the survey respondents were working Off the farm in addi- tion to their farming activities. First, the Soil Bank participants on the whole did not shift their Operations from cash grain to dairy or livestock farming. They seemed to be using the Soil Bank to replace a large part of their farm income and did not try to make up the loss in total income, if any, by shifts within the farm operation itself. Second, a majority of the farmers who placed land in the Acreage Reserve put all of their eligible land in the program. This indicates that farmers used the pro- gram on an all or nothing basis rather than as a sup— plement for part of the grain production Operation. Third, most of the Acreage Reserve participants were cash grain farmers. Farmers who fed most of the grain that they raised did not participate to a great extent. Another important aspect of the participants was that about one-fourth of participants were over 65 years of age. Elderly farmers, those in poor health, and others who wanted to farm less intensivel seemed to find the program an attractive alternative. BZIbide, pp. 36, 370 CHAPTER III PROCEDURE AND METHOD The Sample The sample which provided data for this study was originally selected in 1954.33 By resurveying the same sample as used previously, it was hoped to reduce any memory bias concerning past farm and crOp acreage figures. In l95h, the sample selection was based on the following criteria: first, to sample farms with the largest number of production 33The following studies have been completed using data obtained from this sample: Hsiang Hsing Yeh, "Esti- mating Input—Output Relationships for Wheat in Michigan Us- ing Sampling Data, 1952-54" (Master's Thesis, Michigan State University, East Lansing, Michigan, 1955.) William Delmar Murphy, “Attitudes of Michigan Farmers Toward Government Production Control Programs as Shown in a 195h SurveyI (Master's Thesis, Michigan State University, East Lansing, Michigan, 1955.) Myron Eugene Wirth, “Production Responses to Agricultural Controls in Four Michigan Farming Areas in 1954" (Master's Thesis, Michigan State University, East Lansing, Michigan, 1956.) Dale E. Hathaway, “The Effects of Agricultural Production Controls in 195h on Four Michigan Farming Areas," Qparterly_Bulletin, Michigan Agricultural Experiment Station, May, 1955, pp. 565-573. Lawrence Witt and Dale E. Hathaway, "Farmers' Plans to Change Livestock Numbers as Related to Agricultural Production Controls,“ Qparterly Bulletin, Michigan Agricultural Experiment Sta- tion, May, 1956, pp. 511-519. Charles Beer, "Effect of Acre- age Control Programs on CrOp and Livestock Operations on Se— lected Michigan Farms" (Ph.D. Thesis, Michigan State Uni- versity, East Lansing, Michigan, 1957.) Eber W. Eldridge, llWheat Acreage Shifts in Michigan and the Implications" Master's Thesis Michigan State University, East Lansing, Michigan, 1957.) -33- -34.. decisions and alternatives which are typical of decisions being made in commercial farming areas in Michigan; second, to obtain a random sample within counties in these types of farming areas; third, to select townships within these coun- ties in an attempt to maintain an approximately uniform soil type within each of the economic areas;3i+ fourth, to sample those farms with a minimum 15 acre wheat allotment.35 The selection of townships within each county was limited to include only those townships which.had not par- ticipated in a similar survey in 1952 and where there were no township agent programs in progress. This restriction avoided dual enumeration by Michigan State University. The sample farms were located in four different eco- nomic areas as shown in Figure II. The types of farms, by percentages, in the four economic areas are shown in Table I. 3“For one area, Gratiot-Isabella, it was necessary to select townships from both counties in order to maintain a uniform soil type. 35In 1954, this sample was chosen primarily to pro- vide data for studies of the effect on then existing produc- tion controls on Michigan farms. The wheat marketing quotas of the Agricultural Act of 195A provides that farmers who have wheat acreage allotments of more than 15 acres are re- quired to comply with these allotments or pay a cash penalty for all wheat grown on acreage in excess of the allotment. Therefore all farmers with wheat allotments of less than 15 acres were eliminated, since they were required to make an adjustment in acreage only if they wanted to be eligible for price supports. Although the farms interviewed were larger than the average farm shown by the census, they were quite typical of commercial farms in Michigan. -35.. . O-TYPE OF-FARMING AREAS IN MICHIGAN (Areas on 0 natural- line basis) i f“ L = "‘ ’ a ,J 2 I w ’ . Ontonegon { 5; Bureau r". LL.-. I E I i - ' 30005": 1 l I |7JMorqueHe '_ _____ 'Luce i . 3.-.-.J."°" i J! ! Chippewa: K 0 n -.'. I \°» I "015mm L '" \.. I E "o I I i I i .I Ch rlevonx y L? J M IC H I GA N y, Livestock and Corn hwestern Fruit, Dairy and Truck , Poultry and Truck ~ and General Farming , Part- Time and Truck 1 . and Cash Crops Crops and Dairy neral Livestock and Part-Time -' Potatoes and Truck r n.’ b “. -—- U. 1_’ TOsceoIo . ,I I ‘1 f-.1I I .1..- MecosIo +- '5' I ' I0 western Fruit and Dairy . a . 4 I ' y, Part-Time and Potatoes 4‘-'-—- I ....... Matt , Part-Time and Cattle ". 10. otatoes and Part-Time little, Hay and Part-Time I’nI y and Potatoes . Potatoes, Part-Time Forestry Jinehips used ;, I sample areas I, :59 Joseph' 8: .- .4 ' o ' "in-.45 1.: - | ..'.‘ - .:- I , . .‘-‘ .-..'. , 2 .;. ' .2, I I - . )4? _._., .’ ' s :1 ‘ . , b‘eed'oe-OOAOO—oehb' I—J‘ZI lb—“_ '3... 00-. The 83 counties in Michigan are here grouped into 17 type-of-farming areas as indicated in this map. The “natural" boundaries of these areas do not, how- ever, follow county boundaries, but lines representing the influences of soil, climate and markets. ' “I‘fiqeua 71' T Anfi+‘nn in" nnmn'l a +A..mnk4vxn -36- TABLE I. TYPES OF FARMS, BY PERCENT, IN THE FOUR FARMING-AREAS* TYPES OF FARMS (PERCENT or TOTAL) .AREA Dairy Livestock Cash grain General other than Farms dairy or poultry Kalamazoo County 29 14 15 24 Gratiot and Isabella 30 5 20 22 Counties Sanilac County 28 2 #2 22 Livingston County 38 ll 15 18 *Data for l9h9 from the 1950 Census of Agriculture. For each township selected for study, a random sample was drawn from the wheat listing sheets on the County Agri- cultural Stabilization and Conservation Committees. In the l95h survey, hlh farms were visited and information was re- corded on a seventeen-page questionnaire. In order to bring information up to date the County Agricultural Stabilization and Conservation Committee offices were revisited in 1957. The current wheat listing sheets were examined to determine which farms would be resurveyed. ...37... Farms were eliminated from the 1957 survey if the ownership of over fifty percent of the total farm acreage had been split in such a manner as to create a new management unit. It must be considered that the farms drOpped from the study could introduce a bias into the final results. In examining the 195? sample, there appears to be no significant differ- ence in the number of farms drOpped for each economic area. Including those farms where the farm Operator could not be contacted, the percentage decrease from 1954 in each area was as follows: Kalamazoo County, 14 percent; Gratiot-Isa- bella Counties, 11 percent; Sanilac County, ll percent; Livingston County, ll percent. The average crop acreage of the farms used in this study was 174.8 acres while the average crOp acreage of the farms drOpped from this study was only 132.2 acres. Most of these latter farms were drOpped because of absorption into larger management units or because they are no longer being farmed. The increase in size of the farms used in the study is consistent with the nation wide trend toward larger and fewer farms. This analysis has assumed that the farms drOpped from the 1954 survey are random in effect and will not bias the results of the 1957 survey. 'L.) Analysis The questionnaire used for the survey contains ques- tions which provided information on the following subjects: characteristics of the Soil Bank and non—Soil Bank partici- pating farms and farmers; livestock and cropping practices and crop acreages for 8011 Bank and non-Soil Bank partici- pants; farmers attitudes toward and Opinions of the Soil Bank Act and other government programs. This study is con- cerned with the first two subjects. The questions used in this study mainly concern factual material which was either pre-coded or provided blanks to be filled in by the enumerator. Farmers who in- creased or decreased their acreage of wheat and/or corn were asked for their reasons for the change. These questions were left cpen ended and later coded to fit the IBM card. All of the data were coded and punched on IBM cards for machine sorting and tabulations. When comparisons are made between the 1957 and 1954 surveys, identical farms are compared except when findings from other studies are re- ferred to. Information concerning payment rates per acre for sample farms was obtained from the wheat and corn list- ing sheets of the County A.S.C. committees. CHAPTER IV CHARACTERISTICS AND COMPOSITION OF SOIL BANK AND NON-SOIL BANK PARTICIPATING FARMS AND FARMERS One of the major factors governing the success of agricultural production control programs is the desire of farmers to participate. If the program is designed in such a manner as to offer a satisfactory management alternative to enough farmers, so that aggregate production of surplus commodities is brought into balance with demand, the pro- gram can be deemed a success. If, as has been estimated, from 30 to 80 million acres would have to be withdrawn from the production of 'basio" crOps for the Soil Bank to be effective, then the present Soil Bank has not been successful. In 1957, only about 21 million acres of "basic“ crOp land was placed in the acreage reserve while another seven million acres of non-allotment crop land was placed in the conservation re- serve. Grain prices drOpped by 8.3 percent from December 1956 to December 1957.36 The Agricultural Marketing Service published the following information concerning crOp output in 1957: 36U.S. Department of Commerce, Business Statistics, (supplement to The Survey g; Current Business}, Washington, D. 0., Government Printing Office, February 21, 1958. -39.. -hO— Reduced output of food grains, cotton, oilseeds, tobacco and vegetables will probably be about offset by increases for sugar crops, feed grains, and hay and forage...Smaller acreage allotments and Soil Bank participation reduced total land planted to crOps this year by about 3 percent from 1956 but yields on the average are up from last year by nearly 5 percent. 37 Commodity Credit Corporation holdings of surplus commodities decreased in 1957 although this decrease was mainly effected by PL 480 disposal programs such as foreign currency sales and domestic donations. In this chapter, the characteristics and composition of Soil Bank and non-Soil Bank participants will be exam- ined. From the analysis, implications will be drawn with respect to (1) some reasons why the Soil Bank has apparently failed to achieve its goal of reducing the accumulation of farm surpluses and (2) what types of farms and farmers have found it advantageous to participate in the Soil Bank pro- gram. Size Characteristics During the course of the survey, many farmers re- marked, I'The'Soil Bank is only good for the little fellow. He puts his farm in the Soil Bank and goes to town to work." However, this statement is not verified by data from the sample. The median acreage of farms of Soil Bank partici- pants was 150.2 acres, while the median acreage of farms of 37Agricultural Marketing Service, U.S.D.A., The De: Inand and Price Situation, Washington, D. 0., Government Printing Office, Nevember, 1957. C l ..1 O; -h1_ non-participants was 158.6 acres, a difference of only 8.4 acres. Table II illustrates the distribution, by size of farm, for the 117 Soil Bank participants and 2A7 non-partic— ipants. While the percentage of participation was slightly TABLE II FARM SIZE RELATED TO SOIL BANK PARTICIPATION SOIL BANK NON-SOIL BANK Farm Acreage Percentage of Farms O;139 acres 4% 41 140-259 acres #2 #1 260-500 acres and over 14 18 Number of farms 117 247 higher for small farmers (139 acres and under), no signifi- cant difference appears to exist between the size of farms of Soil Bank participants and non-participants, even at the ten percent level of Chi square.38 The eight acre difference in the median acreage of 38For an explanation of the Chi square test of sig- nificance see Appendix B. I IFI 1‘ I II L «J I‘II V ‘- u- u Q .- l I It v nu‘ I... ‘ l | I I -42.. the two sample groups of farms may be indicative of a ten- dency for small farmers to accept the Soil Bank more readily than larger farmers. However, a larger proportion of farms of less than lho acres were cash grain farmers than for the sample as a whole. Larger farms were very predominantly livestock producers. The relationship of types of farms to Soil Bank participation is shown below. Type 9;,Farm Characteristics The planners of a policy program such as the Soil Bank need to consider the program's impact on producers who market surplus grains in the form of livestock. Livestock producers make up 30 percent of all U.S. farms and 40 per- cent of Michigan farms. In Iowa, for example, where 63 per- cent of all farms are classified as livestock producers,39 the acreage reduction goal established by the U.S.D.A. was not met. A possible explanation for this may be the fact farmers feel that the value of land used in the production of livestock feed (corn) is much greater than the value of that land in the Soil Bank. This hypothesis is supported by the results of analysis of the sample data in this study, as Illustrated in Table III. Intensive livestock producers appeared relatively unwilling to participate in the Soil h 39Census of_Agriculture, U.S. Department of Commerce, 195 . -u3- TABLE III INTENSITY OF LIVESTOCK OPERATIONS AS RELATED TO SOIL BANK PARTICIPATION SOIL BANK NON-SOIL BANK PARTICIPANT PARTICIPANT Percent of Farms Intensive (Less than 5 acres per animal 17 #8 unit)“ Extensive (More than 5 acres per animal 30 27 unit) Less than 5 animal units of livestock 9 7 No livestock 44 18 Total farms 117 247 ‘For an explanation of the derivation of the animal unit see Appendix C. Bank, while the majority of the Soil Bank participants were farmers with few or no livestock. Intensive livestock pro- duction requires a prOportionately larger fixed investment in the livestock enterprise than is the case with extensive livestock production. It would be expected that the inten~ sive livestock producers would be more unwilling to accept "I ‘1 L... -#4— a decrease in their primary feed source-~corn. Table IV illustrates the relationship of each type of farm in the sample to Soil Bank participation. Dairy and hog farmers appeared particularly unwilling to participate in the Soil Bank. Of the 152 dairy farmers in the sample, only 22 percent participated in the Soil Bank while only 18 percent of the 28 hog farmers participated. This compares with a total participation of 32 percent of all the sample farms. One possible reason why beef producers participated more readily in the Soil Bank than other types of livestock producers may be the fact that the beef enterprise requires less investment in fixed factors such as milking equipment and livestock housing. Location Characteristics The distribution of Soil Bank participants among the four economic areas surveyed in this study appears to be related to the number of livestock farmers in each area. Sanilac County had the highest prOportion of livestock farmers of any sample area. Only 1h percent of all Soil Bank participants were located in this county. The distri- bution of Soil Bank participants related to the number of livestock farms and county livestock numbers is illustrated in Table V. The Gratiot-Isabella area, with the smallest percent of livestock farms, had the highest percent partici- pation. Sanilac County had the least participation in the -14. 5. TABLE IV TYPES OF FARMS IN THE SAMPLE RELATED TO SOIL BANK PARTICIPATION TYPE SOIL BANK % OF SOIL 3: OF NON SOIL— 7; OF 75 OF PARTICI- BANK PARP FARMS BANK PAR? NON— FARMS PANTS TICIPANTS OF EACH TICIPANTS SOIL OF TYPE BANK EACH PARP TYPE TICI- PANTS Dairy 33 28 22 119 48 78 Beef 11 9 29 27 ll 71 Hogs 5 4 18 23 9 82 Sheep 1 l 11 8 3 89 Other 1 1 20 4 2 80 General 6 5 46 7 3 54 Less than 5 animal 8 7 35 15 6 65 units No Live- - stock 52 45 54 44 18 46 Total Farms 11? 100 32 247 100 68 -46- TABLE V SOIL BANK PARTICIPATION RELATED TO NUMBERS OF LIVESTOCK FARMS IN THE FOUR ECONOMIC AREAS SOIL BANK LIVESTOCK COUNTY LIVE— PARTICIPANTS FARMERS STOCK NUMBERS“ .AREA Percent of all Percent of Participants sample farms ~ in each area Kalamazoo County 24 56 37,891 Gratiot— Isabella 36 55 59.134** Counties Sanilac County 14 81 141,437 Livingston County 26 63 50,505 Total Farms 117 247 *Michi an Agricultural Statistics, Michigan Depart‘ ment of Agriculture, June, 1957. (Converted to animal units. *‘Average of the two counties. Soil Bank and had the highest percentage of livestock farm- ers of the four areas of the study. -47- Characteristics With Respect tg.Respondents' Source g£_Income Results from the Wisconsin Soil Bank studyuo indi- cated that Soil Bank payments may be helping to shift labor resources out of agriculture by making off-farm work appear more attractive. 8011 Bank payments often enable a farmer to maintain his net farm income while he decreases his labor inputs in agriculture and increases his off-farm work load. The farmer is also able to maintain his equity in his farm for future use in case he is laid off from his off-farm employment. This observation is substantiated by data from this study. Farmers in the sample were asked what prOportion of their incomes were earned from farming. Among the Soil Bank participants, 33 percent had farm incomes of less than 40 percent of their total incomes. This contrasts with 18 per- cent of the non-participants who had farm incomes of less than 40 percent of their total incomes. Farmers with farm incomes of 90 to 100 percent of their total incomes were more frequently non-participants. The observed distribu- tion is illustrated in Table VI. The Chi square test showed that there was a significant difference in the per- cent of income earned from farming between Soil Bank ”OSCMid, O o Cite, P- 370 -u8_ participants and non-participants, even at the one percent level of significance. TABLE VI PROPORTION OF TOTAL INCOME FROM FARMING RELATED TO SOIL BANK PARTICIPATION. SOIL BANK NON-SOIL BANK PARTICIPANT PARTICIPANT Income From Farming Percent of Farms 0-39% 33 18 40-89% 15 13 sac—100% 52 69 Total Farms 117 247 The percentage of the respondent's income earned from farming was closely associated with the intensity of livestock production on the sample farms. This relationv ship is illustrated in Table VII. Farmers who spend time working away from the farm find it difficult to adequately maintain large numbers of livestock. Therefore, the dis— tribution of the farmer's participation in the Soil Bank with respect to income earned from farming may be related to livestock numbers on the farm. -49- TABLE VII THE RELATIONSHIP OF INCOME EARNED FROM FARMING.AND INTENSITY OF LIVESTOCK PRODUCTION PERCENT OF INTENSIVE EXTENSIVE LESS THAN NO INCOME LESS THAN 5 MORE THAN 5 5 ANIMAL LIVESTOCK EARNED FROM ACRES PER ACRES PER UNITS ON FARMING' .ANIMAL UNIT .ANIMAL UNIT THE FARM Percent of Farms 049% 12 14 46 #2 40-89% 8 15 25 18 90-10% 80 71 29 to Total Farms 138 102 28 96 In Table VIII, the income and livestock production factors described above are compared simultaneously between Soil Bank participants and non-participants. If the hy-, pothesis expressed in this thesis is correct, a large per- centage of the Soil Bank participants will be extensive livestock producers or cash grain farmers earning none to 39 percent of their total incomes from farming. The largest percentage of the non-participants should be intensive live— stock producers earning 90 to 100 percent of their income -50. TABLE VIII PERCENT OF TOTAL INCOME EARNED FROM FARMING, AND TYPE OF FARM ENTERPRISE, RELATED TO SOIL BANK PARTICIPATION PERCENT FARM SOIL BANK NON-SOIL BANK INCOME ENTERPRISE PARTICIPANTS PARTICIPANTS FROM FARMING Farms Percent Farms Percent 0-39% Intensive (84 farms) Livestock 5 4 11 4 Extensive Livestock and/or 34 29 34 14 Cash grain 40-89% Intensive (51 farms) Livestock 3 3 9 4 Extensive Livestock and/or 15 13 24 9 Cash grain 90-100% Intensive (229 Livestock 12 10 98 4O farms) Extensive Livestock and/or 48 41 71 29 Cash grain Total farms 117 100 247 lOO __ ——._‘ -51- from farming. In Table VIII it is seen that 40 percent of the non-Soil Bank participants were intensive livestock producers. This is the largest group of non-participants. Among the 8011 Bank participants, 29 percent were extensive livestock producers and/or cash grain farmers with farm in- comes of less than 40 percent of their total incomes. It should be noted that only 23 percent of all the sample farmers fell in the O to 39% farm income category. Extensive livestock producers and/or cash grain farmers were predominantly Soil Bank participants in all three income categories. This fact suggests that the farm enterprise factor was more important in determining the respondent's choice of the Soil Bank as a management alter- native. This is understandable when it is seen that 83 farmers participated in the corn acreage reserve in 1957 while only 55 were in the wheat acreage reserve. Since corn is primarily grown for livestock feed and wheat is a cash crap, the corn acreage reserve participants strongly influenced the sample data with respect to livestock pro- duction and the Soil Bank. Each of these two groups will be more completely analyzed with respect to 8011 Bank par— ticipation in Chapter V. Farm Ownership Characteristics The ownership status of the sample farm did not af- fect the farmer's desire to participate in the Soil Bank. Of -52- the 117 farms with acreage in the 8011 Bank, 55 percent were owned by the farmer and 45 percent were rented from someone else. This compares closely with an ownership pattern of 52 percent owned and 48 percent rented for non-participants. No significant difference was found in the proportion of owned and rented farms for the two groups, even at the ten percent level of Chi square. Age Characteristics Many rural leaders have looked on the Soil Bank as an income alternative for retired farmers. Conceivably, a farmer who is approaching retirement age and who has diffi— culty finding a renter or hired labor, might find it advan— tageous to place his land in the acreage reserve and the conservation reserve. Most farmers in the sample stated that there was more land offered for rent than there were renters. Under this condition it might be expected that Soil Bank participants would average older in age than non-par- ticipants. The median age of the 117 Soil Bank participants was 45.1 years while the median age of non-participants was 38.0 years-a difference of 7.1 years. However, when the distribution of ages of participants was compared with that 0f non—participants, as shown in Table IX, no significant difference could be found, even at the ten percent level of Chi square. When questioned about their attitudes toward -53- TABLE IX AGE OF RESPONDENT RELATED TO SOIL BANK PARTICIPATION SOIL BANK NON-SOIL BANK PARTICIPANT PARTICIPANT AGE Percent of Total Under 25 3 4 25-35 15 14 36-45 34 25 46-5 5 21 27 56-65 19 13 Over 65 8 12 Total respondents 117 247 the Soil Bank program, many non-participating elderly farmers expressed an interest in learning more about the income alternative which Soil Bank participation would pro- vide. Perhaps when the Soil Bank, particularly the conser- vation reserve, has been in effect for a longer period of -511. time, more elderly farmers will use the Soil Bank as an al— ternative means of retiring. Summary The analysis of the sample suggests that the two important factors influencing the sample farmers' decision to participate in the Soil Bank were (1) the predominant enterprise on the farm, and (2) the extent of the farmers' off—farm work load. These two factors were, in turn, inter- related. Intensive livestock farmers tended to be full time farmers to a greater extent than extensive livestock or cash grain Operators. The data obtained in the survey indicated that full time intensive livestock farmers were very reluctant to accept decreases in the acreage of land used to produce feed for their livestock enterprises. The part-time cash grain farmer apparently found Soil Bank pay- ments an attractive income alternative, particularly since it allowed him to decrease his labor inputs to agriculture while maintaining his net farm income and perhaps to ine crease his total income. The age and tenure status of the respondent did not aPpear to be significantly related to the farmer's decision to participate in the Soil Bank. Intensive livestock producers tended to find it un- Profitable to participate in the Soil Bank. If payment -55- rates were raised to the point where the livestock producer could profit by placing acreage in the Soil Bank and then buy feed, the program might have served to alleviate the feed grain surplus problem more effectively. CHAPTER V MICHIGAN WHEAT AND CORN CROPPING PRACTICES UNDER THE SOIL BANK The purpose of this chapter is to examine the extent to which farmers in the sample are substituting non—labor factors of production for the reduced land factor. If it is assumed that most Soil Bank participating farms are not yet Operating at a point where their marginal factor costs equal the marginal value products of theSe factors, then these farmers could profitably increase their inputs of non-land and non-labor factors, dampening or nullifying the effects of an acreage reduction. An analysis of (1) the extent of this substitution by farmers who reduced their land inputs and (2) the changes in the amounts of non-labor factors of production used by all producers provides a measure of the success of current production control programs. Wheat and corn are the two crOps analyzed in this study. They are the two most important field crops grown in the state. In 1956, corn accounted for 28.5 percent of the total value of Michigan agricultural production and wheat accounted for 15.2 percent.“1 These are the only ulMichigan Agricultural Statistics, Michigan Depart— ment of Agriculture, June, 1957. -55- -57- two "basic“ commodities grown in Michigan which are eligible for the Soil Bank. Wheat Acreage Trends The wheat acreage of the sample farms has been re— duced sharply since 1952. Most of this decrease took place in 1954 when mandatory wheat marketing quotas took effect. Wheat acreage was reduced from 15,069 acres in 1953 to 9,730 acres in 1954, a decrease of 35.4 percent. From 1954 to 1957 wheat acreage has declined further, by 15.1 percent, to 8,261 acres. Table X illustrates the fact that harvested wheat acreage in the United States and Michigan was also drasti- cally reduced from 1953 to 1954. The acreage of wheat in the sample, Michigan, and the United States decreased less from 1954 to 1955 and then increased from 1955 to 1956. From 1956 to 1957 a sharp decrease took place despite favor- able weather conditions in Michigan and over much of the United States, and also despite continued high price sup— ports. Examination of figures from the sample and from the Michigan Agricultural Stabilization and COnservation Office indicate that the wheat acreage reserve of the Soil Bank is primarily responsible for the 1957 acreage decrease. In 1957, the 989 acres placed in the wheat acreage reserve on the sample farms was 101.3 percent of the wheat up. .amma .aa hometown ..o.n .aopmadsmes ..«.Q.m.n .coapospoam mono .Hmeeasm szcc< Nwma .moabaom mcapoxnmz Hennpfisbdnmdtt .ammh mzod>eam 03p 80am omemnomp a pammmaamn mcwam mscaz .neom mzoa>onm on» mo pceopmm cap at oocosowudnt Aooov 200.0: m.man sma.me m.m mmm.u: m.na..mmm.em m.ma..o:m.am m.:.. omH.Ha *¢.<.m.p Aooov Ham o.m.. meo.H :.m mmm m.ma. oao.H a.mn- :Nm.H o.m mme.a etcemdnoaz Hem.m m.oa.. amm.m a.m mom.m :.m.. oma.m e.mm..mmo.ma m.mm :No.NH maaaem Hcpoe xcmm moa.a m.o u. awa.a H.: mm:.a :.a.. mmm.m Haom Inez mmm o.mm.. oa:.H A.H m::.a m.ma. sme.a Ream Haom mono4 commeno meno¢ commune meso< tochSO mono< *mmccno moped someone mono< amma m mama m mmma & Emma a mmma & mmma «axe mmBmmmmm Rosamoa 94m a HX mAm¢B -62- earn less than 50 percent from farming. The sample farms were divided into two income groups; those farms where less than 50 percent of the total income was earned from farming, and farms with farm incomes of 50 percent or over. These two categories were compared with respect to wheat acreage changes from 1956 to 1957. The re- sults are shown in Table XII. Of the farmers in the less than 50 percent farm income category, 61 percent decreased wheat acreage. 0n farms where 50 percent or more of the total income was earned from farming a slightly smaller per— centage, or 59 percent, decreased wheat acreage. A higher percentage of farms in the 50 percent or more farm income TABLE XII WHEAT ACREAGE CHANGE 1956 TO 1957 COMPARED TO PERCENT OF INCOME EARNED FROM FARMING CHANGE IN WHEAT ACREAGE, 1956 TO 1957 Increase Decrease No Change Total Farms PERCENT OF INCOME Percent of Farms EARNED FROM FARMING 0-49 percent 24 61 15 109 50-100 percent 34 59 7 255 ~63- group increased wheat acreage than in the 50 percent or less group. For the sample as a whole, the respondent's source of income appeared to affect his decision to increase wheat acreages. However, this factor appeared to be more important within each area than over the whole sample. The study by Eldridge indicated that 80 percent of the farms in Sanilac County and 83 percent of the farms in Gratiot-Isabella Counties had wheat allotments of 15 acres or less. Only 53 percent of the farms in Kalamazoo County and 73 percent of the farms in Livingston County had allot- ments of less than 15 acres.)+3 Thus farmers in the Sanilac and Gratiot-Isabella Counties were more able to counter the trend toward decreased wheat acreage by overplanting their wheat allotments. Eldridge found that wheat allotments were overplanted by 23 percent in Gratiot-Isabella Counties and 10 percent in Sanilac County. The stratification used in selecting the sample for the Soil Bank study tended to decrease the number of farms with wheat allotments of less than 16 acres in each area. However, the farms in the sample were sorted into two cats- gories; 147 farms with a wheat allotment of 15 acres or less and 217 farms with a wheat allotment of 16 acres or more. Although the distribution of these two groups by areas bore h3Ibid., p. 45. -514... little resemblance to the distribution observed in Eldridge's study, farms with wheat allotments of less than 16 acres were compared for each area. In Gratiot—Isabella Counties where acreage decreased by only 5.1 percent in 1957 from 1954, 46.3 percent of the low allotment farmers increased wheat acreage in 1957 over 1956. In Sanilac County where wheat acreage decreased by 15.4 percent, 42.2 percent of these farmers increased wheat acreage. In Kalamazoo and Livingston Counties where acreage decreased by over 20 per- cent, only 29.3 and 36.2 percent, reapectively, of the under 16 acre allotment group increased wheat acreage. Farmers with wheat allotments of less than 16 acres who are located in areas where cash grain farming is important are tending to overplant their allotments in order to keep incomes up. A study made of this sample in 1954 suggested that (1) areas in which most of the farms were oriented around dairy herds had the most difficulty in maintaining produc- tion under controls and (2) areas with a relatively higher prOportion of cash grain farms were more successful in off- setting controls.M4 The distribution of participation in the wheat acre- age reserve parallels, as would be expected, the reduction in wheat acreage in the four areas. Farmers with a wheat wheat allotment who are turning to alternative enterprises M4Dale E. Hathaway, Op, Cit., p. 573. -55- in the face of government wheat marketing quotas, appear more willing to retire wheat land in the 8011 Bank. Also, in areas where a greater proportion of farmers work off the farm, a larger number of farmers participated in the wheat acreage reserve, presumably reducing their labor inputs. It was pointed out in Chapter IV that the Soil Bank offers an alternative income for farmers making the transition to off farm employment. This is particularly true of the wheat acreage reserve, since a reduction of wheat acreage and the required labor inputs does not require a reduction in any other farm enterprise such as beef, poultry, or dairy. The respondents were asked why they changed their wheat acreage from 1956 to 1957. Table XIII shows the answers that were given by farmers who changed acreage. The two most important reasons given for an increase in wheat acreage were (1) “to fit my rotation" and (2) farm Operations other than rotation. The most important reason given by farmers decreasing wheat acreage was Soil Bank par- ticipation. Many farmers also cited a cut in allotment and rotation as reasons for decreasing wheat acreage. Within each area, one factor which could have af- fected the individual farmer's decision to participate in the wheat acreage reserve was the payment rate offered him by the county A.S.C. office. Payment rates are based each year on the average county yields per acre for the two pre- vious years. Personnel from the county A.S.C. offices rate ll -66— TABLE XIII REASONS WHY FARMERS CHANGED THEIR WHEAT ACREAGE, 1956 TO 1957 REASON NUMBER OF FARMS PERCENT OF FARMS Increased Acreage 1. Allotment was increased (lar er farm in 1957, 18 21 etc.% 2. Rotation induced increase 28 33 3. Farm operations other than rotation induced 22 26 increase 4. Approached 15 acres legal maximum wheat acreage (Farmers with 10 12 less than 15 acre allotment) 5. Don't know 7 8 Sub Total 5 100 Decreased Acreage l. Allotment was out 24 20 2. Allotment was out be- cause farm size 5 4 decreased 3. Rotation induced reduction 25 21 4. Farm operation other than rotation induced 20 17 reduction 5. Participated in wheat acreage reserve 42 35 6. Don't know 3 3 Sub Total 119 100 No answer, no change in acreage or no wheat pro- 160 duced Total 3‘5-E I! -57- each farm for productivity on an index basis. Given the county yields and the index of productivity for each farm, payment rates are assigned to all farms in the county prior to the time set for making contracts. Considerable varia- tion within each county is possible as long as the county average yield is met. There appeared to be no significant difference be- tween the payment rate offered to wheat acreage reserve participants and non-participants, both for the whole sample and for each county. Wheat CrOpping Practices In order to determine the extent of input substitur tion by farmers who participated in the wheat acreage re- serve, two sorting Operations were necessary. First, wheat acreage reserve participants were separated from all other wheat growers. Second, wheat acreage reserve participants who did not remove all their wheat acreage from production were separated from those participants who placed their en- tire wheat allotment in the Soil Bank. Comparisons were then made between inputs applied on wheat on Soil Bank participating farms and non-participating farms. A total of 55 farms participated in the wheat acreage reserve in 1957. Of these, 29 farms placed only a part of their wheat allotment in the acreage reserve. A total of 301 farms grew wheat but did not participate in the wheat acreage reserve. -68- Farmers were asked if they used certified seed for all or part of their 1957 wheat crop. Of the Soil Bank par- ticipants who grew wheat, 14 percent used certified seed while 15 percent of the non-participants used certified seed. Therefore, no significant difference appeared to exist between participants and non-participants regarding their use of certified seed. The rate of application of fertilizer, excluding nitrogen top dressing, differs slightly between partici- pants and non-participants. The average pounds of plant nutrients applied as fertilizer, per acre, on wheat grown on Soil Bank farms was 3.80 pounds while the application on non-Soil Bank farms was 3.34 pounds. Farmers participating in the Soil Bank applied 0.64 pounds of nitrogen in top dressing compared to a rate of 0.37 pounds for non-partici- pants. These figures may be indicative of a tendency for Soil Bank farmers to apply more plant nutrients on wheat than non-participants apply. However, when the application rates in 1957 were compared with rates for 1956, non-partici- pants appeared to be increasing their rates of application more often than are Soil Bank participants. Of the Soil Bank farmers who grew wheat, 10 percent were increasing their rate of application, compared with 17 percent of non-participants. While 21 percent of the participants were decreasing their rates of application, only 13 per~ cent of non—participants were decreasing their rates of -69- application. In any case, the number of Soil Bank partici- pants, within the sample, who grew wheat is too small to provide enough data from which conclusions can be drawn with a high level of confidence of accuracy. Summary g; Wheat Acreagps and Practices The wheat acreage reserve appears to have been suc— cessful in cutting back wheat acreage in the sample, Michi- gan, and the United States in 1957. Some reluctance to decrease wheat acreage was exhibited by sample farmers who derive most of their income from cash grain farming. These farmers tended to overplant their allotments if the allot- ments were less than 16 acres. Livestock farmers and part time farmers were most willing to place land in the wheat acreage reserve, probably to expand other farm enterprises or as a way to reduce farm labor inputs and transfer them to off-farm work. These findings may appear to be inconsistent with the results reported in Chapter IV. However, since wheat is grown mostly as a cash crop and corn as a livestock feed, the motives influencing a reduction in acreage for these two crOps should differ. A farmer who derives a large portion of his total income from growing and selling wheat would be expected to resist an acreage reduction in his primary ens terprise. The Soil Bank does offer payment for the acreage reduction, but leaves the full time farmer with a surplus -70— of his fixed labor resources. Corn producers, as will be shown later, are more strongly affected by their livestock enterprise since corn production is an integral part of the enterprise. The wheat acreage reserve participants in this sample did not significantly substitute more inputs (in the form of better seed and more plant nutrients) for their loss of wheat land. The slightly higher use of plant nutrients by Soil Bank participants, as indicated by farms in this sample, if multiplied by much of the wheat land on Soil Bank farms in the United States, would partially offset the production reduction brought about by the Soil Bank. The increase in the rate of application by non-Soil Bank participants as shown by this sample would tend to further offset the effects of wheat acreage reductions. Such increases in the use of plant nutrients, however, might have occurred anyway as part of the changing production pattern. These increases then, may not necessarily be attributable to the existence of a Soil Bank program. In areas where wheat is farmed extenr sively and where water is more likely to be a limiting fac- tor, it would be more difficult, if not impossible, to profitably substitute chemical fertilizers for a loss of land to the Soil Bank. However, an important part of the American wheat crOp is grown where substitution is possible. It“ H.1- II .I‘ -71- Corn Acreagg Trends The harvested acreage of corn in the sample in 1957 increased 20.9 percent from 1952. Michigan's harvested corn acreage in 1957 likewise increased 10.2 percent over 1952. waever, most of this increase took place prior to 1954. In 1954, larger carryover stocks of corn caused the Secretary of Agriculture to announce acreage allotments for corn. Sanilac County was the only sample county where no corn reduction occurred until 1957. It was not designated as a commercial corn county eligible for price supports under acreage allotments until 1956.)+5 However, the sample as a whole has decreased corn acreage by 9.4 percent since 1954, at least partly because of the acreage allotment - price support program. Michigan corn acreage has followed a similar trend. Corn acreage in 1957 had increased by 10.2 percent over 1952, but decreased by 2.7 percent since 1954. Again, the trend toward higher acreages of corn appears to have been reversed in 1954, partly because of government controls. Corn acreage in the United States has decreased steadily since 1952. The acreage harvested in 1957 was 10.2 percent less than in 1952. The trend toward less corn aoreage appears to have been accelerated since 1954. Corn ‘ usFor a complete description of the designation of commercial corn producing areas see Myron E. Wirth, O . 042': p. 590 -72- acreage in the United States had decreased by 9.3 percent in 1957 from 1954. In the sample, Michigan, and the United States, corn acreage appears to have been sharply reduced because of the corn acreage reserve part of the Soil Bank Act. This is shown in Table XIV. The weather in Michigan and the United States in 1957 was generally held to be favorable for corn productionfl6 yet harvested acreage fell off from 1956, 12.8 percent for the sample farms, 7.9 percent for Michigan and 3.9 percent for the United States. Table XV illus- trates the relationship of corn acreage reserve participa- tion to acreage reduction in 1957 from 1956. It should be noted that all of the 9.4 percent corn acreage reduction from 1954 to 1957 in the sample was accounted for by the 8011 Bank participants. Non-participants partly offset this reduction by increasing corn acreage by 12 percent. Farmers in the sample were asked how many acres of corn they would have planted had there been no Soil Bank or government control programs. Farmers reported that they would have planted a total of 14,927 acres or 24.3 percent more acres of corn than were actually planted. When acreage changes were compared for the four areas within the sample, only the sample farms in Sanilac County “6Conversation with A. J. Hintzman, Statistician, Michigan Department of Agriculture, February 19, 1958. .amma .aa tmnsooon ..o.n .sOpweasmea ~oHK mqm