Too Much of a Good Thing

By GEORGE J. CHURCH

The twelve-nation European Community spends $63,000 an hour to store 1.4 million tons of unsold butter in refrigerated warehouses. Its mountain of skimmed-milk powder rose this summer to 988,000 tons. The E.C. is trying to reduce the stocks by feeding the butter to calves and the milk powder to pigs and poultry. But experts estimate that about half the butter and other refrigerated products have deteriorated so badly that they are no longer fit to be eaten by animals, let alone humans.

Japan's farmers each year grow more rice than the nation's citizens can eat. Yet rice can be sold only under government license, and consumers pay about three times the average world price to buy it.

Americans can take no comfort from these shared troubles; agriculture is one field in which misery does not love company.

On the contrary, whenever a nation tries to dispose of its surpluses, furious fights erupt, even among old friends. Australian Foreign Minister Bill Hayden has been thundering that subsidized American sales of wheat to the Soviet Union and sugar to China, traditional Australian markets, could undermine the bilateral defense alliance. Thais are so incensed by subsidized American rice exports that a Bangkok newspaper recently ran the headline BEST FRIEND U.S. CUTS THAILAND'S THROAT.

Farm policy, in other words, is the tar baby of political economy through most of the non-Communist world: an intract-able mess that seems to get ever stickier. Communist nations have agricultural headaches too, but theirs stem from too little production caused mainly by a lack of incentives for farmers. The root problem in the free world is the exact opposite: high price supports and other subsidies have encouraged farmers to grow bigger crops than markets can absorb. In Western Europe, for example, agricultural output has been growing four times as fast as food consumption; in the U.S., farm production has far outpaced the 1% annual population growth.

The trouble has been building since the 1930s in the U.S. and the 1960s in Western Europe. But the effects were muffled during the 1970s by a worldwide boom in exports. The Soviet Union began introducing more meat into its citizens' diets and imported grain on a huge scale for animals to eat. Oil- price increases piled money into international banks; the bankers lent the cash to Third World nations, which then went on a food-buying spree. Farmers everywhere pushed production still higher to cash in on the new prosperity. Western Europe, for example, went from being a net importer to a net exporter of some important food products. Still there seemed to be more than enough business to go around. In the U.S., agricultural exports hit an all-time high, and net farm income came close to one, in 1981. This was no coincidence: one calculation shows that the food and fiber grown on two of every five acres under cultivation in the U.S. is sold abroad.

By the 1980s, however, several trends converged to make the export markets shrivel as rapidly as they had grown. The second oil-price shock, beginning in 1979, tipped the industrial world into recession. Poor countries, unable to sell their products in Europe and the U.S. and under pressure to repay their loans, cut back drastically on food imports. Meanwhile, the high-yielding crop strains developed by the "green revolution" brought many Asian countries to or near the point of self-sufficiency in food production. China and India, the world's two most populous nations, have actually become exporters of grain. Hunger still stalks the world, of course -- some parts of sub-Saharan Africa face outright starvation. But these nations lack the money to buy the imported food they so desperately need.

In the U.S., farm exports have shrunk from $43.8 billion in 1981 to an ! expected $26.5 billion this year. Inept Government policy has contributed. In 1981, Congress, anticipating continuing inflation, authorized annual increases in crop loans (in effect, support prices) that helped to price American food and fiber out of what export market remained. The consequences of dropping exports have been drastic in Western Europe too. The E.C.'s stockpile of unsold farm goods has more than quintupled in the past five years, to a current estimated value of $10.2 billion. Besides its butter mountain and piles of stored grain, the Community produces so much more wine than can be sold that the annual surplus would fill 1,500 Olympic-size swimming pools.

What can be done? The obvious solution would be to knock out price supports and force farmers to grow no more than customers at home and overseas have the money and desire to buy. Such a policy, however, is simply too brutal for public opinion to accept. The U.S. could probably feed and clothe itself comfortably with the output of only half the land now in cultivation. But that would mean a wave of foreclosures and farm bankruptcies dwarfing anything seen so far.

Moreover, in all the democratic countries, farmers retain enough political clout to block any drastic cut in the income supports that encourage overproduction. Japan is an extreme example: the high subsidies on rice reflect an outrageous gerrymandering of election districts that gives some rural areas as much representation in the legislature as city districts with 35 times as many voters. In the U.S., farmers now constitute only 2.2% of the population, vs. 8.7% as recently as 1960. But farmers and people dependent on them (small-town bankers, food processors, machinery dealers, fertilizer makers and the like) dominate the economies of enough states to wield disproportionate power in Congress. One result: the Reagan Administration last year could not begin a dismantling of price and income supports that it had widely touted. Congress passed a new law keeping supports high enough that they are likely to cost taxpayers a stunning $26 billion in the fiscal year that ends Sept. 30 -- though not high enough to prevent many farmers from going broke anyway.

So it goes around the world. Farmers, governments and taxpayers are paying the price of living in an agricultural fantasy land. But they shrink from the even more devastating price of a return to economic reality.

With reporting by Jay Branegan/Washington, with other bureaus