The Happy Farmer

Despite the rollback on auto prices and hints that prices in other industries may also be controlled soon, food prices continued to skedaddle gaily upwards (see NATIONAL AFFAIRS). But though food comprises a big 40% of the Government's cost-of-living index (v. 4.8 for autos), there was little talk in Washington about slapping on mandatory controls. Reason: there was nothing that Price Stabilizer Michael DiSalle could legally do to stop the rise in most foods.

When Congress passed the Defense Production Act, which provides for wage & price controls, the farm bloc built high food prices into the law by exempting farm products from price control until they sell at parity* or above. As additional protection, ceilings on farm products must be set at parity or the highest price in the month before the Korean invasion, whichever is higher.

Parity last week was so high that only seven commodities were priced above it: cotton, rice, flue-cured tobacco, wool, beef cattle, lambs and veal calves.

Most household staples, despite a 10.5% jump in farm prices since Korea, were still selling below parity. Oranges on Nov. 15 (when parity was last computed) brought the grower an average $1.46 a box or 39% of parity, and before the Government could control oranges the price would have to rise to $3.70 a box. Similarly, milk would have to go up 13%, wheat 15%, corn 17%, butter fat 18% and potatoes 51% before price ceilings could be put on.

What Washington was finally realizing was that the nation is on an inflationary merry-go-round that can't be stopped under the present law. As food rises, the cost of living rises. Since a million non-farm workers have wage rates tied directly to the cost-of-living index, they automatically get wage increases as the cost of living goes up. That, in turn, boosts the cost of manufactured goods, and is bound in time to force up even mandatory ceilings, if the companies are to remain in business. But when manufactured goods go up, parity goes up, and the merry-go-round starts all over again.

*Parity is a formula for adjusting farm support prices according to the prices farmers have to pay for the things they buy (fertilizer, tractors, etc.). The aim is to give the farmers' dollar the same purchasing power it had in 1910-14. No other segment of the U.S. economy has the same government guarantee. Parity prices are revised monthly by the Department of Agriculture.

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