1977 U.S. agricultural outlook

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Title:
1977 U.S. agricultural outlook papers presented at the National Agricultural Outlook Conference, sponsored by the U.S. Department of Agriculture, held in Washington, D.C., November 15-18, 1976
Physical Description:
vi, 445 p. : ill. ; 23 cm.
Language:
English
Creator:
United States -- Congress. -- Senate. -- Committee on Agriculture and Forestry
United States -- Dept. of Agriculture
Conference:
National Agricultural Outlook Conference (U.S.), (1976
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U.S. Govt. Print. Off.
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Washington
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Subjects / Keywords:
Agriculture -- Economic aspects -- Congresses -- United States   ( lcsh )
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bibliography   ( marcgt )
statistics   ( marcgt )
conference publication   ( marcgt )
non-fiction   ( marcgt )

Notes

Bibliography:
Includes bibliographical references.
Additional Physical Form:
Also available in electronic format.
Statement of Responsibility:
prepared for the Committee on Agriculture and Forestry, United States Senate, December 10, 1976.
General Note:
At head of title: 94th Congress, 2d session. Committee print.

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University of Florida
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
aleph - 027166479
oclc - 15195151
Classification:
lcc - HD1765 1977 .N38 1976
System ID:
AA00025959:00001

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94th Congress }
t2d Session COMMITTEE PRINT





1977 U.S. AGRICULTURAL OUTLOOK




Papers Presented at the National Agricultural Outlook
Conference Sponsored by the U.S. Department
of Agriculture-Held in Washington, D.C.,
November 15-18, 1976




PREPARED FOR THE

COMMITTEE ON AGRICULTURE AND

FORESTRY
UNITED STATES SENATE




DECEMBER 10, 1976












Printed for the use of the Committee on Agriculture and Forestry


U.S. GOVERNMENT PRINTING OFFICE
78-885 0 WASHINGTON : 1976

For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402 Price $3.85

























COMMITTEE ON AGRICULTURE AND FORESTRY
HERMAN E. TALMADGE, Georgia, Chairman
JAMES O. EASTLAND, Mississippi ROBERT DOLE, Kansas
GEORGE McGOVERN, South Dakota MILTON R. YOUNG, North Dakota
JAMES B. ALLEN, Alabama CARL T. CURTIS, Nebraska
HUBERT H. HUMPHREY, Minnesota HENRY BELLMON, Oklahdma
WALTER D. HUDDLESTON, Kentucky JESSE HELMS, North Carolina
DICK CLARK, Iowa
RICHARD B. STONE, Florida
PATRICK J. LEAHY, Vermont
MICHAEL R. MCLEOD, General Counsel and Staff Director
HENRY J. CASSO, Chief Economist
CARL P. ROSE, Counsel
JAMES W. GILTMIER, Professional Staff Member
WILLIAM A. TAGGART, Professional Staff Member
DALE L. STANSBURY, Economist
THOMAS REESE SAYLOR, Economist
JAMES C. WEBSTER, Chief Clerk and Press Secretary
PHILLIP L. FRAAS, Assistant Counsel
STEPHEN E. STORCH, Assistant Counsel
ROY FREDERICK, Economist
STUART B. HARDY, Professional Staff Member
REIDER J. WHITE, Research Assistant
BETTY M. MASON, Clerical Assistant
HELEN A. MILLER, Clerical Assistant
LAURA D. RICE, Clerical Assistant
MARGARET KELLEY, Clerical Assistant
DENISE A. LOVE, Assistant Clerk
MAUREEN T. BURKE, Clerical Assistant
NANCY W. WHITEHEAD, Clerical Assistant
ANN C. BOND, Clerical Assistant
DIANE G. COVINGTON, Finance Secretary
Jo R. PATTON, Clerical Assistant
ELLEN J. WILLIAMS, Clerical Assistant
JAMES E. BARKSDALE, Clerical Assistant
(II)












FOREWORD


The National Agricultural Outlook Conference was held in mid-
November this year. This Conference is sponsored annually by the U.S.
Department of Agriculture to give farmers, those serving farmers and
those who process, market, and consume farm products an opportunity
to get up-to-date information on production, prices, input supplies, and
the demand situation. However, the Conference goes much beyond this
and projects the direction and magnitude of agricultural trends for the
upcoming year.
The Conference is of particular significance this year because of the
convergence of major agricultural and food policy areas requiring con-
gressional attention in the coming months.
The Agricultural and Consumer Protection Act of 1973, applicable
to feed grains, wheat, cotton, wool, and dairy products, expires at the
end of the 1977 crop year. The 2-year Rice Production Act of 1975
also expires in 1977. Modifications in the existing peanut program will
almost certainly be proposed again in the next session of Congress. The
authorization for the Agricultural Trade and Development Assistance
Act of 1954, popularly known as Public Law 480, expires. In addition
the funding authorization (sec. 16) for programs under the Food
Stamp Act of 1964 also expires.
Thus, in early 1977 the "agricultural policy" debate will coincide
with the "domestic food policy' and "foreign food policy" debates. The
change in the economic setting since 1972 now means that the three
formerly distinct policy areas have become more closely interrelated.
Policy issues from these areas are now intermingled. When new legis-
lation is considered, the traditional concerns of farm prices and in-
comes will undoubtedly be considered jointly with newly emerging
issues.
In the interest of providing the members of the Senate Committee
on Agriculture and Forestry, the Senate, and the general public with
timely and reputable information regarding the agricultural setting
and the outlook in 1977, I have asked that the papers presented at this
year's National Agricultural Outlook Conference be published as a
committee print. While the views and analyses presented in these
papers are those of the authors and not of the Committee or of the
USDA, the Committee nonetheless wishes to recognize that these con-
ference speakers are professionals and experts in their respective fields.
HERMAN E. TALMADGE, Chaiwrmn.
(III)




















Digitized by the Internet Archive
in 2013














http://archive.org/details/1977usagr00un it













CONTENTS


Page
Foreword ---------------------------- -----_ _______----_ i-
U.S. Economic and Agricultural Outlook:
1977 Agricultural Outlook--by Hon. John A. Kneble------------- 3
U.S. Economic Outlook-by Burton G. Malkiel------ ----------- 6
Agricultural Outlook for 1977-by Rex F. Daly -----------__ 11
Food-Supplies, demand and consumption:
The Outlook for Food Supplies and Prices-by James R. Donald---- 27
Outlook for USI)A Domestic Food Assistance Programs-by Stephen
J. Hiemstra -- ---------------------------------- 43
Current and Emerging Issues in Food Marketing and Distribution-by
S. Kent Christensen -------------------------- ------- 46
Food Marketing and Distribution: Costs and Related Issues-by
Patrick J. Luby ------ ---------------------------------49
Dietary Trends and National Health-by Graham T. T. Molitor----- 53
The Awareness of Today's Consumer-by Nancy Harvey Steorts --- 72
Agricultural inputs and productivity:
Farm Input Situation and Outlook, 1976-77-by Robert D. Reinsel- 81
Rural America and Environmental Quality: Issues and Potential Im-
pacts-by Lyle P. Schertz_______--___--------------------- 88
World Climatic Changes and Agriculture-The Issues-by Joseph W.
Willett and William R. Gasser ---------------------------- 100
The Farm Financial Outlook for 1977-by Philip T. Allen-------- 106
U.S. agriculture in the world:
Agricultural Trade Outlook-by Richard E. Bell --------------- 119
Agriculture and World Economics-by Gerard Viatte ------------ 125
U.S. Agriculture and the Third World-by T. K. Warley -- ------ 128
Issues in U.S. International Trade-by William Barraclough ----- 143
U.S. agricultural policy :
Perspectives on Agricultural Policy-by Wayne D. Rasmussen ---- 151
Agricultural and Food Policy Beyond the Agriculture and Consumer
Protection Act of 1973-by J. B. Penn _----___-- ----- ----- 160
Emerging Policy Issues-by Dr. Don Paarlberg ------------------- 168
The Future of the U.S. Department of Agriculture-by Ronald D.
Knutson __----------------------------------173
Commodity outlook:
Situation and Outlook for Wheat and Rice-by James J. Naive ----- 177
A Wheat Producer's Outlook-by Winston Wilson----------- ---- 191
Outlook for Fruit and Tree Nuts-by Jules V. Powell -------------- 193
Outlook for Vegetables and Potatoes-by Charles W. Porter-----_ 202
World Sugar Situation-by Gordon E. Patty ---------------- 209
Domestic Outlook for Sweeteners-by Fred Gray ---------------- 212
Outlook for Cotton-by Russell G. Barlowe------------------------ 219
Curves Ahead-by David Cox -------------- ------------- 231
Outlook for Tobacco-by Robert H. Miller -------------------- 237
Situation and Outlook for Feed-by James J. Naive---------------- 245
Outlook for Oilseeds, Fats and Oils-by George W. Kromer-------- 258
Livestock Outlook-1977-by Richard Crom------------------------- 272
Outlook for Poultry and Eggs-by William E. Cathcart ------------- 279
Poultry and Egg Outlook-by Ralph L. Baker----------------- 289
Outlook for Dairy-by Charles N. Shaw------ ------------ 293
Outlook for Timber Products-by Robert B. Phelps--------------- 301
(V)






VI

Family living:
Demographic Perspectives on Recent Changes in the American Fam- Page
ily-by David L. Brown --------------------- -------_ ___ 311
Adult Performance Levels and Consumer Affairs-by James T.
Parker -------------------------------------322
Decade for Women and Development: Implications for U.S. Women-
by Julia Chang Bloch --------------------------------- 324
Implications for Changing Life Styles-by Joyce E. Bisbee------__ 330
The 1972-73 Consumer Expenditure Survey-by Eva E. Jacobs ----- 333
Family Money Management-by Mrs. Julia H. Barnes__-------------- 340
Consumer Legislation-by Jane S. Wilson- ----------------------- 351
Overview of Computer Programs-by Ava D. Rogers, Ph. D-------__ 358
Data Needs and Validity of Applications-by Frances M. Magrabi --- 361
Adapting a Computer Program-by Irene Hathaway ------------ 363
Costs of Computer Program Development-Time and Money-by
Muriel S. Brink -------------- --------------- 3
Managing Computer Programs-by Ann E. Thompson ---- --------- 368
An Interdisciplinary Approach to Computer-Assisted Instruction-by
Veronica Carnack --------------------- ----------------------- 369
Planning and Use of Computer Programs-Reaction of Users-by
Patricia M. Tengel ------------------------------ 371
Flexibility to Meet Changing Housing Needs-by Jerry O. Newman__ 374
Household Energy Adjustments-by Richard B. Smith-------------- 385
Transportation and Farm-()perator Households-by Connie M. Hoer-
man ----------------- ------------------------ 394
Energy Expenditures and Appliance Ownership of Farm-Operator
Households--by Marilyn Doss Ruffin--------------------------- 400
Home Gardening and Preservation of Fruits and Vegetables-by
Evelyn F. Kaitz and Carole A. Davis_ ------ ------------- 405
Outlook for Housing and Mortgage Markets-by Marshall A. Kaplan_ 423
Outlook for Energy-by Jerry Ann Penno-------------------------- 430
Health Care Outlook-by Barbara S. Cooper---------------------- 436
Clothing and Textiles: Supplies. Prices, and Outlook for 1977-by
Annette Polyzou----------------------------------- 442






























U.S. ECONOMIC AND AGRICULTURAL OUTLOOK















1977 AGRICULTURAL OUTLOOK

(By Hon. John A. Kneble, Secretary, U.S. Department of Agriculture)


Welcome to the 1977 National Agricultural Outlook Conference.
Let me say at the outset: The future of American agriculture and the
American farmer is excellent. Today, the farmer has not only achieved
the recognition and reward he so richly deserves, but he has achieved
a lot more:
-Record production which enables each farmworker to feed himself
and 56 others at home and abroad.
-Record exports which enable him to prosper and America to
achieve a favorable balance in international trade.
As we look ahead, let us consider the vast power for good of Amer-
ican agriculture-agripower, if you will-the power to produce and
provide an essential of life no one can do without-food-and to im-
prove the quality of life in this complex world where our fate is inter-
twined with the fate of others.
Without question, the credibility and strength of this Nation abroad
rests upon its vast resources and productivity-just as much as it does
upon its defenses. And the American farmer is in the front lines of this
effort.
The challenge-the heavy responsibility-is nothing new to the
American farmer. With sweat and imagination, he has brought agri-
culture to unparalleled heights-and all of us in this Nation are in his
debt.
Today, because the farmer has responded with abundance to ex-
panding markets and his new freedom with governmental controls,
agriculture is assuming its rightful place in our international trade
relations.
In 1974, America squirmed in the stranglehold of an energy crisis.
The farmer came to America's rescue. Freed at last from four decades
of governmental controls, some 60 million acres of cropland were re-
leased for production. The farmer went into full production, exceed-
ing our domestic needs. In fact, agricultural exports shot to a historical
high. That year, America exported $21.3 billion worth of agricultural
products, which was just about enough to pay for the petroleum prod-
ucts we had to import at much higher prices.
America had been suffering trade imbalances. In recent years, be-
cause of large agricultural exports, it began recording favorable trade
balances. Last year, American farmers exported $22.1 billion in farm
products. Without those agricultural exports, the United States would
have suffered a deficit of at least $8 billion in its trade business. The
year before, our Nation would have suffered a $10 billion deficit if it
had not been for agricultural exports.
(3)






4

The projection for U.S. agricultural exports is that they will reach
about the same level in 1977 as in 1976. Agricultural production and
exports are vital to our economy because the projection for all U.S.
trade next year suggests that we will have a large deficit. Imagine how
severe that deficit would he without agricultural exports. It is inpera-
tive that exports of agriciultural products be maintained, and increased
if possible.
This is crucial to our national economy and to all of America's con-
sumiers. )Our agricultural exports will help stabilize our economy and
balance our trade with otfher nations.
The projection for food prices in the United States for 1977 is that
they will increase only modestly, well below the overall rate of infla-
tilon. American conlsumers are realizing that their grocery purchases
are the best deal in the world. In America, the consumer spends only
17 percent of his disposable income for the best and most nutritious
food ever produced. In Issia. by comIparison, the consumer is spend-
ing 37 percent for food-and thle iussian consumer doesn't get nearly
the selection, tlie qluality. nor the built-in services that the U.S. house-
wife gets in her food.
In this regard, we must look carefully at regulations and proposed
regulations on America's food producers and handlers. Superfluous
and needless regiulations will add unnecessarily to the prices that
American consumilers will have to pay at the grocery stores.
Expanding our atricuiltural exports results in another benefit which
is often overlooked. Agricultural exports boost employment in the econ-
omy. More than 50.000 jobs are created for every $1 billion of agricul-
tural products exported. Agriculture, the Nation's biggest industry.
employs nearly 17 million persons from production on the farm to the
sale of the food. Also, every $1 received from agricultural exports gen-
erates $2.20 spending in our economy.
Based on these facts and experiences, we are optimistic about the out-
look for 1977.
But the current law requires that by May 15 the new Congress must
report a new farm program which could affect to some extent 1977's
outlook and greatly affect production in the following years.
At this time. it is impossible to forecast what the Farm Bill of 1977
will contain. We hope it will continue the market-oriented farm pro-
gram now on the books-a program which has produced record income
for farmers, record exports. record production-and a minimum of
governmental interference in the daily lives of farmers.
However. Congress may move in another direction. Some have re-
peatedly called for the establishment of significant commodity reserves
and export licensing where those reserves fall below certain levels.
This, of course, requires more Government control and puts the Gov-
ernment in competition with the farmer when it's time to liquidate
those reserves. Still others have called for reserves with a mixture of
Government and private ownership, and for much higher target and
loan prices tied to a cost of production formula. The difficulty is in
establishing a cost of production-there are many levels to the cost of
production depending on farm size, locality, management, the year and
other factors. The problem will be to base supports on "a cost of pro-
duction" without encouraging excessive production that will lead to
Government accumulation of surpluses, followed by Government con-
trols on farm production.





5

Many in Congress would like to extend the farm program as it is.
with upward revisions in target prices that have been eroded by infla-
tion. Some want to see the farm program more conslumer orientedI with
"'cheap food" for (ldoniestic consll ers an(l for co1ntribnition to f)orein
nations-with less emphasis on profitability for the farmer. There's
a big job ahead-for the new 95th Congress.
We must also look at the problems of disaster assistance. One ap-
proach would be to expand the disaster programs of the Governlent:
another would be to expand the availability of crop insurance.
I expect the Farm Bill of 1977 may well be a compromise. because of
the complexity of the issues, the significant support by the farmers of
this country for the free market farm program. and the division in
Congress over alternative programs. Perhaps we will have a simple ex-
tension of the current law with some revision in target prices. We will
probablv see an ex)ansion of the crop insurance program. and it is un-
likely that the ASCS disaster program will be totally eliminated.
Looking back again for a moment so we can see better what is ahead
of us, there has been a mass migration since the industrial revolution
from rural areas to the cities. That migration reached a peak during
the 1960's when America was losing 100.000 farms a year. So far
in the 1970's, that loss has drastically declined to about 27,000 farms
per year. Today, there are approximately 2.8 million farms. But the
fact remains that less than 5 percent of the U.S. population today lives
and works on our farms compared with about 25 percent 4') years ago.
Obviouslv. U.S. Senators and Congressmen represent many more city
folks than farmers-and city folks consume most of the farmers' out-
put. Fifty years ago, there were 251 Congressional Districts in which
the farm population constituted 20 percent or more of the total. To-
day, there are only 49 Congressional Districts with 20 percent or more
farm population.
It is, therefore, important that we focus the economic spotlight of
the Nation on agriculture and the importance of sound programs that
provide growing export markets and ample food for American house-
wives at reasonable prices. Members of Congress and consumers need
to weigh the importance to farmers of having a profitable business if
they are going to continue to produce adequate food for the future,
maintain the Nation's resources. and invest in modern methods in order
to maintain their efficiency. The case for agriculture must be well
presented and understood so this small but crucial segment of our
society is not relegated to its previous plight through which it suffered
for so many years.
If there is no reasonable reward for the farmer's risks and efforts,
farm production will surely diminish. If production declines. prices
for food and fiber will soar, and our economy, as well as the economies
in the rest of the world which depend on us for their food, and which
depend on us to purchase their goods from our food exports, will suffer
the dreadful consequences.
During the last few years, the farmer has once again demonstrated
the importance that agriculture holds for each of us. our Nation and the
world. The outlook for 1977 is that the farmer will continue to fulfill
this crucial responsibility which he has willingly assumed, if we fulfill
our responsibilty to him.










U.S. ECONOMIC OUTLOOK
(By Burton G. Malkiel, Member Council of Economic Advisers)


The ecolnomie( expanIsion during the past 18 months can, I think, cor-
rectly e described as a typical business cycle recovery. It is typical
first because it has been relatively sharlp as one would have expected
given tli severity of the 1974-75 recession. Real growth during the
last six (luarters has proceeded at a rate of 6.3 percent. Since the trough
of tlhe recession 3.7 million people have found new jobs and record
llnumbers of Americans. close to 88 imillion, are currently employed.
The recovery has also been much like other cyclical recoveries in
that the pattern of growth has not been smooth. We had an initial
sharp advance in the summer and fall of 1975 as the massive inventory
liuidiat ion of early 1975 all but camne to a halt. During the fourth
quarter of 1975 there was a brief shift back to fast decumulation. As a
result the growt li rate of real ( P dimninished to 3.3 percent. You
will recall at that tinie that ltress reports frequently expressed doubts
as to the strength of tle economy in 1976. Our own projection last year
of a 6.2 percent growth rate for 1976 was widely doubted. Then in the
first q(uater of 1976 the growth rate shot up to 9.2 percent as modest
inventory rebuilding replaced inventory liquidation. At that time
fears were raised thlat the boonm might have gotten out of hand and
that calacity shortages would be realized in the near future. But then
inventory behavior stabilized again and the rate of growth in the
second and third quarters of this year fell to 41,/ percent. The growth
in final sales over the whole period has been much steadier. Final sales
grew at a 4.3 percent annual rate in the past two quarters, not much
below the 4.6 percent rate of the proceeding four quarters.
Despite the fact that it is typical for the pattern of recoveries to be
jagged, there has a-ain been considerable consternation-that the re-
covery may be in danger. Much publicity has been given to the fact
that the slower growth phase in economic activity has now continued
for half a year. The third quarter growth rate in real GNP was only
4.0 percent-somewhat below our mid-year projections and signifi-
cantly below the growth in earlier quarters. The unemployment rate
has risen from 7.3 percent in May to 7.9 percent in August and re-
mained at that level in October. Moreover industrial production has
declined in the last two months and the index of leading indicators
declined in each of the past 2 months. These recent reports have led
many to question whether the economic recovery is in trouble and if
sustained expansion is possible over the remainder of this year and
into the next.
I would like to spend most of my time today discussina these re-
cent doubts. In the process, I will describe the economic outlook as we
see it for next year.
(6)





7

We believe that the recent slowdown is neither unusual nor perma-
nent. While we are disappointed by the continuation of sluggishness
in the economy. we are convinced that a reacceleration of economic
growth will soon be underway.
Our optimism is based on an expectation of an acceleration in con-
sumption expenditures, a very sharp pick-up in business fixed invest-
ment and strong increases in residential construction. Let me discuss
each of these elements in turn.
Monthly data on consumption indicate a leveling in real terms since
late spring that surprised nearly all forecasters. Auto purchases stag-
nated in part because of shortages of preferred models, the strike at
Ford Motor and consumer resistance to price increases. Moreover. sales
of nondurables-particularly apparel and shoes appear to have been
very sensitive to price increases. At the same time the rise in real dis-
posable income shrank to less than a 11/ percent annual rate, largely
because of declining farm net income. With auto shortages disappear-
ing coupled with price decreases or rebates likely to boost auto sales
and with real disposable income growth expected to pick up, the recent
slowdown in consumer spending is not likely to persist. We believe that
consumption will soon resume its growth and help sustain the eco-
nomic expansion in coming quarters.
Business fixed investment has grown at a relatielly modest 7.9 per-
cent rate so far this year but appears to be set for substantially larger
increases in the months ahead. Indeed investment in plant and equip-
ment will provide a major source of strength for the expansion in 1977
and should make up for more modest increases expected in inventory
investment. For some time now the fundamental factors supporting
business investment have been highly favorable. Final sales have been
rising. Business profitability and cash flow have improved substan-
tially. Profits will be up about 30 percent this year and we project a
further 15 percent increase next year. Equity and bond markets are
more favorable for financing and business balance sheets have been
materially strengthened. More recently, the leading indicators of busi-
ness investment spending have shown significant increases. New orders
for nondefense capital goods rose 7.7 percent during the second quar-
ter. The monthly figures have been quite volatile in July and August-
rising sharply in July but falling about the same amount, in August.
This August drop helped push the leading indicators down. Still the
average for July and August is 111i percent above the average during
the first half of the year. Moreover. the September figures showed a
strong gain over August. This is indicative of a strong rise of invest-
ment in the next four quarters. Our optimism is confirmed by the Con-
ference Board data on new capital appropriations by manufacturers
in the second quarter, which rose 13.2 percent, and bv the value of
plant and equipment projects started by manufacturers last quarter,
which rose 13 percent by the second quarter from their low in the third
quarter of last year. Moreover, the McGraw-Hill survey projects a
13 percent increase in business plans for capital spending next year.
This survey usually undertakes investment spending in ears of ex-
pansion. Thus, a healthy increase in business fixed investment over the
coming quarters seems assured.
Housing is another area from which we expect substantial strength.
The recovery in the housing sector now looks particularly strong and





8

this in turn will have favorable influences on other sectors of the econ-
omy. )During the third l quarter the housing recovery accelerated
sharply as the 11 percent increase in total starts in August was fol-
lowed b an even healtlier 18 percent increase in September to a level
of 1.81 miillion units. The average level of starts during the third quar-
ter was 1.58 m1illion units, a 10 percent increase over thle secon1 quarter
as compnared with i an 'vera'e 2 percenti increase in the first two quarters
of the vear.
The very high September figure does not appear to be a one-shot
aberration. Permits plus starts outside permit issuing places reached
a level of 1.82 miillion unlits in September, slightly greater than total
starts in that month, and llths an indication that high levels of starts
are likely to be sustai ned inl the monlths ahead. Moreover, Federal as-
sistance programs will contintue to support multifamily starts in the
year ahead. Financial developments have also been encouraging for
t he housing r ecovery as bothl short-term and long-term interest rates
have been declining.. Tie yield on new home mortgages in the second-
ary market (FIIA) fell for the third consecutive month in October to
8.82 percent. Moreover, flunds for mortgages are readily available and
this shoull enlcourage further building.
Tihls, there is no reason to doubt the underlying durability of the
recovery. (onsumption sloulld show substantial gains, and residential
construct ion should continue its sharp recovery from the low levels of
1974. Even without any additional fiscal stimulus, the quarterly pat-
tern of real growth should expand to a 5 percent rate in 1977.
I think it is important to note that there is no indication of any of
the imbalances which normally portend a future weakening in the
econotmy. While there has been a bit of unwanted inventory accumula-
tion in some nondurable goods sectors, inventories overall are not
high-they are low in relation to production and sales. Moderate fur-
ther growth in inventory accumullation can occur without an increase
in inventory to sales ratios. (Consumers have not been on a spending
binge, their balance sheets have been substantially repaired, and gains
in consumer confidence have recently been registered according to the
University of Michigan survey. Retrenchment by consumers and busi-
nessimen under these conditions is not likely. Indeed, the very caution
of businessmen and consumers is a healthy sign for the durability of
the recovery. By keeping the economy from overheating, their actions
help contain inflation which has been proceeding this year at only a
5 percent rate, allow time for capital spending projects to expand
capacity and retard the emergence of new imbalances. Thus, I believe
the current. pause is not the precursor of a period of economic stagna-
tion but should soon be followed by a reacceleration of economic
activity.
Let me turn finally to the question of government spending which
has received much attention in the press and to the issue of policies
for next year. Federal government expenditures in the last two quar-
ters were below budgeted levels, and this "shortfall" has been viewed
as the culprit responsible for the slowdown in real growth. It is im-
portant first to state that the magnitude of the shortfall has been
greatly exaggerated in the press. In the first place, nart of the dis-
crepancy which appeared in the second quarter was added during the
mid-year budget review to spending estimates for the third quarter





9

and thus were in effect counted twice. Thi s doluble-count ing inflated
tie estimate shortfall by about $4 million over the past two (lquarters.
Secondly, tlle figures (quoted in the press relate to thle IUnified buldget,
whose numbers are affected by purely financial transactions whichl
do not affect the current level of real activity. For exatimple, sales of
offshore oil-land leases in tlhe third quarter were $800 million higher
than expected d and 11I) sold an unanticipated $900 million of mort-
gages from its portfolio. Both transactions show up as a lower level
of outlays on a unified basis, but neither has any direct affect on (NP
because they are simply financial transactions representing transfers
of assets.
Briefly, the facts on the shortfall are these. In tle National Income
Accounts budget--the budget which shows tie impact of tlie (overn-
mient sector on tie economy-Federal spending in the second quarter
was $3.2 billion below the January estimate (quarterly rate) : for
fiscal 196 as a whole, actual expenditures were about $3.8 billion
below target. In the third quarter, spending was actually $.4 billion
above the original estimate made in January.
While a proper accounting shows that the underestimate of Fed-
eral spending was relatively modest and is well within the normal
statistical margin of error, it iw Moreover, the NIA Ibudget may understate the full impact of the
budget on the economy since defense expenditures are included in
NIA totals only when the final payment is made. During 1976 there
have been substantial shortfalls in defense oblioations which have a
more immediate impact on the economy. When this is combined with
the unusually sluggish growth in State and local spending earlier
this year, there was an unplanned net reduction on the stimulative
impact of the Government sector on the economy-particularly in
the second quarter-and this may well have contributed to the slow-
down of the expansion.
The question now is what should be the appropriate policy re-
sponse-if anything-to insure that the expansion returns to a path
of faster growth. Federal spending already appears to have returned
to its targeted level in the third quarter. W'e also expect spending by
State and local governments to pick un noticeably in the future, in
view of the. improvement in their financial situation. Thus all
signs indicate that the Government sector will be exerting a more
expansive impact on the economy over the next two or three quarters.
Nevertheless, it is clear that fiscal policies must be designed to pro-
vide sufficient stimulus to the economy so that real growth can pro-
ceed at a fast enough rate to reduce the margin of excess capacity
in the economy and to lower the unemployment rate to acceptable
levels. Thus, a tax cut such as the additional $10 billion tax reduc-
tion originally proposed by President Ford in last year's budget must
certainly be considered.
In designing fiscal policies for the period ahead. however, two
factors should be kept clearly in mind. First. excessive fiscal stimulus
must be avoided. Overly expansive fiscal policies which threaten to
intensify inflationary expectations and fears of new instability could
prove counterproductive by causing both consumers and businessmen
to cut back on spending plans. Secondly, the type of fiscal measures
chosen must be consistent with the need to stimulate investment as





10

well as consumption. A major reason for the sluggishness of the econ-
omy is that major long-term investments by corporations in plant
and equipment have been disappointingly slow. Over the longer run,
substantial increases in business fixed investment are essential if we
are to have enough factories and tools to employ all those who seek
work and if we are to encourage the kind of productivity increases
necessary to increase real living standards and to provide adequate
supplies of goods a1d services over the longer thlerm The encourage-
mnent of investimenlt is thus an essential step in the control of inflation
and in returning our economy to a path of stable growth.












AGRICULTURAL OUTLOOK FOR 1977
(By Rex F. Daly, Outlook and Situation Officer. Economic Research
Service, USDA)


Prospects for continued large supplies of crops and near record
livestock production in the coming year will face an expanding domes-
tic market and another year of near record exports. These conditions
will help to bolster prices and farm incomes in 1977, despite large sup-
plies.
Crop supplies will continue large relative to demand in the 1976/77
marketing year, except for soybeans, cotton and some fruit and vegeta-
ble items. Output of livestock products will be large, but increases will
likely taper off and decline later in the year if cattle numbers and beef
production drop off as expected next year. Prospects for next year's
crop are uncertain. But barring unexpected weather developments, the
crops should be large again, with some shifts in the acreage of major
crops. There are no program restraints for major crops and large sup-
plies of fertilizer and other inputs are available.
U.S. growers are completing the harvest of this year's big crops, giv-
ing us two big harvests back-to-back. Livestock production also is at a
record rate culminating a recovery from the depressed output rate early
in 1975. With large supplies and strong domestic and foreign markets,
most farmers have completed one of the highest income seasons of
record. However, it was not a good year for some cattle operators and
producers in drought areas. The consumer also enjoyed big gains in
per capita use of meats and poultry in a year of amazingly stable retail
prices for food.
Currently, farm prices and incomes are running at a rate somewhat
below earlier this year and below the last half of 1975. Recent price
weakness is expected to bring net farm income this calendar year down
to around the 1975 level-with a modest gain in realized net farm in-
come and perhaps a small decline in total net income, depending on
what farmers finally do about inventories.
In looking ahead to the latter part of 1977, although the band of un-
certainty is wide, returns to farmers will likely be better than the last
half of 1976 and early 1977. If crop output is maintained around the
level of the past 2 years and livestock numbers decline as expected,
producers of livestock products may be in a stronger income position
compared to this year and relative to the crop producer. For the cal-
endar year 1977, the above income pattern would suggest average net
farm income much the same as this year.
Major uncertainties for 1977 center about the expansion in domestic
markets, weather and growing conditions here and abroad, and the im-
pact of the downswing in the cattle cycle on supplies and prices of
(11)






12

meats. Obviously, the outcome of these uncertainties can have major
impacts on the income and general prosperity of U.S. farmers, especi-
ally later in 1977 and in 1978.
In sup)port of this income outlook, I would like to explore with you
a broad brush sketch of what I see as the agricultural outlook for 1977.
Domestic and foreign demand conditions are being discussed in some
detail in this session. Other sessions will further discuss foreign eco-
nomic developments, farm costs, and the weather as well as the outlook
for major commodities in considerable detail.

I)OMESTIC DEMANI) CONDITIONS

Consuier buying power and the demand for food, textiles and other
finished goods of farm origin have expanded rapidly over the past year.
This expansion reflects the recovery in the economv from the most
severe economic recession in the past quarter century. The economy
absorbed last year's big crop and a rapidly expanding output of fed
beef, poultry, pork and dairy products. Per capita use of food this year
will total 2 to 3 percent larger than in 1975 with most of the increase in
beef and poultiry. Larger supplies have eased the farm price of foods
and materially slowed the rise in retail food prices despite expanding
domestic demand. Per capita nonfood uses of farm products also have
increased witlh nill use of fibers up around a tenth from 1975.
Although the current pause in UT.S. economic activity provides rea-
son for concern about the health of the economy, this appraisal reflects
prospects for continued economic growth and a reasonably well bal-
anced recovery through this year and in 1977 (table 1).

TABLE 1.-GENERAL ECONOMIC DEVELOPMENTS AND OUTLOOK FOR 19771
[Dollar amounts in billions except per capita]

1977 projection, 2 percentage
1976 estimate change from year earlier
1975
January to January to July to January to July to
Item June June December June December

Gross national product---------------- $1,464.0 $1,657.0 $1,732.0 11 12
Price level (1972=100)_ ------- 125.2 132.1 135.4 5% 6
Real output __ ----------- 1,169.0 1,253.0 1,279.0 5 6
Consumer income after-taxes----------- 1,056.0 1,160.0 1,204.0 10 11
Income per capital (dollars) ------- 4,956.0 5,401.0 5,584.0 8%2 10
Real income per capita (dollars) -.. 3,984.0 4,123.0 4,159.0 3 5
Consumer expenditures. ------------947.0 1,054.0 1,102.0 10%- 10
Food and beverages -------------- 206.0 220.0 230.0 9 11
Clothing and shoes ---------- 68.0 73.4 76.3 4 Y 8

1 Based on background account data from Survey of Current Business.
2 Seasonally adjusted annual rates.

The U.S. economy is still in the process of moving toward greater
stability. Although the pace of recovery may be somewhat short of our
expectations and hopes, the recovery is reasonably consistent with this
phase of past cycles. Employment has increased, albeit not rapidly
enough to employ the post World War II baby boom now in the labor
force plus the growing percentage of women moving into the work
force. Price inflation continues to slow due largely to the slower rise






13

in retail food prices. Unfortunately, prices of non farm y noods coni inie
to rise about twice as fast as food prices. An ea(sinl o)f iniflatilonuarv
pressures can be a imajor force in rest oring i te colfi de0tie of C('o-11!11IerI
and investors and in briring in aboutl a. well-l lance ( re,0overO,- in t ll
economy.
Expanding employment. rising after-tax incl)omes and ra in in real
consumer buyincl power will expand domestic dema(n:ll all( bTinl
further 2'ains in food consump111tion. in th e demand for fiber andl otlfer
nonfoods, and in the use of feed for livestock.

FORETGN MLARIKETS FOR FARMP PROlDCTS

Foreign markets for U.S. farm products are still promisin de(lpite
general improvement in world grain crops. World grain production in
1976-77 is explected to total around 6 percent larger than a year earlier.
Wheat, in particular. is in abundant supply with the world crop up
about 15 percent from 1975-76. Much of the gain in the world g-rain
crop is inl the U.S.S R. wb-,re the larger crop mav cut Soviet purchases
from 1976 crops by half. Grain production also increased in the major
grain exporting countries. However, d rouht damaged Grain and
fodder crops in Europe. and the South Asian monsoon was disappoint-
ing. Grain production in the world. excluding the U.S.S.R.. is esti-
mated slightly below 1975-76 (table 2).

TABLE 2.-WORLD GRAIN PRODUCTION AND TRADE IN COUNTRIES OTHER THAN U.S.S.R., 1972-73 TO 1976-77

Million metric tons
Area, Yield,
(millions (metric Beginning
Years hectares) ton) Production stocks Consumption Gross exports

1971-72 _------------- 571 1.67 953 165 949 108
1972-73 ...-----------. 566 1.75 990 161 1,015 146
1973-74 --------------- 583 1.78 1,039 116 1,040 155
1974-75 ------------- 587 1.73 1,015 110 1,016 140
1975-76---------------- 604 1.80 1,087 107 1,046 168
1976-77 --.---------- 614 1.76 1,082 122 1,064 151

1 Includes coarse grains, wheat, rice (milled) and some minor grains.

A 15 to 20 million metric ton decline in world grain trade is expected
in the 1976-77 marketing year. so U.S. grain exports will face stiff
competition from larger exportable supplies abroad. On the other hand.
exports are being encouraged by improving feed /livestock price ratios.
by economic recovery in both developed and developing countries, and
by the need in many countries to rebuild small carryover stocks.
U.S. grain exports in 1976-77 imay be down from record 1975-76
shipments of 83 million tons. and gtrain export prices will likely aver-
age lower. Soybean exports are likely to decline because of smaller
domestic supplies. However, strong recovery is expected for exports of
cotton. The total volume of agricultural exports will likely be down
some from the record volume shipped in 1975-76 (table 3). But with
tight supplies and higher market prices for soybeans, fibers, tobacco.
and some other crops. the value of agricultural exports is expected to at
least match the record level of recent years.





14

TABLE 3.-U.S. EXPORTS OF SELECTED GRAINS AND SOYBEANS, MARKETING YEARS, 1974-75, 1975-76 AND
PROJECTIONS FOR 1976-77
[In million metric tons]
Estimated Projected
Commodity 1974-75 1975-76 1976-77

Feed grains ....._------------------------ _---------------- 35.7 49.6 43.0 to 51
Wheat....--------.--.--. -------- ----..- --. 27.7 31.9 27.0 to 33
Rice, rough--- ----..- 3.2 2.6 2.5 to 3
Soybeans- ...---.--.-_ ------_ _.------------- . 11.5 15.1 13.5 to 15
Total_.. .... .-----------------------------------. 78.1 99.2 86.0 to 102

LIVESTOCK SUPPLIES AND PRICES
Last year an expanding domestic market, big gains in prices of live-
stock products, and the record 1975 grain crop initiated a sharp upturn
in livestock feeding. By the closing months of 1975, farmers were plac-
ing more cattle on feed, increasing their pig crops, raising more broil-
ers and feeding more grain to their dairy cows. This step up in feeding
led to increases in production of livestock products that extended
through 1976. The gains have been rapid enough to reduce animal
product prices this year despite the expanding domestic market.
In the first half of 1976i the market was takin ab)oult 10 percent more
beef and 141 ercent mlore poulltry than a year earlier. Livestock product
prices avera(rged a little bel)ow the strong prices in the last half of 1975,
lut. were still 14 percent above a year earlier. Part of the strength in
demland for beef and poultry in the first half was due to the reduced
level of pork output.
Outlook, 1976-77
Output of livestock products continues to expand in the July-
December period this year. Tlhe increase reflects a big gain in pork
output and further but slower advances in output of beef. poultry, and
milk. Combined output is rising to a rate more than 7 percent above
second half 1975. putting dlownward pressure on prices of all major
livestock products. Accordingly. prices in July-December this year
may average around 7 percent below a year earlier (figure 1).
Beef output continues to expand. but losses by cattle feeders much
of this year led to reduced placemlents of cattle on feed this summer.
This and the downphase of the cattle cycle is expected to lead to less
beef output next year and strengthening prices for cattle. But the sharp
upturn in lhog production from mid-1976 will extend at least through
mid-1977 at a rate about a fifth above a year earlier. Broiler output
and milk production also is expected to rise further early in 1977. but
much more slowly if the expected tightening price-cost squeeze reduces
producer returns. The sizable gain in pork output. and a little more
poultry, about match the expected cutback in beef output in first half
1977. By the last half of 1977. tonnage of meat and poultry produced
coulld run 3 percent or so below the last half of this year. This tapering
off in supplies of meats and poultry, with an expanding domestic
market, should strengthen livestock product prices later next year. The
gain in milk production also is expected to slacken in the coming year
as lower milk prices and the return to surpluses of some dairy products
slow output gains (table 4).







15

TABLE 4.-PRODUCTION AND PRICES OF LIVESTOCK PRODUCTS, 1973 TO 1976 AND PROJECTIONS FOR 1977

1974-75 Estimated 1975 76 Projected 1976 77
Commodity October to Annual October to Annual October to Annual
September 1975 September 1976 September 1977

Beef (billion pounds) .------.-----.- 23.39 23.66 25.53 25.59 24.10 23.75
Pork (billion pounds) .. ..---- ......- 11.90 11.31 11.46 12.03 13.40 13.50
Broilers (billion pounds) -----------. 7.78 7.97 8.79 9.00 9.10 9. 10
Eggs (billion eggs)--..---.--------.. 64.3 64.3 64.6 64.8 65.5 65.9
Milk (billion pounds) ..------------- 115. 1 115.5 118.9 119.6 120.2 120.6
Total output index (1974=100)..-.... 98.7 98.0 103.5 104. 1 104.6 103.6
Prices received by farmers (1967 =100)_ 164 172 182 177 170 175



LIVESTOCK OUTPUT AND PRICES
OF PORK, BEEF AND BROILERS
OUTPUT PORK PRICE
BIL. LB. C PER LB.



3.0 -- o, TpUT 60
OUTPUT "



2.0 PRICES. ... .. .. '- 40

P E...... ....

1.0 20

7.0 BEEF 60


PRICES
6.0 50




5.0 . 40
\P '*. '*..... .*
.......... ... .. OUTPUT -.


4.0 30


2.5 BROILERS 60


2.0 40
PRICES



OUTPUT


1.5 i I I I I i i I i 20
1972 1973 1974 1975 1976


*FIURE 1

FIGURE 1





16

CROP SUPPLIES, USE AND PRICES
Dry weather in a few areas reduced this year's crop from the big
gains indicated earlier in the season. However, despite drought prob-
lems in some areas, grain crops in general are as large as the big 1975
crop. In addition stocks carried into the 1976/77 marketing year are
larger, but most of the increase was in wheat. Wheat supplies are
large relative to prospective market and in early November market
prices (No. 1 IHard Winter, Kansas City) averaged around a fourth
below mid-November a year ago. Corn prices (No. 2 Yellow, Chicago)
were also running lower by around 7 percent. But reduced production
of hay and forage crops has materially tightened supplies and in-
creased hay prices compared with last fall.
This year's soybean crop was off 18 percent from 1975. This re-
duction materially tightened supplies relative to demand and market
prices (No. 1 Yellow. Chicago) in early November were running about
40 percent above mid-November a year ago.
The cotton crop is about one-fifth larger than last year's crop,
although increased domestic use and a strong foreign market reduced
carrying stocks and sharply increased cotton prices. The market price
of cotton (spot price, 1I /G in early November was up more than 50
percent from mid-November last year.
Although the outcome for a few crops, mainly cotton and some
fruits and vegetables, is still uncertain, it appears that combined crop
output this year will fall a little short of the big 1975 crop. Produc-
tion of crop food commodities will be down. perhaps 2 or 3 percent
from 1975. However, production of nonfood crops may be up some
since the larger cotton crop will offset the reduced output of tobacco
and hay and forage (figure 2).
Outlook, 1976-77
In looking ahead to the coming year, the crop supply picture is
mixed. Grain supplies look large enough to provide for expected
increases in domestic use and exports near the record volume shipped
in 1975-76. 1Wheat prices will likely continue lower and the season
average price for corn may average a little below last year. Wheat sup-
plies are large and prices are low enough relative to feed grains that a
sizable increase is expected in the feeding of wheat.
Feed use of all grains will increase in the coming year, but perhaps
only about half as much as the 10 percent increase estimated for the
1975-76 feeding year. The big output increases underway for hogs will
require substantially more grains for feed. However, prospective cuts
in beef production and slower gains in production of poultry and milk
will moderate the demand for feed grains in the 1976/77 feeding year
(table 5).
Exports of wheat and the major feed grains may fall a little short
of their record 1975-76 volume. Thus, prospective use points to a fur-
ther buildup in wheat stocks, but a somewhat closer balance for corn.
Soybean and cotton supplies will continue tight and stocks will likely







17



CROP AND LIVESTOCK PRODUCTION

% OF 1960-


130



120 Livestock production- _--


110

10 _ Crop production
100 ,


90 1 I I I
1960 1963 1966 1969 1972 1975 1978
A PRELIMINARY.
USDA NEG ERS 1357-76 19

FIGURE 2

be drawn down to minimum operating levels by the end of the 1976-
77 season (figure 3).
Crop prices overall for the 1976/77 marketing year (generally
October-September) may average a little above 1973-76 prices, bar-
ring the unexpected in U.S. and world crop developments. The gain
would reflect prospects for higher prices for soybeans, fibers, tobacco.
and for some fruit and vegetables, but some easing in grain prices.

TABLE 5.-MAJOR CROPS: SUPPLIES, USE AND PRICES 1974-75, 1975-76 AND PROJECTIONS
FOR 1976-77 1

Season
Domestic Ending average price
Crop Production use Exports stocks (bushel)

Corn (million bushels):
1974-75_--......----....-- ...... 4,664 3,641 1, 149 359 $3.03
1975-76 estimated. ------------ 5, 767 4,029 1,700 399 2.55
1976-77 projected __ ------------ 6, 063 4, 100-4, 400 1, 500-1,700 475-675 2.20-2.60
Wheat (million bushels):
1974-75 ---... ......... ---------1,796 690 1,018 430 4.09
1975-76 estimated... -----------. 2, 134 729 1,175 664 3.52
1976-77 projected ...-........... 2,127 760-830 950-1,150 860-1,040 2.60-3.20
Soybeans (million bushels):
1974-75....-------------. ------1,215 701 421 185 6.64
1975-76 estimated -----.... ..---. 1,521 866 560 244 5.00
1976-77 projected-...-........ ---1,252 760-820 510-570 60-110 6. 50-7. 50
Cents per
pound
Cotton (million bales):
1974-75.--------------........- 11.5 5.9 3.9 5.7 42.9
1975-76 estimated .. -----------8.3 7.3 3.3 3.7 50.0
1976-77 projected ........------- 9.9 6.3-6.9 4.0-4.6 2.7-3. 3 ..-----------

1 Marketing year beginning June 1, formerly July 1.






18


CARRYOVER OF MAJOR FARM COMMODITIES
BIL. BU. MIL. CWT. / MIL. BALES
1.5 WHEAT 30- RICE 15 COTTON

1.0 20 10

0.5- 10 5-
o ,,,1 I t ,,,,111 1i l ll ll flf l 0o ,ill 1111,illol
1960 '70 '80 '60 '70 '80 '60 '70 '80
BIL. BU. MIL. BU. SOYBEANS BIL. LB.

.5 CORN 300 4,5 TOBACCO


100 1.5
o, ,,,,, ,,,,,Il,, ,l 0 ,,lI I 0 ,I I 11111 1 I
1960 '70 '80 '60 '70 '80 '60 '70 '80
CROP YEARS*
*CROP YEARS BEGINNING WHEAT JULY 1 1960-64 JUNE 1. 1965 TO DATE:
COTTON AND RICE. AUGUST 1 SOYBEANS, SEPTEMBER 1, CORN AND OTHER TOBACCO. OCTOBER 1
USDA NEG. ERS 2407-76 (2)
FIGURE 3

Prospects for 1977 crops
Crop and livestock product prices, livestock feeding and breeding
plans and the producers' management of their inventories by next
summer will hinge importantly on the size and progress of the 1977
crop. Despite many uncertainties, some useful insights can be gleaned
about the size and mix of next year's crops.
Again this year there will be no restrictions on plantings of the
major crops. Our appraisals of how producers respond to program
and economic incentives point to increased plantings of soybeans.
The increase may be around 4 or 5 million acres from the 50 million
planted this year. Plantings of cotton also are expected to be larger
in response to cotton's continuing tight supply-demand situation. As
usual plantings of both crops could be influenced by weather condi-
tions at planting time.
Acreage planted to corn and other feed grains will likely decline
some from the large 1976 plantings. Much of the decline will reflect





19

a loss of acreage to soybeans and possibly cotton in some area?. Little
overall change is likely in plantingg of wheat. Evenl if we corectlv
anticipate the changing mix for major crops and perhaps a -mall in-
crease in total acrenage weather conditions can knoc.k producers' plan1
into a cocked hat. Unfortunately, I know no way of accurately p rog-
nosticating what the weather may he at critical times during tihe year
in order to assure adequate soil moisture. good planting and grow ing
conditions, and favorable weather for harvesting the crop. Nor can
we anticipate the possible onset of disease or insect infestations that
could destroy the crop or seriously reduce yields.
In considering yield prospects for next year or the next few years.
an examination of yield variations in the past 5 or 6 years is not too
reassuring. For major crops (other than fruits. vegetables. potatoes,
etc.) yields from the early 1950's to the last half of the 1960 decade
display a positive uptrend with relatively small annual variations.
Beginning around 1968 to 1970. yield trends flatten out or decline and
annual variations widen (figure 4).
Econometric analyses of factors influencing yields show that
weather variations are important and may be even more important if
it were possibly to better quantify relevant "weatlher" characteristics
affecting yields. But there are other important forces impacting on
yield trends and variations. The price of the product relative to costs
and related inputs of fertilizer, supplementary water, and other inputs
also affect yields. Moreover the total acreage planted to the crop affects
the yield.
Undoubtedly the leveling or slow decline in yields in the past 5 or 6
years was related directly to the higher cost and reduced applications
of fertilizer and to the substantial increases in plantings of some crops
as acreage set aside under earlier programs came back into use. mostly
since 1972. Obviously, the wide annual swings in corn yields also re-
flect the blight in 1970. excellent growing conditions in 1972, and rather
widespread unfavorable weather for crops in 1974.
In speculating about the size of the 1977 or 1978 crop. we can do
little more than assume yields. For example. for the 1977 crop feed
grain tonnage could vary from 175 million short tons under "poor"
yield assumptions to around 230 million tons under "good" yield as-
sumptions. Since this range compares with a 1976 feed grain crop of
over 200 million short tons, either end of the production range would
likely lead to problems, depending on world demand conditions. But
surely the problems associated with the large crop would be minor
compared with those that may arise from a very short crop.






20



CROP YIELDS AND RELATED DATA

.. ....... ..... ....... ........... . ..... .... .. % o 1 9 6 4
0 of 19 64

CORN WHEAT
240- -
I



/ \ II
SI "
Il 1/ ...200
NITROGEN
I FERTILIZER0o
180 -
I I
I I
I /
SI 160- I
;. YIELD* I
I /
ACRES6
I -
S140 -


I 2
I I







I \..8- I10 I ... 80
1960 '65 70 75 80 1960 65 70 75 '80
'* BUSHELS PER ACRE
MILLION HARVESTED ACRES
0 APPLICATION RATE FERTI ZER H U ON 1HAH7i[ V AC O,) IVDLD I Y 1HA) 6ESi[ ACR,(ES
USDA/ERS n. 1976

FIGURE 4

Farm price and income prospects for this appraisal of the outlook
for 1977 are not based on the wide swings in yields just outlined. In-
stead projected plantings and yields reflect prospective price-cost rela-
tionships, a relative abundance of fertilizer, and "average" growing
conditions. Accordingly, a crop modestly larger than this year's is
assumed for 1977.





21

FARM INCOME SITUATION AND) OUITLOOK
The substantial glains in oltplt and 11 te vollirme of fal ril maretl ings.
with higher average prices for livestock prodlucts, resulted in a record
gross income flow to farmers in 1975-76. However, rising production
costs limited glains in net fa1r income. Net incomlels of falrmers in 1975--
76 were well above tlie relatively low returns in 1974-75 and the tthird
highest of record. Even with the recent slack in prices, a strong dem(land
is moving record supplies of livestock products into markets. This is
helping to inaintain gross income in the closing mnonths of tilis year
despite larger supplies. As a result, the gross farml income flow for
calendar year 1976 will likely total 5 or 6 percent larger than in 1975.
In the coming year, the volume of marketings will rise more slowly,
at least until 1977 crop developments begin to influence markets. Prices
in calendar 1977 may average much the same as in 1976 for both live-
stock products and crops, depending on the outcome of 1977 crops. In-
dicated changces in marketings and prices for 1977 suggest modest gains
in gross farm income with increases over this year most likely for live-
stock products if output eases as expected later in the year (table 6).
Farm inputs and production expenses
The slower rise in farm production expenses reflects lower prices this
year for fertilizer, chemicals, and feeder livestock. Prices of feed and
seed were also steady to lower. Prices paid for production items, inter-
est, taxes, and wage rates in mid-October averaged about 41/, percent
above a year earlier. With this showing in input prices, farm produc-
tion expenses this year may total around 5 percent above 1975. The
slower rise in input costs is expected to extend into 1977. Fertilizer
and chemical supplies are large enough to suggest steady to slightly
lower prices in the coming year. Outlays for purchased feed and live-
stock also may change little. However, with the cost increases indicated
in 1977 for fuel, hired labor, interest, and taxes, farm production
expenses will rise, perhaps at least as rapidly as this year.
Net farm income
The net income position of farmers this year is essentially unchanged
from 1975. Some livestock operators and producers in drought areas
did not fare as well. Realized net farm income this year is estimated
around $24 billion as compared with nearly $23 billion in 1975. Total
net farm income, including an allowance for inventory change, is still
more tentative than realized net. Inventories for crops and livestock,
other than cattle, will likely increase modestly. However, the down-
trend in cattle numbers may be offsetting. Prospective inventory de-
velopments tentatively suggest a small decline in total net income
from 1975 (figure 5).







22



FARM INCOME COMPONENTS

$ BIL.



100
Total gross income


75




50-
PRODUCTION EXPENSES


25 .
......ii i.... N :. .


TOTAL NET INCOME .
iii: : > -ii:i i M .:::::..:::.:..::::: :. ...:..:....::

1965 1968 1971 1974 1977
1975 Pi'f IMtINARY
USDA NEG ERS 2400-76 21


FIGURE 5

TABLE 6.-FARM INCOME, MARKETINGS AND PRICES, 1973 TO 1975, AND ESTIMATES FOR 1976

1972 73 1973/74 1974 75 1975/76
October to October to October to October to
Item September 1 1973 September i 1974 September 1 1975 September 11976

Volume of marketings
(1967=100)-..---------- 113 113 114 111 112 115 120 121
Livestock ......-..--.. 104 105 105 104 105 106 111 112
Crops ----------------- 125 126 127 121 123 128 132 133
Prices received (1967=-100)_- 165 179 191 192 187 186 189 187
Livestock-...---------- 172 183 172 165 164 172 182 177
Crops ----------------_ 158 175 212 224 213 201 198 200
Cash receipts (billion dollars)- 78.2 87.1 92.7 92.6 90.3 89.6 94.5 95
Livestock_ .-.---------. 43.0 46.0 43.9 41.4 40.9 42.9 47.5 47
Crops----------------- 35.2 41.1 48.1 51.2 49.4 46.6 47.0 48
No-money, other income and
Government payments --. 8.6 8.4, 7.8 7.6 8.4 8.6 9.0 9
Realized gross income (bil-
lion dollars) ------------ 86.8 95.5 100.5 100.2 98.7 98.2 103.5 104
Production expenses (billion
dollars). -------------- 60.2 65.6 71.1 72.9 75.3 75.5 79.0 80
Realized net income....- 26.6 29.9 29. 4 27.8 23.4 22.7 24. 5 24
Inventory change.....--- --2.2 3.4 .8 -1.3 .9 2.9 1.2 --------
Total net income ..---. 28.8 33.3 30.2 26.5 24.3 25.6 25.7------

SCalendar year.





23
Net farm income in 1977. suggested by prospective marketings and
prices, is expected to hold close to the average of recent years. Tile
expected modest gain in gross income and the slower rise in produl l) -
tion expenses would suggest little change in net farm incomie again
next year. But this is a highly tentative projection that will depend
heavily on the outcome of 1977 crops. With average growing condli-
tions next year and no big surprises in world markt. et et farm~ incilome
in a $23 to $25 billion range is a reasonable projection.
The relatively stable net income level of farmers in general in the
past two calendar years is about double the net income of farmers inl
the late sixties.
Much of the gain in the dollar income flow to farmers, as is the case
for other industries, was due directly to higher prices. Average crop
prices are about double and prices of livestock products are 70 to 80
percent above levels in the late sixties.
Even so, farmers have made net gains in the past 5 or 6 years in real
farm income, adjusted for price level change, and substantial gains in
net income per farm. Per capita income of farm people from all
sources also has improved relative to incomes of nonfarm people.

FOOD PRICES AND CONSUMPTION
Retail food prices-average prices we pay for purchases of food in
grocery stores for use in the home-have held amazingly stable in the
past year. Quarterly averages of the retail price index for food used
at home ranged from 179 to 181 (1967=100) during the main October-
September farm marketing year. This was a year of big supplies of
food crops and expanding output of livestock products. Per capita
food consumption estimated for calendar year 1976 may be up 2 to 3
percent from a year earlier, with most of the gain in consumption of
beef and poultry.
This stability in retail prices for food used at home is expected to
continue into the early months of next year. However, some firming in
farm prices is likely by next spring if domestic demand increases as
expected and output of livestock products tapers off and declines
modestly later next year. Costs of processing and marketing food will
continue to rise in 1977. But farm-to-retail margins are relatively wide
and will likely narrow some if prices at the farm increase next year.
Even with some narrowing in farm-to-retail price spreads. retail
prices for food used at home probably would begin to increase next
spring and for the year may average nearly 3 percent above 1976.
Prices paid for food used in restaurants and other "away from
home" uses will increase about 7 percent this year and perhaps another
5 or 6 percent in 1977. Away from home eating accounts for more than
a fifth of the overall weight in the retail food price index. Combining
indications for retail prices for food used in the home and for away
from home eating suggests an all food retail price index for next year
averaging some 3 or 4 percent above the average for this year.
l--- r- -- -- --

































FOOD-SUPPLIES, DEMAND, AND CONSUMPTION













THE OUTLOOK FOR FOOD SUPPLIES AND PRICES
(By James R. Donald, Deputy Outlook and Situation Officer, Economic Research
Service, USDA)


The current food situation is highlighted by: Large supplies due
to fairly good crop harvests and heavy output of livestock and poul-
try products; relatively strong demand both here and abroad; and
marketing costs that are rising about in line with general inflation in
the U.S. economy. All this adds up to the relative stability we've seen
in retail food prices this year. The 1977 outlook is for continued
generous food supplies. Prices will start the year fairly stable but
increase into spring if beef supplies tighten as expected.
With the increase in food supplies outpacing demand this year,
retail food prices will average only about 3 percent above 1975. Rising
marketing spreads, coupled with higher prices for imported foods
and restaurant meals, are behind the moderate retail price rise. Larger
supplies are also contributing to an increase in per capita food con-
sumption in 1976. And, combined with the moderate rise in retail
prices, consumer expenditures for food may increase about 6 or 7
percent from 1975.

FOOD DEVELOPMENTS DURING 197 6
Food supplies
Increased supplies of food commodities are available this year. A
significant expansion in livestock and poultry supplies and larger
January 1 inventories of crop-related foods are offsetting slightly
smaller production of crop foods. For major field crops: Wheat pro-
duction is near last year's record; the corn crop is record large; how-
ever, the soybean crop is down because of smaller plantings and
drought-reduced yields.
Among other crop foods: Supplies of sugar and sweeteners are
much larger this year; fresh and processed potatoes and sweet pota-
toes have been in tight supply, but the important fall potato crop is
record large and should be adequate for domestic use and expanded
exports; tonnage of processing vegetable crops will be the smallest
since 1972, but carryover stocks will keep supplies large enough for
domestic disappearance, particularly for canned vegetables; and the
citrus crop is expected to be well above last year's record, while
noncitrus tonnage is down moderately. Some imported foods, and a
few fishery products, are in tighter supply.
Livestock and poultry product supplies are well above a year ago,
reflecting the record 1975 feed crop and favorable feed prices in rela-
tion to livestock and poultry product prices. Rising pork output
combined with large beef production pushed meat output to very high
(27)



78-885 0- 76 3





28

levels this summer. For the year, output of animal products is likely
to exceed 1975 by 5 to 6 percent, with more generous supplies of beef,
pork, broilers, turkeys, and milk.
Food demand
While softening a bit with the summer pause in economic activity,
demand has been fairly strong for record food supplies. The turn-
around in economic activity that began in the second half of 1975
has resulted in gains in employment and rising consumer incomes.
Combined with larger supplies and relatively stable food prices, this
has led to rising civilian consumption of food products.
Domestic demand for crops-which flow into both feed and food
uses-las been rising in response to expanded livestock production.
However, the gain in demand for animal feed is expected to slacken
in coming months as cattle numbers decline and feeders alter plans
in response to less favorable feed cost-product price relationships.
Export demand for U.S. farm commodities has been rising in recent
years, and is expected to remain relatively strong through mid-1977.
A high level of exports is indicated for the coming year by expanded
domestic activity in several countries-notably in Europe. Canada,
and Japan-Land the need for relatively large imports by Europe
because of reduced crop prospects. tHowever, world food production
prospects are improved this year. with indications of expanded pro-
duction of both food grains and feed grains. This should lead to
some easing in tight world food supplies, particularly wheat. and a
slightly- reduced( level of total connodity imports from the United
States.
Food /n ices
The combination of the farm price of food and marketing costs
determines the price of food to consumers. There are several ways to
measure food prices or costs. USDA computes the retail cost as well
as the farm value, and farm-retail price spread, for a market basket
for farm foods. based on data from the Bureau of Labor Statistics
(BLS). BLS includes a measure of retail food prices in its Consumer
Price Index. In this index. food accounts for about one-fourth. The
food index itself includes two components: Food consumed at home,
or purchased in grocery stores. accounts for most of the total, with
food consumed away from home accounting for 20 to 25 percent. The
food-at-home component is weighted slightly more toward livestock
products than crop foods.
With food supplies outpacing demand. farm food commodity prices
have been easing since the summer of 1975 due to a decline in farm
value, a measure of returns to farmers for food products. This fall. the
fa'rm 'al!u of the market basket of farm food commodities will be well
below a year ago and, for the year, average nearly 4 percent below
1975. Livestock-related foods-particularly meat animals-have shown
the greatest decline. Crop-related foods generally have been under less
downward price pressure.
Although the farm value of the food market basket has declined
over the past year. the retail cost of the basket of farm foods is averag-
ing slightly higher in 1976. A rise of about 5 percent in the far m-retail
sproad is accounting for the small rise in the retail cost of domestically-





29

produced foods. While the spread is widening this year because of
higher marketing costs, largely reflecting wage settlements and higher
packaging and transportation costs, the expected increase is only about
half the 1975 advance. Among major foods, price spreads have in-
creased the most for those commodities showing the sharpest price
declines at the farm. including beef. pork. and bread.
If consumers purchased only domestically produced farm foods from
grocery stores, they would pay about 114 percent more for food this
year than a year ago. But consumers also buy imported foods, such as
coffee and fishery products. Taking these purchases into account pushes
up average retail food prices by slightly more than 1 percentage point-
to an average increase of nearly 21/4 percent for all food consumed at
home.
Finally, consumers do not purchase their total food needs in grocery
stores. That is, they eat away from home in places like restaurants and
pay for the services of someone else to prepare and serve meals. And
taking this into account tacks another percentage point onto this year's
food price increase.
All told, taking into account farm-produced foods, imported foods.
fishery products, and meals eaten away from home, the prices con-
sumers pay for food will average around 3 percent more in 1976 than
in 1975. Still, this is sharply below 1975's 81/2 percent increase and the
lowest annual rate of increase since 1971.
Per capita consumption and consumer expenditures
With record large food supplies and higher consumer incomes, U.S.
per capita food consumption for all of 1976 is likely to be up a little
over 2 percent from 1975, and nearly equal the record high of 1972.
Consumption of crop foods. where 1976 supplies were supplemented
by large carryovers from 1975 crops, may be up slightly over 1 percent.
while animal product use may be about 3 percent higher. The combina-
tion of 2 percent larger consumption and 3 percent higher prices will
mean a rise of 6 or 7 percent in consumer expenditures for food. But
food spending is not likely to match the rise in disposable personal in-
come: so the percentage of income spent for food is likely to average
slightly less than the 17.1 percent in 1975.

FOOD OUTLOOK FOR 1977
Looking ahead into 1977, large food supplies will continue to slow
the rise in food prices during the first half. At the same time, demand
expansion and rising marketing costs will put upward pressure on food
prices. On balance, a retail food price increase of 2 to 4 percent is in
prospect for the first half of 1977.
However, the seasonal pattern of food price movements may shift
sharply as 1977 unfolds, mostly due to a reduction in beef supplies by
next spring. During the first quarter of 1977, a price increase of 2 or 3
percent is expected over a year earlier, mainly reflecting increasing
prices for coffee, some produce items and higher marketing costs and
restaurant meals. But by next spring, food price increases may be a lit-
tle sharper if the economy is strong and beef output declines as ex-
pected. Prospective higher farm prices, coupled with marketin- costs





30

5 to 6 percent above the spring of 1976, may lead to food price increases
averaging 3 or 4 percent above last spring.
Crop supplies and livestock product output during the first half of
1977 generallv depend on plans and actions already taken by pro-
ducers. The second half of next year is less certain. On the crop side,
farm prices this winter and next spring, along with growing and
harvesting conditions, will greatly influence crop supplies during the
summer and fall of 1977. Relatively favorable crop prices are indi-
cated if demand continues strong as expected and this should lead to
large 1977 plantings. particularly for soybeans.
Prospective 1977 crop developments also will influence production
plans for livestock and poultry. Output of animal products should
remain large in the second half of 1977, especially if supplies and
prices of feed are favorable to livestock and poultry producers.
Cattle are a key to the outlook. If feed cattle prices improve this
winter and next spring as expected, cattlemen will likely increase
placements on feed and reduce the number of animals going to
slaughter directly off grass during the first half. This would point to
a, little larger beef production in the second half. Coupled with con-
tinued relatively large pork, poultry, and milk output. animal prod-
uct supplies would continue at a high level, although below the sec-
ond half of this year.
On balance. 1977 looks like a year of fairly generous food supplies
for consumers, with another year of only moderately rising retail
food prices.

WIHAT PRICE FOOD: SOURCE AND CAUSES OF PRICE VARIATIONS
Now, let's examine the food situation in a long-run perspective.
Today's interest in food prices is in stark contrast to just 3 years ago.
Let me quote the first line of the food outlook talk presented at this
conference in December 1973: "Food prices in 1973 have risen at the
most rapid rate in over a quarter century." (Summers. 1973.)
Prices are still a topic for discussion, but the overall level of retail
food prices has been fairly stable in 1976 and concern now more often
centers around particular foods rather than the overall level of food
prices. Developments over the past few years have stimulated con-
siderable interest in a better understanding of the forces and factors
influencing the Nation's food system. Insight can be gained by review-
ing causes of the sharp rise in food prices during 1973 and 1974 and
the slowdowns in 1975 and 1976.

WORLD FOOD TIES GROWING
The understanding of how much food, which types of food, and at
what price food is available to consumers involves a complex set of
developments that came into focus in the 1970's. Of particular note is
the interdependence of the food production and marketing system in
the United States and the food systems of other countries. A brief
overview of supply-demand developments during the 1970's will help
us understand these interrelationships and provide a basis for examin-
ing implications for the future.





31

The most striking development has occurred on the demand side.
Since 1972, the value of U.S. agricultural exports has jumped from
less than $10 billion to about $22 billion. U.S. exports have grown in
importance until they now account for about a fourth of the total
market for crop commodities.
The growth in world demand was largely brought on by increasing
incomes and rising population, coupled with the decision by the
U.S.S.R. to import food. This introduced more uncertainty into
domestic agricultural markets and caused sharp variations in food
prices to both farmers and consumers. U.S. exports are sensitive to
both supply and demand conditions in other countries. These condi-
tions can change rapidly if weather reduces crops or if economic
activity stimulates demand, as well as with economic-trade policies,
such as international currency alignments.
The sharp rise in U.S. retail food prices in 1973 is explained by a
combination of these conditions. Simply put: Weather-reduced world
crops in the face of expanding world economic activity and strong
demand caused a jump in food prices. Although the farm value repre-
sented only about 40 percent of retail cost, higher commodity prices
accounted for three-fourths of the 141/2 percent rise in retail food
prices in 1973.
In 1974, retail food prices again increased by 141/2 percent, but only
about a fourth of the increase was due to higher farm commodity
prices. Farm price rises were moderated by an easing of the tight
world food supply-demand relationship. But marketing spreads rose
sharply, reflecting rising costs and delayed passthrough after eco-
nomic controls were removed. The sharp rise in marketing costs also
reflected economic interdependence of world economies as the embargo
tightened oil supplies. This contributed to higher costs for the energy-
dependent U.S. food system. from farm to retail.
Since 1974, farm food prices have continued an easing trend as
world food supplies generally caught up with demand. In 1975, about
three-fourths of the advance in retail prices was due to rising market-
ing costs. In 1976, marketing costs are accounting for all the moderate
increase in retail food prices, even though there has been a slowing
in the marketing cost rise. The farm value of food will be below 1975.
Thus, it is evident that both the level of and changes in retail food
prices vary with food supply-demand conditions here and abroad, as
well as with marketing costs in this country. For individual foods, the
volatility in prices can vary greatly, depending on the proportion that
farm value is of retail cost. Livestock and poultry products are gen-
erally more closely tied to the volatility of farm prices than are crop
foods since the farm value constitutes a higher proportion of their
retail cost. Moreover, inventories of major crops can cushion the
impact of supply-demand changes. For example, the farm value for
beef and eggs accounts for over half of the retail cost, while for bread
and corn flakes the farm value is less than a fourth. Fresh fruit and
potatoes tend to fall between these extremes. While fresh produce
undergoes little processing, marketing costs are large because of trans-
portation and retailing costs (Harp, 1976).





32

SUPPLY-DEMAND FACTORS AFFECTING RETAIL FOOD PRICES
Sources of food supply
The U.S. food supply depends heavily on the output of domestic
farms and ranches. In the 1970's, the percentage of the total supply
of food from domestic production has fluctuated around 88 percent.
The remaining 12 percent comes from imports.
The supply of livestock food commodities is almost entirely from
domestic sources, 96 percent, while about 70 percent of crop foods are
produced in this country. Prices for imported crop foods can be quite
variable, such as for coffee, reflecting supply and demand conditions
both here and abroad.
Supply factors.-U.S. farm production of food commodities is
heavily dependent on the relationship between production costs and
product prices. Production costs are closely tied to the quantity and
price of inputs farmers use. Farmers are becoming increasingly
dependent on outside sources to furnish production inputs.
Today, farmers purchase well over half their inputs from outside
sources, and these purchases have been rising. Thus, the farm sector
is becoming increasingly linked to and dependent upon input supply
industries-and the availability and price of inputs have a critical
impact on farm food production. At the same time, costs have been
rising in other sectors of the economy in response to rising energy costs
and inflationary pressures. This has resulted in cost pressures through-
out all the sectors of the food system in the 1970's.
Cost pressures on prices can be moderated by productivity gains
throughout the food system, either through more output from a given
quantity of inputs or from the same output from a reduced quantity
of inputs. But productivity gains in the food system appear to have
slowed in the 1970's.
For example, one study found that food system labor productivity
slowed from over a 3-percent annual growth rate in the 1960's to less
than 1 percent in the 1970's (Durost and Kirkley, 1976). Among the
sectors of the food system, the farming sector has been the leader in
productivity gains. But in the 1970's, farm labor productivity has
slowed and crop production per acre has been cut below longer term
trends.
Several developments have tended to reduce yield levels: Less pro-
ductive acres have been brought back into cultivation; high input
prices caused farmers to cut back on the quantity of inputs used,
especially in years of declining farm prices; and weather and disease
have taken a severe toll on the farm sector several years, with the
corn blight of 1970 and weather problems in 1974 and 1976. On the
livestock side, the banning of DES (diethylstilbestrol) tended to
moderate efficiency gains in cattle and calf feeding, although sub-
stitutes for DES should help recapture losses.
Sources of demand for food
There are three primary sources of demand for farm commodities:
Domestic food use; animal feed; and exports. As a percentage of total
use, domestic food use and animal feed have trended downward in the
1970's. Exports of all farm food products now account for nearly
18 percent of the total compared with about 12 percent in 1971. But





33

exports of crop foods account for 27 percent of crop utilization com-
pared with 18 percent in 1971. Animal feed accounts for about 30
percent of total utilization, but year-to-year variations usually are not
as sharp as for exports.
Demand factors.-The level and composition of domestic food use
or per capita food consumption reflect a combination of economic,
sociological, and psychological factors. Historically, the level of per
capita consumption in terms of total pounds has shown a gradual
downward trend, although it has remained around 1,450 pounds
(retail weight) in the 1970's. But of far more interest and significance
is the changing composition of foods consumed, where sociological
and psychological factors have increased in importance (LeBovit,
1976 and Manchester, 1976). Consumption has shifted away from
lower valued foods toward those of higher value, reflecting improved
living standards and rising per capita incomes. Both livestock and
crop-related foods have trended upward at about the same rate; but
within the livestock group, meat and poultry have been a big gainer
while eggs and dairy products have trended downward. Among crop
foods, vegetable oils and processed fruits and vegetables have shown
major increases in use.
On balance, the combination of domestic demand factors affecting
the level of per capita food consumption, as well as consumption of
individual foods, tends to impact gradually over time. Sharp year-to-
year changes are more likely to be associated with changes in food
supplies. Also, participation in domestic food programs works in the
direction of more stability in food consumption. Food stamps, in par-
ticular, may provide a floor for food expenditures above levels to
which they otherwise would fall rather than generating a greatly
expanded demand for food (Bunting and Reese, 1975). People par-
ticipating in the food stamp program reached a peak of 19 million in
1975.
Animal feed use is tied in with per capita consumption of foods.
As consumers have upgraded their diets, they have consumed more
protein from meat and poultry, directly increasing the demand for
feed crops.
The overall level of animal feed use shows more stability than does
the use of individual feeds. However, the level of feed use can show
considerable year-to-year change because of changes in feed prices in
relation to animal product prices. For example, a sharp increase in
cattle slaughter because of a squeeze on feeding profitability can cut
back on the number of animals being fed and reduce feed requirements.
In the 1970's, supplies and prices of feed crop have shown con-
siderable variation. This has meant increasing fluctuation in live-
stock product supplies and retail prices. But, by no means, is all the
variability at the farm or the consumer level due to the increasing
instability of feed supplies and costs. Cycles in beef and pork produc-
tion, for example, would be likely even if adequate low-cost feed sup-
plies were available to producers, reflecting farm level adjustments
to changes in consumer demand.
Among the demand sources for food, exports are the most volatile.
U.S. exports vary with both supply and demand factors abroad, as
well as with changes in government policies in other countries. For





34

example, the decision of the U.S.S.R. to increase imports to meet
food production shortfalls greatly tightened world food supply-
demand balances and contributed to the sharp increase in U.S. farm
and food prices.
As in the United States, the composition of food consumption
abroad has been changing with the increase in the level of consumer
income. Crop-related foods generally constitute a greater proportion
of total food consumption than in the United States. But the con-
sumption of meat and poultry as a source of protein is increasing,
although it is still small in a number of countries.
Food production in many countries shows greater year-to-year vari-
ability than in the United States due to weather and climatic factors.
Crops in the U.S.S.R., for example, are more vulnerable to weather
since they are grown in more northern latitudes.
Thus, weather variability, growing dlemland for food, and closer
world economic ties have led to a sharp increase in the level of U.S.
food commodity exports. While these developments set the stage for
sharp year-to-year changes in U.S. exports, trade arrangements with
several countries help to stabilize U.S. food supplies and prices.

THE FUTUPE
Since 1973 most of the increase in retail food prices can be attributed
to increased marketing costs, including transportation, packaging, and
labor costs. Still, with reduced prices at the farm level for food in
1976, retail food prices are advancing at about half the rate of increase
as the CPI and thus slowing the increase in the overall cost of living.
As we move into the future, both the level of food prices and year-
to-year changes will depend heavily on factors related to general price
inflation, food production both here and abroad, productivity through-
out the sectors of the food system, food demand, and Government
policy.
The impact of these factors on retail food prices will be reflected
through marketing costs and farm prices. Marketing costs have be-
come increasingly tied to inflation, or the overall cost of living, and
this is likely to remain the case in the future. If upward cost pressures
continue as expected in the economy, marketing costs will rise. For
example, about one-half of total food marketing costs are accounted
for by labor and, currently, wage contracts of at least one-sixth of food
industry employees include cost-of-living adjustment clauses that are
tied to the CPI for all items (Barr and Blanciforti, 1976). And wages
of nonunion and management employees usually follow changes in col-
lective bargaining agreements. Further, transportation and packaging
costs, the next two largest components of food marketing charres.
will be responsive to rising energy requirements and generally higher
operating costs.
On the production side, the world has the potential to produce ade-
quate food supplies. Questions center around the level of farm prices
needed by producers to cover the cost of producing food and the im-
pact of weather, disease, and pests on the food supply. In the United
States, farmers have the capability to produce sufficient food for cur-
rent domestic and export needs but uncertainty centers around pro-





35

duction costs and product prices needed by U.S. producers to expand
production to meet growing food markets.
Developments in the 1970's would suggest the possibility of a con-
tinued high level of exports, and considerable year-to-year variability
because of changing conditions abroad.
The total quantity of food that U.S. farms will supply, and at what
prices, is related to production costs and the productivity of resources
used by farmers. Upward cost pressures are likely to continue in the
farm sector, especially for inputs related to energy, labor, and environ-
mental quality. Among other inputs, a key question centers around the
cost of feed. For example, feed cost rises would increase the cost of
finished cattle and could result in the cattle industry becoming more
dependent on roughages and thus tend to reduce productivity gains in
feeding (Allen, 1976).
For both crops and livestock, there is further potential for substitut-
ing capital for other inputs, such as labor, and continuing output gains
from adoption of available technology (Farrell, 1976). However, total
farm productivity has slowed in recent years. Annual gains of 1 to
11/2 percent to 1985 are projected by the Economic Research Service
and realization of these gains assumes that yields will be subject to
"the average weather conditions that prevailed during 1950-72"
(Smith, 1976).
The projected rate of productivity gain likely would not fully offset
the impact on production of rising costs, since the latter costs may rise
more in line with prices for chemicals, fertilizers, and energy. And,
even if productivity gains hold per unit food production costs and
farm prices constant, expanding demand would likely exert upward
pressure farm food prices in some years.
The worldwide demand for food products likely will continue to
expand with rising world population and increasing per capita in-
comes. It is generally agreed that the United States can remain a com-
petitive producer of food commodities in relation to other countries.
This implies that the United States can maintain a significant share
of world food trade, with a continued strong export demand for U.S.
food products. However, world trade expansion could slow as coun-
tries abroad strive for greater self-sufficiency in food production. In
this case. the rate of U.S. export growth may not match recent years.
U.S. per capita food consumption may continue relatively stable
to possibly slightly increasing with use of processed foods and fresh
meats continuing to show the fastest gain. This would suggest a little,
if any, change in the farm value as a percent of retail cost due to these
shifts since farmers' small share of processed foods likely would be
offset by their large share for meat.
On balance, the level of retail food prices in the future will reflect
the impact of inflation in the economy, marketing and production
costs, productivity, and the level and composition of food demand.
Retail food prices-and especially year-to-year variations in prices-
also could be affected by Government policy. Governments can
influence both farm and retail food prices through farm programs or
retail price stabilization programs. Governments generally use indi-
rect methods to moderate the impact of changes in food supplies and
demand on farm retail food prices, such as the recent U.S. grain






36

trade arrangements with several countries. Reserve food stocks repre-
sent another indirect method, either through stocks owned and held
by the Government, or through privately owned and held stocks with
assistance from the Government; and actions may be related to inter-
national trade, including export embargoes, taxes and subsidies, ad-
justing tariffs and quotas on imports, trade arrangements and com-
modity agreements.
In looking ahead, most indications point to a desire of countries to
assure their producers reasonable incomes and consumers adequate
food supplies, whether through domestic production or trade. In either
case, this points to closer economic ties among countries and perhaps
relaxation of trade barriers, particularly to meet production deficits.
In summary, both producers and consumers became more aware of
their food system in the 1970's. Their voices-whether from farmers
in the United States who complained of grain embargoes or consumers
in Poland who pressured the government to rescind sharp food price
increases-were raised and heard around the world.
Consumer voices were probably louder than producers', particularly
about the sharp rises in food prices. This might suggest pressures for
more stability in food supplies and prices in the years ahead, but pros-
pects appear far from certain about the level of food prices-the 3
percent yearly increase in food prices during the 1960's looks much
less likely for the 1980's.



RETAIL FOOD PRICES*

% OF 1967

220


1976 1975

190
..,C -------------:7---------:---"'"'"':;;.

1974

130
1973

100 -I I I 1
JAN APR JUL OCT
ifOO0 RT HOE. SOUCE: BRER OF LFBOR STIfTISTICS.
USDfl NEC9.ERS 2147-78(09)






37




PRODUCTION OF FOOD COMMODITIES

% of 1967



CROPS
120 -




110 -
11 -mm LIVESTOCK


100




90 -
1967 '68 69 70 71 72 '73 '74 75 76 77

Based on supply ut1z/ation nndex data, which uses 1957-1959 farm price weiyhts.
A Pre mnary.
USDA/ERS No1et) 1976




UTILIZATION OF FOOD COMMODITIES

% of 1967


CROPS
120




110 0 0 04 LIVESTOCK -




100




90- I I I I
1967 '68 '69 70 '71 72 73 74 75 76 77

Based on supply-utilzation index data, which uses 1957 1959 farm price weights.
A Preliminary.
USDA/ERS November 1976






38




FARM VALUE FOR MARKET BASKET FOODS

of 1970 4
/'
/ I

190 CROP PRODUCTS -4

I %

160.i



130
LIVESTOCK PRODUCTS


100



70 ... ... 1 1. ... ....... I_.. .....___
1971 1972 1973 1974 1975 1976
tS[);A/ ERS N bov W il 1976




FARM-RETAIL SPREAD FOR MARKET BASKET FOODS

% of 1970


CROP PRODUCTS I
145 I % S



130

S LIVESTOCK PRODUCTS

115



100



85 1
1971 1972 1973 1974 1975 1976
USDAiERS Novitmhel 1976







39






COMPONENTS OF INCREASES

IN FOOD STORE PRICES

%Change in _-
Retail Price MARKETING SPREAD.
Retail Price
FISH & IMPORTED
FARM VALUE FOODS

15




10











1972 1973 1974 1975 1976 A

*Farm value decreased. AEstimated.


USDA/ERS November 1976






FARMER'S SHARE OF RETAIL PRICE


UNDER 25 PERCENT 25 TO 50 PERCENT OVER 50 PERCENT


CANNED CORN FROZEN BEEF

ORANGE JUICE

CANNED TOMATOES PORK

PEANUT BUTTER
CANNED SPAGHETTI BUTTER

FRESH APPLES

CORN FLAKES EGGS
LETTUCE

SANDWICH COOKIES MILK
ICE CREAM

BREAD FRYING CHICKENS
FLOUR

FRENCH FRIED
POTATOES POTATOES TURKEY

THIRD QUARTER, 1976
USDA/ERS November 1976
i~iiiiii~i!.................ii
.. ..--o -*% . %%.o... .
.................:::::::::
o. o~..-.. ,...... ...
S.. --.. '. :-.-.'.:.:.......:::::::::::::::
1 0:::::::::::::::: ..............::::::::::
5 -- :-:,:~~~~~~~~.-.'..... ...-----:::i .....':::':::+ :
========================================== ::::::::::::::::::::::::::: : ... I ........... ~~i::!:


1972 1973.1974 1975.1976.
Farm v lue de..as...........d
USDA/ERS ..........9..


FARMER'S SHARE.F. RETAIL PRIC

UNDER 5 PERCNT 25 O 50 PRCENT.VER 50PERCEN
CANNED..ORN FROZEN.BEEF.
.O.ANG.....ICE
CANNED..... ....OE ..R

PEANUT BUTTER..
CA NE ..PAG.H.E..T. ............
.....~~F ES ..........E....
...... .. ....... ...E GG.
LETTUCE
K=DW C COO IE ...ILK...







40





FARM RETAIL SPREAD AND MARKETING COSTS

% of 1970

PACKAGING
MATERIALS
160 -




145 i.........
ii /RE TAIL SPREAD


130 -
RAILROAD
FREIGHT RATES EARNINGS OF
S.... '" / FOOD MARKETING
115 #' ......... / EMPLOYEES
115 ............ -

.O '.

100
1971 1972 1973 1974 1975 1976
USDA/ERS November. 1976




PRICES FOR PRODUCTION ITEMS,GASOLINE,
AND ANHYDROUS AMMONIA
% of 1960




200 PRODUCTION ITEMS


GASOLINE


150 I \
_1 I

..* ANHYDROUS
....----**** AMMONIA
100- -=--wo I ................
I



50
1960 62 64 '66 '68 70 '72 "74 '76 78

A Preliminary.

USDA/ERS November. 1976






41




CROP PRODUCTION PER ACRE
AND CROPLAND USED FOR CROPS

% of 1960

130 CROP PRODUCTION
PER ACRE t


120- ft


110 CROPLAND USED
SFOR CROPS


100


90
1960 62 64 66 '68 70 72 74 76 78

A Preihinrary.

USDA ERS November 1976





EXPORTS AS A SHARE OF UTILIZATION

FOR SELECTED CROPS

% of Utilization


WHEAT "**
60- e D. -


40I SOYBEANS


CORN
20
2o ------------------


0
1967 '68 '69 70 71 72 73 '74 75 76 77
Based on supp y utliz tion nde x data, which uses 1957 1959 farm p)rices weights.
A Prelhmnary.
USDA/ERS Noveme 1976






42

REFERENCES
Allen, G. C., "Feed Utilization for Beef Production," Feed Situation, No. 262,
September 1976.
Barr, T. N., and L. A. Blanciforti, "Forecasting Retail Food Prices: A Look
at the Future and an Appraisal of Controls and Input Costs," ERS, USDA, 1976.
Bunting, F., and R. Reese, "USDA Food and Nutrition Programs-A Progress
Report," National Food Situation, No. 151, February 1975.
Durost, D. D., and J. E. Kirkley, "Productivity Changes in the Food and Fiber
System," Agricultural Economics Research, Vol. 28, No. 4, October 1976.
Harp, H. H., "Who Gets the Food Dollar," ERS, USDA, January 1976.
Farrell, K. R., "Structure and Organization of Agriculture, 1980-85," ERS,
USDA, May 1976.
LeBovit, C. B., "The Impact of Some Demographic Changes on U.S. Food Con-
sumption, 1965-75 and 1975-90," National Food Situation, No. 156, May 1976.
Manchester, A. C., "Household Consumption Behavior: Understanding,
Measurement and Applications in Policy-Oriented Research," ERS, USDA,
August 1976.
Smith, A. G., "Commodity Production and Utilization Projections to 1985,"
Agriculture The Third Century, No. 2, ERS, USDA, July 1976.
Summers, L. V., "Outlook for Food Prices, Consumption and Expenditures,"
ERS, USDA, December 1973.












OUTLOOK FOR USDA DOMESTIC FOOD ASSISTANCE
PROGRAMS
(By Stephen J. Hiemstra, Director, Economic Analysis and Program
Evaluation Staff, Food and Nutrition Service, USDA)


FOOD STAMP PROGRAM
The domestic food assistance programs of the Department are
operated by the Food and Nutrition Service. They include the food
stamp program, the child nutrition programs, the WIC program, and
a few direct distribution programs.
Participation in the food stamp program reached a peak of 19.3 mil-
lion in April a year ago. It has been trending generally downward
ever since. Our most recent figure-based on preliminary data for
September-shows a drop of 2 million from the peak, to 17.3 million.
Part of that decline is seasonal since April is typically high and
September typically low. But more than 1 million of the decline has
been due to the improving economic situation and drop in unemploy-
ment. We have been getting about a one-half million change in par-
ticipation for every 1 percent change in the rate of unemployment.
Now that no large changes are expected in the economic situation,
our expectations are for near stability in food stamp program par-
ticipation. Participation averaged 18 million in fiscal year 1976. Since
we are already below this figure, we are looking for some decline in
the average for fiscal year 1977.
Looking farther ahead, we are expecting participation to remain on
a new plateau near current levels rather than decline with further
growth in the economy. Continued outreach efforts and increasing
benefit levels are gradually bringing higher proportions of those
eligible into the program. This trend assumes no change in the pro-
gram rules or structure. However, legislative authority is needed to
continue the food stamp program beyond fiscal year 1977. The level
of appropriations and enactment of legislation to reform the program
could significantly affect participation in the program.
Program costs totaled $5.7 billion in fiscal year 1976; $5.3 billion
represented benefits to recipients and $0.4 billion covered the cost of
printing and distributing the stamps plus Federal costs of adminis-
tration (including one-half of State and local administrative costs).
Costs in 1977 are expected to be close to those of last year.
Food stamp allotments have been at the level of $166 for a house-
hold of 4 since January 1976 (48 States and the District of Columbia).
No increase was warranted in July and no increase will be made in
January 1977 because prices for food at home, as reflected in the
'alu1.la~tins of the thrifty food plan, have remained essentially stable.
(43)





44

Economic Research Service projections of relatively stable prices
through next February mean little or no change in benefits through
fiscal year 1977. Bonus per person averaged $24.50 in the latest
quarter.
CHILD NUTRITION PROGRAM
There are some uncertainties in future trends in the national school
lunch program and other child nutrition programs because of signifi-
cant legislative changes enacted about a year ago. The net result of
these changes likely will be expansion in both participation and costs
of the program.
Extension of the program to include residential child care institu-
tions and mandating the offer of reduced price lunches are among the
changes that will affect participation in the lunch program this school
year. Categorical availability of the school breakfast program and
the summer feeding program are other changes. In addition, liberaliz-
ing benefits and expanding the child care feeding program will
greatly increase potential costs of preschool food programs.
Last school year, the national school lunch program reached an
average of 25.6 million participants over the months of typical opera-
tions. That was an increase of 0.5 million from the previous year.
It represented 58 percent of the enrollment in program schools. About
94 percent of the public schools and about three-fifths of the private
schools have programs. Forty-two percent of the lunches were served
free or at reduced price to eligible students. That's an average of
10 million students. All of the half-million increase from the previous
year was in this category. The number of youngsters paying for their
lunches has been declining gradually over the years.
The breakfast program continues to grow as more schools adopt
the program. An average of 2.2 million students participated last year,
up from 1.8 million the previous year.
The fiscal year 1977 budget for all of the child nutrition programs,
including the special milk program, is $2.8 billion.

SPECIAL SUPPLEMENTAL FOOD PROGRAM FOR WOMEN, INFANTS AND
CHILDREN (WIC)
Our latest figures show about 600,000 participants in the WIC pro-
gram. About 100,000 of these are pregnant or nursing women and the
rest are infants and children through 5 years of age.
This program has been growing steadily as it expands into new
areas of the country, in line with a court order to spend all of the
money available for the program. The appropriation of $250 million
for fiscal year 1977 will be increased by $50 million because of the
availability of unspent carryover funds. Therefore, a total program
level of $300 million is expected for 1977.

ALL PROGRAMS
In total, domestic food assistance programs cost the Federal Gov-
ernment about $8.5 billion in fiscal year 1976. Some increased costs
in 1977 are expected for the child nutrition and the WIC programs,
due both to program expansion and escalators on Federal inputs that






45

are tied to food price changes. These increases, combined with near
stability in costs expected for food stamps, are expected to increase
total Federal costs for these programs. But the aggregate increase is
likely to be small.
The $8.5 billion Federal input into the food programs accounted
for 4.4 percent of the $194 billion total U.S. food expenditures in
fiscal year 1976 (including Puerto Rico). The Federal input accounted
for 61 percent of the total value of stamps issued (with the balance
paid by recipients as a purchase requirement) and 45 percent of the
total value of food served under the national school lunch program.
The total value of food purchased or served under these programs
approached $14 billion. That amounts to 7 percent of the aggregate
of $194 billion spent for food in this country. Little change is ex-
pected in these percentages in fiscal year 1977.
We have available for distribution at the conference, our prelimi-
nary annual statistical review for fiscal year 1976 that gives the spe-
cific data related to each of our programs for the year.











CURRENT AND EMERGING ISSUES IN FOOD AARKETING
AND DISTRIBUTION
(By S. Kent Christensen, Vice President and Agricultural Counsel, National
Association of Food Chains)


I am pleased to have been asked to appear on this panel to discuss
some of the current and emerging issues in food marketing and distri-
bution-particularly in the retail sector.
As many of you may be aware, with the exception of selected indi-
vidual firms, the retail sector of the food industry has not been very
healthy over the last decade as indicated by various profit measures.
Starting in about 1965, at which time profits were around 1.41 cents
per dollar of sales, and 12.55 cents per dollar of net worth, profits have
trended downward almost continuously to a low of 0.49 cents per dollar
of sales and 5.63 percent return on net worth in 1972-73. There was
some slight recovery in 1974-75, but again this year many firms are
having serious profit problems.
I mention these figures not to plead "poor mouth", but rather because
they are symptomatic of some basic changes facing the retail sector
which in turn suggest the kinds of economic pressures that will mold
the nature of this business for several years ahead.
One basic change has been the very dramatic reduction in the birth
rate-down from an average of about 4 children per household in the
late 1960's and early 1970 to less than two children per household this
year. Thus, the expansion rate in food sales enjoyed year after year
since World War II due to population growth has been cut in half.
Second, at about the same time, the transfer of fast moving nonfood
sales items from drug and department stores to food stores has slowed
materially, thus curtailing another facet of expansion. Last, a lessen-
ing of consumer demand due to curtailed real income has had an ad-
verse effect on sales, as consumers have actually reduced purchases
and/or shifted to lower cost products.
Thus in a broad general sense, the postwar supermarket growth
industry, now comes face to face with a rather static expansion curve.
Individual firms choosing to follow a growth policy are going to have
to do so to a substantial degree by taking sales away from other retail
food firms in contrast with the past several years where growth was
possible to all concerned.
As the name of the game is volume, in keeping down unit costs in the
supermarket industry, no firm is going to give up sales without a se-
vere struggle. Thus it becomes rather apparent that the firms in an
already intensely competitive industry will face an even greater in-
tensive struggle for survival.
(46)





47

At the same time sales growth has been leveling off, unit cost inputs
have been rising rapidly-thus putting pressure on profits from an-
other angle.
With the sales growth-route limited as a potential source of relief-
at the same time cost pressures intensify-either one of two results or
both are evident: (1) chain store margins must increase on a dollar
and cents basis, and/or productivity improvements must be achieved.
I suspect we shall see some of each, but I want to talk specifically about
productivity changes.
As many of you are aware-improvements in productivity at the
retail level have been minimal for several years. The change to self-
service was the last major breakthrough.
There are, however, many potential cost savings to be achieved if
various institutional barriers can be eliminated or minimized. Such
barriers include many resulting from Government regulation; many
are tied to restrictive labor practices; while some are imposed by con-
sumer pressures. We have made very little progress in shortcutting
these barriers- by we I include we the food chains, we the Govern-
ment legislators and executive branch employees and we the consumers.
I have given this dilemma much thought over the last couple years
and seriously have concluded that much of the problem lies in the area
of misguided priorities by those concerned about rising food costs. By
this I refer to the constant concern about profit levels as a factor af-
fecting farmers' and consumers' prices.
I would not attempt to dissuade anyone from continuing their care-
ful review of industry profits. But, I would suggest that this miotic
view keeps those who are sincerely seeking relief from food price in-
creases from looking at the only real potential for relief-i.e. im-
proved productivity. Consumer leaders, and legislative and executive
branch leaders who continue whipping the profit horse, are in fact
doing a gross disservice to their constituents because they are concen-
trating their attention on a "dry hole" and in doing so missing a po-
tential opportunity for helping to bring about positive results.
Food chains retain roughly 22 cents of each dollar spent by con-
sumers. About 1 cent of this goes for profit-while 21 cents is paid
out in costs for labor, rent, packaging, promotions, etc. About 68 per-
cent of the 22 cents goes for labor-including fringe benefits.
Unfortunately the current socio-political-economic environment
makes it near impossible for the food distribution sector on its own to
make any real headway in increasing productivity. About the only
force which can bring about productivity reform is intelligent con-
sumer action.
In my remaining time I would like to outline very briefly some spe-
cific areas of potential reform.

I BACKHAUL
Backhaul remains a problem as there remains a considerable degree
of uncertainty under what conditions a manufacturer may offer a dis-
count to retailers desiring to pick up merchandise on a backhaul pro-
gram without being charged with violation of the Robinson-Putman
Act.





48

UPC AND ELECTRONIC SCANNING
The installation of electronic front-end scanning systems continues
at a slow pace. The latest count is about 100 individual stores across
the Nation. The main deterrents to faster adoption are: (1) the heavy
initial investment in a capital-short industry; and (2) the controversy
over the price-marking of individual packages. Hopefully a shelf
price-marking system satisfactory to consumers can be developed
which will make acceptable elimination of price-marking individual
packaging. Roughly 25-30 percent of the cost saving potential of this
innovation is in not having to price-mark. Because of the tremendous
potential saving-both direct and indirect-it is hoped this program
will not be diluted by premature legislation.

CENTRAL BREAKING OF BEEF CARCASSES AND RETAIL CUTTING AND
PACKAGING OF MEAT
Much of the industry (perhaps 40 percent) has shifted to programs
involving the breaking of beef carcasses at a central location and the
shipping of vacuum packaged primal cuts to stores for retail cutting
and packaging. The breaking is done by both packagers and retail
owned central meat plants. The national union headquarters has now
generally accepted this innovation, but several locals are still holding
out after about 8 years. It would appear firms in the industry will con-
tinue moving into this program.
Of even greater interest is the central cutting and packaging of re-
tail cuts. Such a program has been around for several years on a semi-
experimental basis, but at least two important firms have recently gone
into this program in a major way. There yet remains many problems
to be overcome but the potential savings suggest ways will be found
to do so.
The perfection of this innovation, no doubt, could be speeded up
materially were the industry "free" to clearly experiment.
In summary, I would say that there are no doubt many, many in-
novations and practices (both technological and management) which
would surface if the social climate were right. I sincerely believe we
are closer to a productivity reform climate than ever before. But only
strong consumer support-marshalled by consumer leaders can make
the reform fully fruitful vs. a temporary abortive program.












FOOD MARKETING AND DISTRIBUTION: COSTS AND
RELATED ISSUES
(By Patrick J. Luby, Vice President and Corporate Economist,
Oscar Mayer & Co.)


There are many issues with important cost implications in the
livestock-meat industry. Some are issues associated with the rapid
inflation of the past decade and probably are quite similar to issues
in other food industries. Other issues are unique and peculiar to the
meat industry alone.
The marketing and distribution of meat has much in common with
other foods and the rapidly rising costs of the past decade have im-
pacted upon its management problems similar to those of other food
industries. The normal response is to try to perform the functions
more efficiently-to use the resources more effectively. In any com-
petitive industry, such as the meat industry, the pursuit of efficiency
has always been necessary for survival. The training and imagination
of managers, engineers, scientists and technicians are always focused
on these goals. Thus, significant breakthroughs on costs are rare. Most
gains are usually modest in nature and are the results of daily doing
a few things better than they were performed yesterday.
For purposes of quick review, in the meat packing and processing
industry about 70 to 80 percent of the total costs are made up by
the purchases of animals and meat. For packers of fresh meats, the
figure is nearer 80 percent; for those firms who perform more process-
ing, it is nearer 70 percent. If one does not include the cost of live-
stock and meat, about half of our industry's costs are composed of
labor costs, about 15 percent made up of containers and supplies and
the other 35 percent include energy, interest, depreciation, rents, local
taxes, and other miscellaneous items. For many years, income before
taxes has been near 2 percent of sales and after taxes about 1 percent
of sales.
Under very favorable consumer demand, weather, and feed supply
conditions, the livestock industry expanded rapidly during the 1950's
and 1960's. Commercial meat production rose 80 percent from 1951
to 1971. This expansion helped reduce costs of processing and mar-
keting per unit by permitting more efficient utilization of human and
capital resources. However, some adverse weather and other condi-
tions since 1970 forced commercial meat production down 3 percent
from 1971 to 1975. If the cattle production cycle had not been in an
expansion phase, the reduction would have been greater. In fact, com-
mercial pork production declined more than 30 percent from its 12-
month high in 1970-71 to its low in 1975-76. These kinds of rapid
contractions usually force up costs per unit, whether the institution
be public or private.
(49)





50

The fact that the meat industry's principal input is livestock and
that its production is subject to considerable variability because of
weather and cyclical production phases also presents a problem. The
packing and processing industry must provide expensive capital to
handle peak production periods.
For hogs, this has meant slaughtering 1,923,000 hogs during a week
in December, 1970 and 1,024,000 hogs during a week in July, 1976.
Neither of these weeks contained a holiday. This kind of variability
creates considerable inefficiencies in the use of resources, a consider-
able part of which is fixed. Obviously, plant, equipment, transporta-
tion, refrigeration, and many other resources are of a fixed nature
for the intermediate to long run. Staffs of trained and skilled man-
agers, salespeople, buyers, technicians, scientists and many others can-
not easily be abandoned and replaced every few years. Managers are
very reluctant to abandon skilled and unskilled labor. There are real
inefficiencies connected with hiring and training new people. There
are real costs in terms of guaranteed weekly wages and unemployment
compensattion t, shortrun changes in output and sales. There are tre-
mendous costs in separation pay to permanently closing a production
facility.
The rapidly rising costs of doing business force our and all indus-
tries to look increasingly hard at the use of all resources. To the
extent that some resources are rising more rapidly than others, man-
agers. engineers, scientists, technicians-everyone-are looking hard
at new ways of doing things, new substitutions of one resource for
another, new ways of handling materials, packaging, transporting,
and selling. During the last 3 years, the cost of energy has ballooned
more rapidly than most other resources. The industry is looking
closely at its powerplants and fuels, at new energy saving techniques.
Management of the operation of any heating and refrigeration unit
is being sharpened. New and improved technology in air atomizers,
heat exchangers and other methods and equipment are being studied.
Better housekeeping measures and the installation of more fluorescent
lighting can save some electrical costs. However, there are not likely
to be any great panaceas to the problem. Progress may be slow. The
Federal Energy Administration has proposed a target of 12 percent
reduction in energy consumed per unit of output in the meatpacking
industry by 1980 from the base year of 1972. The corresponding target
in the sausage processing industry is 11 percent. Progress, yes. But
hardly the kind of change that will significantly make up for the
price rises we have had and are likely to incur in energy.
There are many other important issues in the meat industry today.
Since our topic today deals with "costs and related issues", I will try
to sort out those which appear to be greatest in cost implications.
Some very important issues such as the morality of the level of
meat consumption which exists in the United States, the healthfulness
of meat consumption with regards to the ingestion of fat, its effect on
cholesterol levels, et cetera, the very important nitrite issues, the whole
question of additives-all most important issues, but for the most
part they are not principally cost issues. Certainly, the eventual out-
come of these issues, should they result in doubling or halving the
production and consumption of meat in any reasonably short period





51

of time, would have tremendous cost and income consequences to the
meat industry and especially to the livestock feeding and grain pro-
duction industries and farmland owners. But the questions are not
principally cost related.
There are other important issues which are most cost related. For
the most part they result in more services and information for con-
sumers, more safety and work satisfaction for employees and a better
physical environment for society. Most would be considered by most
people to be desirable. Unfortunately, most do add to the cost of
processing and distribution.
Some of these issues include nutritional labeling and freshness label-
ing-an improved service to consumers at fairly modest increased
costs. There are new laws and regulations which afford greater pro-
tection and improved working conditions for employees. Progressive
changes here are most laudable. But, unfortunately, most add to the
cost of processing and distribution. Other new laws and regulations
in recent years are yielding us cleaner air and water, fewer odor prob-
lems and more attractive industrial sites. These are very desirable
but in almost all cases has direct cost implications. In most of these
kinds of questions, it is a matter of society determining the value of
the benefits against the costs of obtaining them.
The amount and kind of packaging has from time to time been an
issue in meats. With smaller households and more eating away from
home, the size of package desired by consumers has declined con-
siderably. Thus, everything else constant, it now takes more packaging
per pound of meat merchandised. With increased processing and
fabrication at packing and retailer warehouses, the package has to be
better to withstand longer periods of transportation and more han-
dling. And modern "vacuum" packaging keeps the product fresher and
at a higher level of quality for the consumer. Packaging technology
has been serving the consumer by optimizing size of package, quality
of product and visibility of product.
During the last year or two the issue of mechanically deboned meat
has arisen. Manual boning of meat results in 1 to 3 percent of
the original weight of meat left on bones and lost to human consump-
tion. In recent years, technological developments have resulted in
mechanical methods to retrieve the heretofore wasted meat. The cal-
cium content of the deboned meat is higher and the binding qualities
are somewhat different. There are differences of opinion. Among the
choices are to ban it from human consumption, to permit its use with-
out restriction or labeling, or to permit its use with proper identifica-
tion on the label. It would seem that if nutritionists are satisfied with
the quality of the deboned meat for human consumption, that with
food scarce, its use should be permitted with proper labeling
information.
The issue of meat imports has reemerged recently as the cattle
production cycle is peaking and cow prices have been relatively low.
Although U.S. agriculture is a large net exporter and generally favors
freer world trade to open up and keep open world markets, some
segments of U.S. agriculture face strong competition from low-cost
producers.






52

One of these segments is the cattle producer. Processors and con-
sumers would be happy to import more lean beef but cattlemen object.
The pork sector is in near balance the last year or two as pork exports,
particularly to Japan, have increased to mostly offset canned pork
imports from Europe.
There are many important issues in the livestock-meat industry
today. In a business environment of rapidly rising costs, some of the
issues have direct cost implications. Others may be equally or more
important but not principally cost related. The industry is working
hard to battle problems of rising costs, variable production, while
providing consumers with better products and more and better serv-
ices, farmers and feeders with a good market and society with a better
environment. The job is not easy. The need for good managers and
people to do this is vital. The need for new and upgraded capital in-
vestment is equally vital. And it will take lots of investment-invest-
ment which will have to come out of earnings or borrowings which,
of course, ultimately depend upon earnings for their availability and
repayment. But problems mean opportunities. And solutions mean
better products and desired services for the public. Other things being
normal, better products and desired services for the public will ensure
a viable livestock and meat industry.


















DIETARY TRENDS AND NATIONAL HEALTH

(By Graham T. T. Molitor,* Director of Government Relations,
General Mills, Inc.)




EXCESS CALORIES

Americans eat too much. Calorie consumption is excessive to needs.
America is an overweight society. Many Americans consume, on the
average, some 650-1350 more calories than they need:



CALORIES, per capita, per day, U.S.




No. of
Calories




3600
-3500
-3400
-*, --3300 -- -
3200
-'-- ---' -- Excessive consump-
3100 -- tion of some 650
calories for middle
-3000 aged males, and
some 1350 calories
l-2900 -- for females may be
major factor in
dietary diseases
Recommended Daily Allowance (RDA) for
-700 H of abundance.
23-50 yr. male, 69 in. ,154 lbs. (FNB,of abundance.
NAS-NRC) -2600
2500

RDA for 28-50 yvr,female.64 in., 128 Ibs. 2000
(FNB, NAS-NRC)
-1900
Starvation Level
1500
-1000 -
500




| I | I | I I l | I___
1911 1930 1950 1960 1970 1973 11975 Year
1927 1910 1957 1965 1972 1974 1976(prel.)




*The views expressed in this paper are those of the author and not necessarily those
of the USDA.
(53)






54

Obesity: A national health problem
Obesity-brought on by overeating, improper diet and lack of ex.
ercise-is one of the most widespread public health problems today.
Estimates of the number of obese Americans vary tremendously-
from 20 percent to nearly 60 percent of the population. One of the
high estimates asserts 58 percent of all American adults (79 million
persons) suffer from obesity to some degree.' The American Heart
Association estimates that 40 percent of Americans are overweight.
HEW's estimate is 30 percent.2 The American Heart Association
estimates that weight-related cardiovascular disease is prevalent in
nearly 15 percent of the population. The Metropolitan Life Insurance
Company estimates that a person over 45 years of age who is 10 pounds
overweight decreases his chances for survival by some 8 percent; for
each additional pound of excess weight the risk of dying prematurely
rises approximately 1 percent.3
Abundance, coupled with unprecedented affluence, has contributed
to overeating which has brought on new health hazards. Today over-
eating and lack of proper exercise threatens not only health, but life
itself. Weight control, not the age-old task of simply obtaining enough
food to keep going, describes America's food problem.
Caloric cutbacks
In an effort to cut back the excess consumption of calories and to
bring overconsumption under control, increasing attention will be
given to the "nutritional load" carried by each calorie consumed.
Consuming less food, Americans will become increasingly selective
about eating the "right" kinds of foods.
A number of countries have already given serious consideration to
their national state of health and have responded to food overin-
dulgence. Two most significant trends are underway:
1. Caloric consumption per capita between the years 1955-1973
has declined in the leading Scandinavian countries-Denmark,
Norway, Sweden-and in the United Kingdom;
2. Animal fat consumption per capita also began a gradual de-
cline during the 1960's in Sweden, Denmark, Canada, United
Kingdom and in the United States.4
While all the evidence is not in, it does appear that excessive
calories, and particularly excessive calories from saturated fats, may
be a major contributor to many of the diseases and disorders afflicting
populations in these advanced, affluent countries. More and more, we
are likely to see national agricultural and food policy planning aimed
1Peter Wyden, The Overweight Society (New York: William Morrow & Co., 1966), p. 2.
2 U.S. Department of Health, Education & Welfare, Forward Plan for Health, Fiscal Year
1977-81 (Washington, D.C.: Public Health Service. 1975), pp. 116, 227.
3 Dr. David Reuben, The Save Your Life Diet (New York: Ballantine Books, 1975),
p. 95.
4 Food Consumption Statistics, 1955, 1973 (Paris; OECD, 1975).






55

at selective reduction of food intakes deemed harmful or injurious
to individual well-being.
Americans, along with many other persons living in the advanced
affluent nations, are overfed victims of abundance. Obesity is an ob-
vious target of concern.
Man's lifestyle began to change markedly when he ceased being
a food-hunter and food-gatherer and became a food-producer. At that
point, dietary needs began to decline. Successive changeovers-from
agrarian to industrial, on to a service and toward knowledge/educa-
tion/information based economy-place lesser demands upon energy
input/output. In today's technological society machines take over an
increasing number of the tasks, jobs involve less ardous work-brains
not brawn-humans enjoy ever shorter work weeks, longer vacations,
more holidays, and earlier retirements, and the result is a substantial
reduction of demands upon human energy output. In our emerging
post-industrial lifestyle humans are becoming increasingly sedentary
and caloric needs have been lessened, as a result.
Lifestyles have changed but traditional eating habits, stolidly cul-
turally engrained, have not. "Cultural lag," the slowness of adapta-
tion, heightens the problem. Many Americans, still set in their ways,
consume food in quantities keyed to needs of a bygone era.
Three hearty square meals a day, required during a time when
men lived by the "sweat of their brow," have gone by the wayside.
Today, for many persons, dinner remains the only planned meal of
the day. We have become a Nation of "nibblers." Our hummingbird
eating styles involve 5-7 snacks or mini-meals a day.: instant break-
fasts; mid-morning and mid-afternoon coffee breaks, lunchboxes and
brown-bags, cocktail hour snacks, TV snacks, and bedtime snacks.
There is some evidence that more frequent intake of smaller quantities
of food enables the body to assimilate more of the nutrients contained
in the food, further lessening consumption needs. All of these changes
result in a lower level of caloric and attendant nutritive requirements.
It's that simple. An increasingly sedentary lifestyle requires lower
caloric/nutritive intake to maintain necessary body functions.
Sources of calories in the .diet
The obvious question for any society faced with excessively high
consumption of calories is where do the unneeded calories come from ?
The next chart gives some answers-consumption of fat is up, protein
remains static, and carbohydrate has declined. (Keep in mind that
the caloric value of 1 gram of fat is approximately 2 times that of
basic carbohydrates or proteins.)







56







CALORIES -- % From 3 Major Nutrients, U.S.




35
39 42.5 lbs. fat

invisible)
41 per capita,
S' Fat per year
1972--127.1
cFA T \1 \ Increase

10.5%
\\ \\ of 1970 126.2
SPoints 1965 -116.7
\\ \\ \' \\ \
\ 1960 114.9
11 \



12 12.2
12
5s O Protein
SFROTIN
__. Static


47 47 -45.3
747

.. Carbo-
S--hydrate

....... -- CARBOHYDRATE- Decline
of
S . -10.7%
Points









911 1927 1937 1949 1958 1965 1971 1976(prelim.) Year

403470 3A70 3230 3140 31160 3320 3290 No. of calories
consumed








57






FAT -- SOURCE, %, PER CAPI A, PER DAY, U.S.



1.3 4- Flour, Cereal prod.

71.3
h Fa-- Other Foods

.6 DD 1s2 3.1
A9.9 Bea 596
Bs 99 & Ins 33.2


.3 53.6

.4 Soy 2.3 27.8


17.8
Other Fats and Oils





4.3 F 4
17.3 165 3.5.







33.5
Mea, P12.9 Animal
Dairy (sans butter )35 Source
Animal 59.6%
Source
74.6% 1- .4 _3.1 -'95
195 1717 171 10.0

Butter & Lard 34.2
35.3
35.0


33.0
33.5
Meat, Poultry, Fish












1947-9 1957-9 1967 1971 1972 1973












FAT--Some Main Sources, FAT CONTENT--Some Main a LEa- tty ids
US* (aoorox.1970)1 "r, -r' ,.
Saturated ,Polyunsatura- Food
Content (%) _t4d content %.
Coconut Oil 90-93
Palm Kernel 85
Palm Oil 57
SLamb 56
Milk 4." Milk 55 3 Tallow 51-55
Butter 48-68
Beef 45-58 Linoleic Acid
Pork & Lard 14.7 P& L 38 6 Lard 38-50
Chicken 32 Fat or Oil %
1 CCotton Seed il 25-26 Coconut 2
Beef&Vea 12.3 B &V 48 2 Peanut Oil 18-21 Butter Fat 2
Fish 15-25
Fish 15-25 Cocoa Butter 2
S- Olive Oil 14-15 Cocoa Butter 2
Salad Corn Oil 14 Lard 14
oil & D Soybean Oil 13-14 Olive 15
S8.9 7 & 57 Sunflower Oil 11 Peanut 31
Safflower Oil 10 Sesame 43
I JoLstIrol Soybean 50
Marga8.3 26 9 Contents, someest- Cottonseed 54 Cn
in 8.3 24 main foods /100 Corn 57

L. L Eggs 470 Sunflower 68
Lun. Lunch. Safflower 75
mts.J 5.4 meat 43 J4 Liver 250
Butter 240
r Sht- Meat (untrim- 100
ing 4.4 Sh.23 med)
Lean Meat 90
SE (trimmed)
3.7 E 32 18 Fultry 75
-... 28 Fish | 70
2.6 nuts & peanuts 18 N P J28 Lard 56
I I I i 1 II
5 10 15 20 25 I

*List is partial, representing Saturated fat in- IHuman body cannot synthesize
84.6% of total fat intake, but cludes lauric, the 2 pdyunsaturated acids
highlights principal dietary myristic, and from available protein or
sources of fat. palmistic e li acids arbohdrate inoleic acid
which increase linolenic acid. Linoleic acid
cholesterol; it is decreases cholesterol,is deemed
generally recom-I essential but rqmt, is uncertain;
mended that con- suggested consumption is 4% o
sumption be re- total calories consumed.
duced.






59

INCREASED CONSUMPTION OF FAT AND EXTRA CALORIES
The only basic diet component for which consumption has been
increasing is fat. Dietary intake of fat (as a percent of total calories
consumed) is up over 10 percent within the last 60 years alone, as
indicated in the chart on p. 56.
Nutrient fat consumed is dominated by animal-source fats-which
tend to be more highly saturated and contain more cholesterol than
plant-source fats. Quantitative intake of animal fats has declined-
from 104 grams in 1909-13 down to 93 grams in 1973. However,
animal fat still accounts for nearly two-thirds of total fat consumed.
Plant-source fats and oils have increased some threefold in the
corresponding period-from 21 grams (1909-13) up to 63 grams
(1973).
Fat and possible health hazards
Consumption levels of fat have risen to the point where they may
pose possible health hazards, particularly if the trend continues
upward. (See chart on p. 57.)
Increasingly, professional medical organizations specializing in
particular diseases, especially diseases of the heart, have stressed the
need to avoid foods high in fat. The American Heart Association
indicts foods high in saturated fats (butter; cream and cream substi-
tutes; yolk of egg; cheese; chocolate; coconut oil) and suggests persons
on fat-controlled, low cholesterol diets should avoid them. The next
chart details which foods make up fat consumption and further high-
lights foods highest in saturated/polyunsaturated fatty acid content,
cholesterol, and linoleic acid.
Fat consumption trends
The body must have fat. About that there is little question. Main
debate rages around the controversial question of how much and what
kinds. As a general rule of thumb, 25-35 percent of total calories from
fat-all sources-is suggested. Recommendations in 1970 from the
Inter-Society Commission for Heart Disease Resources 5 and endorsed
by the American Heart Association 6 called for a substantial reduc-
tion of dietary saturated fats-to less than 10 percent of calories-and
an overall limit for fat of 35 percent of total calories. Still another
recommendation calls for a minimum for fat consumption of not less
than 20-25 percent of total caloric intake.7
If excessive diet fat concerns an individual, foods high in fat con-
tent are likely to experience declining demand. The percent of fat in
typical foods varies all the way from 100 percent down to zero:
6 Report of the Inter-Society Commission for Heart Disease Resources, "Primary Preven-
tion of the Artherosclerotic Diseases." Circulation 42 : A-55, 1970.
6 American Heart Association: Diet and Coronary Heart Disease, statement of the
Committee on Nutrition. 1973.
SLenna F. Cooper, Edith M. Barber, Helen S. Mitchell & Henderika J. Rynbergen,
Nutrition in Health and Disease, 13th ed. (Philadelphia, J. B. Lippincott Co., 1958), p. 29.








78-885 0 76 5






GOI
60

The Percentage of Fat in Some Typical Foods

Fat The Foods

Per cent
between lard
100-91 salad and cooking oils
vegetable fats
butter
90-81 fat salt pork
margarine

80-71 mayonnaise
pecans
70-61 walnuts

60-51 bacon
60-51
baking chocolate
50-41 peanuts
peanut butter
Cheddar cheese egg yolk potato chips
40-31 chocolate bar heavy cream salad dressing
coconut pork chop
beef pattie sirloin steak
30-21 frankfurter
ham
apple pie doughnut lamb roast veal cutlet
20-11 avocado egg luncheon meats
chocolate cake French fried potatoes
apple bread cottage cheese milk
10-0 baked potato carrot halibut oatmeal
beef liver chicken ice cream salmon
none sugars and sirups

Adapted from values in Composition of Foods-Raw, Processed, Prepared. U.S. Dept. Agr.,
Agr. Handbook 8, revised 1963.

Public awareness of information on fats in foods is likely to depress
consumption of foods high in saturated fats.
FDA action is pending on a proposal specifying fat labeling. New
disclosure requirements and increasing consumer interest in continued
optimum health will make the public increasingly aware of the role
fats play in the diet. As a result, decreasing use of highly saturated
palm, palm nut, and coconut oils is likely, while those with the least
amount of saturated fat-safflower and sunflower oil-may be in-
creased significantly.






61

Cholesterol
Enormous controversy has been centered around the role of
cholesterol in the human diet. Half-truths abound. Exaggerations and
myths have been perpetuated to the extent that much misunderstand-
ing surrounds the role cholesterol plays in the diet.
Synthesis of cholesterol by the body occurs at the rate of 2,000-
3,000 mgs. per day according to reported calculations by one research
team.8 Daily cholesterol intake from foods has ranged between 509-556
mg. for more than the last half century:
Cholesterol
Years: (mg.)
1909 to 1913 ------------------------ 509
1925 to 1929------------------------------------ 524
1935 to 1939 ------------------------------- 493
1947 to 1949 ------ -----------------------577
1957 to 1959----- -------------------578
1965 --------------------------------------------------- 540
1970 ---------------------------------------- 556
Because of the relatively low daily dietary amounts, dietary choles-
terol has been considered fairly inconsequential.9 Some researchers feel
that elimination of cholesterol-containing foods from the diet may
stimulate the body's production of cholesterol.
Another research team estimated average adult daily consumption
between 500-800 mg. of cholesterol and that the body synthesis of
cholesterol approaches 1500 mg. daily.10
Numerous studies link diets high in fats (especially saturated fats)
to high serum cholesterol levels and high serum cholesterol levels to
coronary heart disease. Nonetheless, these contradictory views con-
tinually have been put forward. A diversity of opinion still persists.
The controversies surrounding the appopriate role of cholesterol in
the diet are highly technical, wide-ranging and far from being con-
clusively settled.
While controversies, such as those mentioned, rage, numerous medi-
cal authorities and organizations have spoken out, suggesting maxi-
mum cholesterol intake levels. The Food and Nutrition Committee of
the American Health Foundation in 1970 recommended a daily maxi-
mum intake of 300 mg.-the Inter-Society Commission for Heart
Disease Resources and American Heart Association concur.
Consumers-whose awareness of the issues at stake should not be
underestimated-have responded. Concerned by the probable connec-
tion between high intake levels of saturated (animal) fat/cholesterol/
heart disease/atherosclerosis, per capita consumption has declined for
animal products high in cholesterol/saturated fatty acid.
8 Eva D. Wilson, Katherine H. Fisher & Mary E. Fuqua, Principles of Nutrition, 2d ed.
(New York: John Wiley & Sons, 1965), p. 49.
SThid., n. 49.
10 R. I. Hodges & W. A. Krehl, 1963. "Cholesterol as Related to Atherosclerosis-A Review
of the Literature," July 1961 to July 1962, Cereal Institute Inc., Chicago, Ill., p. 8.






62

Illustrative of the point are the following reductions in per capita
consumption:
-eggs (decline from 386 in 1950 to 278 eggs in 1975);
-milk (consumption declined from 322 pounds in 1964 down to 292
in 1975);
-butter (consumption declined from 7.5 pounds in 1964 down to 4.7
pounds in 1975).11
Government efforts to reduce dietary fat
The Swedish government has been especially concerned over sub-
stantial increases of fat consumption in their national diet. Calories
from fat rose from a low during 1876-85 of 19 percent total calories
to a high of 42 percent (nearly one-half of all calories consumed) in
1965.
Among corrective measures undertaken to reverse this dietary trend
has been the requirement to explicitly disclose fat content of products
high in fat. Starting in 1973 with butter and margarine, cooking fats
and oils, cheeses, and milk, the disclosure was extended to sausage-type
meats and to ice cream in 1974.
Disclosure is in terms of grams of fat per hundred grams-or, effec-
tively, a percentage disclosure. The disclosure is not only for saturated
fats for polyunsaturated fat as well. Linoleic acid, in some cases, also
must be disclosed.
In practice, many packages I personally inspected also included
monosaturated fat content. Not infrequently labels also indicated the
source of the fat or oil. This disclosure went beyond mere indication of
animal or vegetable fat, often indicating the particular source (e.g.,
corn oil, safflower oil, etc.). As well as labeling the amount of linoleic
acid, some packages also listed cholesterol content.
Such explicit (even precise) disclosure is not expected to be under-
stood immediately by the general public. However, it is felt that over
a period of time, an understanding will develop, and this kind of infor-
mation can then be translated into a meaningful tool for better dietary
choices.
CALORIES FROM ALCOHOL CONSUMPTION
High and steadily increasing levels of alcohol consumption account
for a large number of calories in the diet. Alcohol, in recent years, has
accounted for some 7 percent of total calories in the diet, or some 225
calories per capita/per day. Alcohol has no redeeming virtues from a
nutritional standpoint.
Alcohol and cirrhosis of liver
Cirrhosis today is a leading killer disease in America, ranking as a
cause of death:
-3rd for persons ages 25-34 (surpassed only by cancer and heart
disease);
-4th for persons ages 55-64.
National Food Situation (Washington, D.C.: Economic Research Service, USDA, 1975).






63


PERCENT CALORIES IN TOTAL DIET FROM ALCOHOL
Percent
7
6

5

1 I
1950 1960 1970 Year
1955 1965 1972


CALORIES FROM ALCOHOL
Calories
250
225
200

175


1950 1 19 O Year
1955 1965 1972

Alcohol consumption and cirrhosis mortality
The evidence is not conclusive as to the precise role increased con-
sumption of alcohol plays in the increasing incidence of cirrhosis of
the liver. While some doubts are raised with respect to the appropriate-
ness of the correlation between cirrhosis of the liver and high levels of
alcohol consumption, there is a broad consensus of opinion linking the
two.
A most dramatic graphic presentation highlighting the correlation
between alcohol consumption (all forms-beer, wine, distilled spirits)
and cirrhosis of the liver mortality follows:
At the turn of the century, State and local prohibition was well
underway. By 1908 a virtual "tidal wave" of State and local prohibi-
tion laws had been enacted. Consumption of alcohol beverages of all
kinds dropped precipitously during this period.
The temperance movement, already having succeeded in imposing
"dry" laws in a substantial majority of the States, moved toward na-
tional prohibition which became the law of the land from 1920 to 1933.
Mortality rates for cirrhosis plummeted during this "dry" period-
the cirrhosis morbidity rate per 100,000 during Prohibition dropped to
one-half the rate it had been in 1910, reaching an all-time low for this
century.
Following the repeal of the prohibition amendment, the rate of
alcohol consumption began climbing and has been steadily rising ever







64

ALCOHOL CONSUMPTION & CIRRHOSIS MORTALITY


BEER CONSUMPTION, U.S., PER CAPITA Gallons
r 30
INational I 5 ".5
Aa i ,Prohibition j

1

0 1 1 5
I
'^O ~9* W f".N-h^ 'U^t39 l' ^ 15 Hui Iw ( '^ rttr Slr/ E__

1908 "Tidal Wave" of
State and local prohibition
WINE CONSUMPTION, U.S., PER CAPITA Gallons

National I ,,
IProhibition
I o

.47 .53 51 it
Io 110 ,3 1 o

It jar rfq Io-mj tTin 19:; t"D t # s ttro Atts5 0I 7

1908 "Tidal Wave" of
State and local prohibition

DISTILLED SPIRITS CONSUMPTION,U.S. PER CAPITA Gallons

INational I t 3


I 1 t


rho. #Iw 0 14 tr 5 Jj- 0 40 of- 6 #by


1908 "Tidal Wave" of
State and local prohibition
Death
CIRRHOSIS OF LIVER, U.S. DEATH RATE per 1OOM Rate

5 33 INational I
IProhibition -5t,
\ l 910




I140 0IO I 1 0q iqtO 19&0 j o
o- 19 I ^J^ ^

1908 fBy 1908 many Southern State and local governments already
"Tidal Wave" of State and had enacted prohibition laws--also: Ill., Mich., Colo.,
local prohibition Nebr., Ind., Ohio, Wisc., and Minn.

since. Closely tracking this increase in per capita consumption of al-
cohol is the incidence of cirrhosis of the liver which has reached an
all-time high for the 20th century. The rate of morbidity per 100,000
population for cirrhosis of the liver currently is running at a rate in
excess of 200 percent the rate during Prohibition.







65

From the standpoints of nutrition, national health, and excess calo-
ries/obesity, moderation of alcohol consumption is likely. Lowered
levels of consumption means less demand for agricultural raw mate-
rials from which such beverages are derived.

SUCROSE CONSUMPTION-STATIC FOR 50 YEARS, NOW DECLINING

Another controversial carbohydrate is sucrose. There is a wide-
spread misapprehension that sugar consumption has been increasing
dramatically in recent years. Two facts are worthy of note. First, sugar
consumption over the past half-century has been stabilized at about
100 pounds per capita per year. Second, the sharp drop in per capita
consumption just within the last few years which came about largely
as a result of higher prices and the drawing down of inventories on
hand. Historical consumption patterns for sucrose (cane and beet
sugar), as well as total sweeteners, are depicted in the following
charts.


SUGAR(Sucrose Only -- Cane & Beet), Per Capita, Annual Consumption, U.S.

Pounds
Consumed








109 6 -110

-105
104.3
100.6 102.5 100
7.8
96.3 964 95

90
*87.6 (est.)


S80
7785.56 / 85
75
75.4 73.9


1910 1920 1930 190 1950 | 1960 1970
1915 1925 1935 1945 1955 1965 1975 Year







66


SWEETENERS (All Sources), Per Capita, Annual Consumption, U.S.

Pounds
Consumed




128.7 -130
125.1
125

121.7
-120
117.8
117.1
113.4 7
112.1 113.9 *113.2 (est.)
111.7 110

-105
104.3

100

98.6 95

.-91.5 90
89.9

85



1910 1920 1930 1940 1950 960 1 970
1915 1925 1935 1945 1955 1965 1975 Year




FIBER/ROUGHAGE/BULK

Voluminous medical articles and books-some 600 of them published
by 500 prominent medical authorities 12-voice concern over the lack of
dietary roughage and warn of adverse implications involving a variety
of health problems. Popular journals have picked up the issue and have
substantially increased public awareness of possible links between fiber
deficiency and the following diseases/disorders:
-cancer of the colon and rectum (second largest cancer killer behind
lung cancer);
-heart disease;
-gastrointestinal disorders;
-varicose veins (afflicts 1 out of 10 persons);
-thrombosis (and pulmonary embolism);
-hiatus hernia;
-hemorrhoids;

1 David Reuben, op. cit., pp. 21, 81.






67

-polyps of the colon (afflicts 1 out of every 5 adults);
-peptic ulcer;
-gallstones;
-diabetes;
-constipation;
-phlebitis;
-diverticulitis/diverticulosis (afflicts 40 percent over age 40; 70
percent over age 70).
Africans who consume large amounts of carbohydrates and fiber
experience very low rates of the aforementioned afflictions. Dietary
habits, notably the high consumption of fiber, are credited with this
fact.
Widely claimed benefits of a high-fiber diet include:
-the increased excretion of cholesterol from the body;
-a reduction in the amount of cholesterol secreted by the liver;
-a lowering of the triglycerides in human blood.
Careful scientific evaluation and judgment as to the merit of these
claims is needed to provide direction to the consuming public.
Fiber consumption level
Fiber consumption of 25 grams (approximately 1 ounce) daily has
been indicated for African villagers, and a daily dietary intake of 24
grams of fiber has been recommended for Americans.13 Another au-
thority suggests the daily need for fiber at only 4-7 milligrams.14
Current U.S. consumption of crude fiber is estimated at 4 grams per
capita per day, a decline from the 6 grams daily per capita consump-
tion level of 1909-13.15,16 The reduction is attributed primarily to lower
consumption of grain and potatoes.

Crude fiber and food lipids available per capita per day
in the United States food supply

Fatty acids
Total
nutrient Oleic Linoleic Choles- Crude
fat Saturated acid acid terol fiber
Years (g) (g) (g) (g) (mg) (g)

1909-1913 ............ --------.........------ 125 50.3 51.5 10.7 509 6.1
1925-1929... ............._.-------------. 135 53.3 55.2 12.5 524 5.8
1935-1939....---........--------- ...----- -..133 52.9 54.5 12.7 493 5.5
1947-1949...------------.-------------- 141 54.4 58.0 14.8 577 4.9
1957-1959..- -------------- .----------- 143 54.7 58.2 16.6 578 4.4
1965........----.......... .....- -........-. 145 53.9 58.8 19.1 540 4.2
1970......----------............._ -......-. 157 55.9 63.1 23.3 556 4.2
1974--......................... -----------158 56.0 62.9 24.2 _---_-- 4.3


3 Ibid., p. 82.
14 Wilson et al., op. cit., p. 27.
'5 Friend and Martson, "Nutritional Review" (Washington, D.C.: USDA ARS, Consumer
& Food Economic Institute, January 1975).
18 William A. Gortner, "Nutrition in the United States, 1970 to 1974," Cancer Research,
Vol. 35, November 1975.






68

Despite the doubling of per capita fruit and vegetable consumption
over nearly 60 years, dietary fiber obtained from these sources has
probably declined. Per capita consumption of fruits and vegetables in
1909 stood at 146 pounds and increased to 273 pounds by 1970. Peeling,
boiling, canning and dehydrating substantially depleted the available
fiber.
Changing sources of fiber
Current interest in dietary fiber has encouraged a 20 percent increase
in sales of ready-to-eat bran cereals during the last year, according to
A. C. Nielson Company. Crude fiber content in cereal products varies
substantially:

The amount of crude fiber in various grain foods*

Approximate quantity of crude fiber
Grams per
Food Percent 1 oz. serving
High bran icontent cereals : 7.5 2.0

40% bran cereals 3.5 1.0
Raisin bran cereals 2.5 0.7

Wheat germ 2.0 0.6

Whole wheat cereals 1.8 0.5
(shredded, flaked or formed)
Hot whole wheat cereals 1.8 0.5

Hot oat cereals 1.1 0.3

Whole wheat bread 1.6 0.4**


*Values for breakfast cereals furnished by
manufacturers; bread values from Composition
of Foods, USDA, Handbook #8, 1963.
**Per slice







69


PROTEIN OVERKILL

Protein consumption has been amazingly constant over the years
as indicated in the following chart:

PROTEIN --% OF CALORIES BY SOURCE, U.S.



Total Calories









101 gr.
1972 daily per capita
consumption



PROTEIN
i, IIt"OVERKILL"
i i r56 gr.
Rcmnd. daily dietary
P TEIN 0 I allowance (RDA) for
'1 males,23-50yrs.,
69 in.154 Ibs.,over-
kill of 45 gr.
46 gr.
RDA for females,
23-50 yrs. ,64in.
128 lbs. ,overkill of
55 gr.
Protein Source % Protein % Protein Protein Source
1957-8 (Avg.) % Total % Total 1972
Ca___l____lri Calorie
Meat,poultry 35.7 4.0 Meat, poultry
fish 18.2 20.8 fish
Dairy Prod. 24.5 22.2 Dairy Prod.(ex-
(exclud.butter) 13.5 11.3 cluding butter)
Flour,cereal 19.9 17.7 Flour,cereal
prod. 21.4 19.5 prod.
Eggs 6.8 57 Eggs
2.6 ow 2.2







I I 1 I I I I I
1911 1927 1937 1949 1958 1965 1971 1972


Note that the RDA for adult males is only 56 grams of protein
per day. USDA statistics reveal an availability for consumption of
100-110 grams of protein per capita per day. This amounts to a "pro-
tein overkill" of some 50 percent. And, protein is the most expensive
nutrient in our diets.






70

Protein sufficiency
Protein intake, calculated on a "disappearance" basis, already ex-
ceeds per capita daily intake requirements by a factor of nearly 2x.
Actual nutrient availability or human assimilation is frustrated in a
number of ways:
1. Protein quality, a measure of the effectiveness with which the
body is able to absorb or utilize the available protein, is largely
regulated by the proper balance of essential or "limiting" amino
acids. Deficiences in the balance of these amino acids substan-
tially reduces the protein quality. Efforts are underway along
two fronts to improve the protein quality: genetically (by alter-
ing the very cell structure of seeds used to grow basic protein
foods), and synthetically (by isolating missing amino acids or
synthesizing them in the laboratory for later enrichment of pro-
tein deficient foods);
2. Disappearance data is a gross measurement and does not consider
losses occuring prior to actual consumption. Based upon retail
weight, substantial losses of moisture (and deterioration of nu-
trients, including protein itself) along the distribution chain as
well as in the home are ignored. Spoilage, waste, trimmings, and
scrap feeding of household pets also are not factored into dis-
appearance data. Perhaps most important, home preparation
methods are not considered-preparation not only affects the
actual amounts finally consumed but heat sensitive nutrients may
also be destroyed by inadequate or improper home preparation.
Protein consumption increases per capita are unlikely, and even-
tually may decline; sources of proteins will gravitate more toward
non-animal sources; and more complete (amino acid balanced) pro-
teins will be sought.

NUTRITION TRENDS-PAST, PRESENT, AND FUTURE
Nutrition concerns hitherto have centered mainly on nutrition de-
ficiency diseases whose impacts were clearly visible and the problem
of simply getting enough calories to avoid hunger or starvation.
Present concerns are focused mainly on the next level of food com-
ponents-carbohydrate, protein, and fat. New roles for vitamins and
minerals are continually being determined. The impact of foods sup-
posed deleterious to the diet are being carefully considered.
Turning the microscope down still one stage further, we are able
to discern some of the increasingly sophisticated nutrition problems.
These matters are highly technical and generally go far beyond pres-
ent levels of public understanding. Diet adequacy in meeting human
needs increasingly will be in the realm of the laboratory specialist.
Increasingly, future concerns will be focused down to the biochemical
and to the level of cellular metabolism. Super-abundance brings along
with it an embarassment of riches-increasingly, attention will be
focused on over-nutrition as sharply contrasted with the earlier prob-
lems of under-nutrition.







71


[Current and impending nutrition concerns are depicted in the fol-
lowing chart:]



NUTRITION CONCERNS -- INCREASINGLY PARTICULARISTIC


tarches dible
ibe
Carbohydrates- nedible
S CSugars ono-saccharide
SAlcohol(beerwine,spirits) i-saccharide

_____ IPlant
I ____Amino Acid
Calories Protein Balance (PER's)
;<< nimal

aturated
isile Monosaturated
Fats
nvisible P olyunsaturated
(linoleic acid)
Cholesterol
1 I


SI /Microtrace
Vitamins & 8 Essentials Constituents
Minerals (nutrient loads) I 'Temperature/Time
S Degradation
Nutrition Deficienc I Functional or
Diseases Colors Cosmetic
Additives Metabolites,
lavors Synergisms
Direct or Indirect

I I


Past Present Future
(Previous Problems) (Current Focus) (Emerging Concerns)
1 I













THE AWARENESS OF TODAY'S CONSIUER
(By Nancy Harvey Steorts, Special Assistant to the Secretary of Agriculture
for Consumer Affairs, USDA)


In recent years, consumers have been faced with rapidly changing
life-styles. Coupled with the desire to live a more comfortable way
of life amid this change, they have become more motivated, better
prepared, and more attuned to the complexities of the society in which
they live.
Consequently. today's consumers are taking more of an interest in
the shopping experience.
They are no longer indifferent to ingredients. Today's consumers
have become label readers.
Faced. as we all are. with economic uncertainty, consumers are now
more economically aware than ever before. Consumers have the will-
ingness to buy, but they also have a desire to save.
They are more quality conscious. Today's consumers are more aware
of nutritional value, wanting the highest quality for their food dollar.
Just as did their forebearers for generations back, today's consum-
ers want the best possible product for the best possible price.
At the request of the President, the Federal Departments and
Agencies have prepared Consumer Representation Plans which will
make the Government more effective and responsive to the public's
needs and wants.
The Department of Agriculture's plan outlines specific steps each
agency will take to insure consumer involvement when it is contem-
plating an action having a significant impact on consumers. The plan
takes into consideration the following:
1. Is there a history of consumer interest in the issue?
2. Are there adverse social and economic impacts?
3. Are these impacts long-term or short-term?
4. Are the consequences irreversible or irretrievable ?
5. Is there potential for widespread controversy?
Agency administrators will seek consumer input at an early stage
in connection with any proposal involving a major change in agency
policy, when the issues are likely to have a significant impact on
consumers.
When proposals are published in the Federal Register, and such
proposals have been identified as having significant impact on con-
sumers, an extended comment period will be utilized to provide an
adequate opportunity for consumer input.
When any such proposal is published in the Federal Register, it
will contain a "consumer summary," a short explanation of the pro-
posal in easy-to-understand language spelling out its major points
and its possible impact on consumers. Announcement of final Depart-
(72)





73

mental action in the Federal Register on such proposal will include
a concise statement evaluating the viewpoints expressed by consumers.
In addition, the plan calls for the establishment of two committees
for consumer matters:
A Consumer Responsiveness Committee, comprised of high-
ranking department officials that will advise the Secretary on
actions and activities of the Department as they relate to consumer
interest and participation; and
A National Consumer Advisory Committee, comprised of con-
sumer representatives, which will meet regularly and advise the
Secretary and Department officials regarding significant policy
matters of interest to consumers as well as the overall effectiveness
i of the Department's consumer efforts.
Other parts of the plan call for consumer representation on all other
national advisory committees whose composition is not prescribed by
law and which deal with matters having consumer impact; improved
complaint handling; and an accountability process to assure that de-
partment officials are adhering to the plan.
In addition, the role of the Special Assistant to the Secretary for
Consumer Affairs will be strengthened and the plan provides a charter
for this position.
Consumer coordinators have been appointed in each major depart-
mental agency. These people will advise the agency administrators on
consumer matters and reflect consumer viewpoints on significant
agency issues.
I think you can see that there is an obvious commitment from the
Department of Agriculture and the Federal Government to be more
responsive to the increase in consumer demands-the voice of the con-
sumer will no longer be met with an echo.
Consumers are concerned about all aspects of the marketing chain-
from the farm to the grocer's shelves-and rightfully so. They are
seeking better information to help them make the right choices for
their needs and desires.
At the point of purchase, one of the best information tools is the label
on the product. Although most food products comply with current
Federal packaging and labeling laws and regulations, improvements
are needed so that labels tell consumers what they need to know to com-
pare and select those products best suited for them.
Ninety percent of the 1,400 respondents to a study conducted by
USDA recently, regardless of age, education, or employment status,
said price and open dates on labels were extremely useful. Well over
half wanted all ingredient information. One half of the shoppers also
indicated that they always, or almost always, read the ingredient on
the label the first time they buy the product. Some members of house-
holds, however, had health problems and said they look for special
information on the labels of food and beverage products when
shopping.
Food processors are now required to put specific nutrition infor-
mation on the labels of all fortified foods and all food for which a
nutrition claim is made. More than half of the respondents said
that nutrition information on food packaging labels was useful when
shopping.






74

An interesting note, however, is that the population segments that
need this information most were less likely to find it useful-those
that had less education, those that had lower total family income, and
those that were elderly. This could be because the information is too
complex or because it is too difficult to read.
Many consumers write in with the complaint that much of the pres-
ent label information is far outside their normal vocabulary. This
information must be made more intelligible and more easily accessible
to shoppers so that they may wisely evaluate what they are buying
and consuming.
We are calling upon both government and industry to realize this
consumer need for easier-to-understand food labeling. Food proces-
sors should share in the burden of demonstrating to consumers what
really is inside a food package, especially where food safety or food
additives are concerned.
I believe there should be a uniform system developed by govern-
ment, industry, and even consumers themselves whereby consumers
can quickly identify what they are buying and eating.
There seems to be a definite reaction by consumers to the changing
pace of our every day lives. Consumers are more nutritionally aware
today and are demanding food of high nutritional quality.
As a way to get an up-to-date measurement of changing consumer
trends and attitudes relating to food, the Department of Agriculture's
Economic Research Service has developed a survey system by which
consumers are being queried periodically about a number of issues.
The first phase of this survey was conducted last spring, and cov-
ered such topics as food safety, label information, home gardening
and canning, food shopping patterns, open-dating, unit pricing, away-
from-home eating, and household energy use.
The survey shows that many consumers are becoming more budget
conscious when they shop for food. Shoppers are now checking news-
paper ads more frequently for "specials," saving and using more cou-
pons, and buying more food in volume. Some consumers are making
fewer trips to food stores, mainly to save gasoline. Others are now
preparing food from "scratch" more often, mostly to save money.
The study also indicates that consumers are getting more food
safety information from newspapers, television, and food labels.
There has been a great deal of media coverage of home gardening,
but not much in terms of actual statistics. We found there has been
a slight but steady increase in the number of households with fruit
and vegetable home gardens over the past two years. Forty-three per-
cent of the households planted a garden in 1974, 46 percent in 1975,
and at the time of the survey, 48 percent either had already planted
or intended to plant a. garden in 1976. This would suggest that the
interest in home gardening generated three or four years ago amid
fast rising food prices may be firmly established and not necessarily
transitory.
These same households have been or will now be home-canning their
harvests. Our study found that almost 85 percent of those who did
home-canning last year planned to preserve fruits and vegetables this
year.






75

The survey also found that in a little over half of the households
at least one member of the household has effected a change in diet,
either because of a present health problem, or because of a desire to
prevent a health problem.
Some of the foods that these changing dieters are eating more of
are low-fat milk and cheese, fish, poultry, fresh fruits and fresh vege-
tables. There is now a shift. toward salad vegetables, especially. Con-
sumers are eating more green peppers, lettuce, raw broccoli, cauli-
flower and mushrooms.
Some of the foods changing dieters are eating less of are sweets and
snacks, fried foods, soft drinks, sugar, ice cream and fatty red meats.
The study also showed that in 73 percent of the households sam-
pled, some member of the household purchased food from a fast-food
restaurant during 1975-at least twice a month.
Consumer response in the marketplace is mixed. In the last decade,
sales of frozen TV dinners increased by 75 percent and are now over
one-half billion dollars. Frozen vegetable use has continued to grow
as well. Last year, consumers used more than 21 pounds per person,
compared with 18 pounds in 1965.
At the same time, we are also witnessing a return to basics. Con-
sumers are preparing more food from "scratch" both for nutritional
and economic reasons. More consumers are growing their own fresh
fruits and vegetables as well as canning and freezing them.
Data from surveys such as ours serve as input into potential con-
sumer legislation. We found, for example, that uniform names and
descriptions of meat cuts in stores were considered to be very useful
by 70 percent of the shoppers. Consumers' opinions about usefulness
of various types of information can change over time, and we plan to
monitor for such changes in the future.
The second phase of this survey will cover such topics as large-
volume beef purchasing practices, purchase of and satisfaction with
vegetable protein analogs, and types of foods prepared from "scratch."
Although the main emphasis in this particular survey has been on
food, fiber products and related services will no doubt be examined
in the months ahead.
Consumers need to be as concerned about what they purchase to
eat away from home as they are about what they buy to eat at home.
At least one out of every three meals is eaten away from home.
Now that diining out is becoming more a way of life, consumers are as
interested in the restaurant where they eat as they are in the super-
market where they shop.
In my dealings with consumers, I have found that the greatest
complaint they have regarding restaurants is that they tend to serve
too much food for the average eater. Leftover meat, vegetables, bread
and butter are simply tossed away when not eaten. Many consumers feel
guilty leaving leftovers or asking for a doggie bag. Such waste. at
a time when the world is concerned about a sufficient food supply,
cannot be justified.
SWhy then, shouldn't restaurants offer patrons a variety of portion
sizes with appropriate adjustments in price ? A number of restaurants
around the country are doing just this, and very successfully. I might




78-885 0- 76 6






76

add. They find that by offering a choice of portion there is not only
less waste, but also less cost. They are also finding that many people
who were reluctant to dine out before are now doing so because of the
reduced portions and the accompanying reduced prices.
One of the first places to accept my portion choice program was
the Camelback Inn at Scottsdale, Arizona. The Inn's managers report
that not only has it enabled them to eliminate much of the needless
waste of food but it has also enhanced their profit picture by providing
clearer guidelines for the purchase and preparation of food.
Billy Martin's Carriage House, and the Sir Walter Raleigh's Inns,
both in the Washington area, have introduced smaller portions for
smaller prices on several entrees. Both report that the smaller sizes
outsell the large ones by two to one.
Just last month, the Sheraton Corporation initiated this program
in both of their Washington, D.C. hotel restaurants. The response was
overwhelmingly in favor of smaller portions.
While only 19 percent of those who ordered lobster tails wanted
two of them for $13.95, 81 percent preferred one tail for $8.25.
Sixteen percent ordered a 9-ounce filet mignon for $10.95, but 84
percent chose a 5-ounce filet for $6.95.
Thirty-eight percent selected two lamb chops for $9.95, while 62
percent had one chop for $6.50.
The tabulations also showed that while more of the smaller portions
were being sold. tlhe sale of appetizers and desserts increased. This
provides a more balanced diet for diners with less cost, and less waste
to the restaurant, with greater satisfaction for both.
Nord Schwiebert, Vice President of the Washington Sheraton
Hotels, feels that if there is a very definite consumer demand ". .. we
have to provide it without looking at the bottom line."
The Sheraton Corporation will now try the experiment for three
more months. If it is as successful as it has been, then the choice of
portion sizes will be expanded to their hotels nationally, and possibly
even internationally.
As you can see, a choice of portion size fits in with what consumers
want today. Now that more restaurants are moving away from tradi-
tion and offering a choice of regular portions at regular prices plus
smaller portions at lower prices, it looks like the doggie bag may be on
the way out. And the pleasant results are that prices can be reduced,
waste can be eliminated, and business will increase as more customers
find they can afford to dine out more often because of reduced prices.
I think it is evident that both industry and Government are now
facing the very important challenge of meeting the demands and
desires of consumers-the challenge of allowing consumers to take
part in the decisionmaking processes, and the challenge of providing
them with wholesome and reasonably priced food products that are
more versatile, easier to prepare, and higher in nutritional value.
I am convinced that these goals can be met with the complete co-
operation of all of us involved-a cooperative effort which is finally
including consumer input.
May I also, in closing, offer some tips that should be of help to
today's consumers ?







77

"TIPS~ TO STRENGTHEN YOUR CONSUMER VOICE
1. Be an active member of a local consumer group and/or civic
organization, concerned with consumer issues.
2. Don't be intimidated! Speak up and give your point of view
based on facts.
3. Actively support your county/State consumer office.
4. Let the appropriate consumer representative at the Federal,
State, or local level know your views on specific issues.
5. Keep well informed of appropriate government proposals (Fed-
eral, State, and local) affecting you the consumer.
6. Write your news media and commend them for good coverage
of consumer issues.
7. Support and write industries or businesses who implement sound
consumer policy and procedures-be critical of those who are not
consumer-responsive.
8. Use consumer power by using your consumer voice effectively
both in the marketplace as well as in government.










































































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FARM INPUT SITUATION AND OUTLOOK, 1976-77
(By Robert D. Reinsel, Program Leader, Economic Research Service, USDA)


In contrast to 1973 and 1974, the 1976-77 outlook for most farm
inputs holds little suspense, excitement, or attention. The major story
is that: (1) manufacturers in general have increased their production
capacity, (2) farmers have increased their purchases, (3) prices for
most inputs, with the exception of fertilizer, are rising, but rising
more slowly. We are back to business as usual. Nevertheless, there are
some major points that farmers must consider. These include: (1) the
rising cost of farm machinery, (2) higher prices for fuel, (3) the
possible loss of some pesticides, and (4) the uncertain situation with
respect to nitrogen fertilizer.
While no major shocks are anticipated in the input markets, any
significant input risk, when added to the risks in developing com-
modity price expectations, become major factors in decisionmaking.
As of October 15, 1976, the index of prices received by farmers was
at 178, 17 points or 9 percent below a year earlier. However, prices paid
by farmers for production items, interest, taxes, and wage rates aver-
aged 5 percent higher. These higher prices and continuing strong
demand pushed production expenses higher. For 1976, total farm pro-
duction expenditures may be up about 5 percent from 1975.
Realized net farm income for the year may average about the same
as last year. With this background, I'll turn to specific inputs and
highlight some of the major points that could alter the outlook for
1977.
FARM MACHINERY
Farm machinery demand in 1976 has remained strong. Through
August, 4-wheel drive tractors' sales had increased 16 percent and
sales of all tractors were about even with the previous year.
Combined sales were up a little over 1 percent, while major increases
in cornhead sales placed their cumulative total through August to
nearly 16 percent above the January-August level of 1975. Sales of
forage harvesters and windrowers were also above their year-earlier
levels, while sharp declines in June-August baler sales reversed the
upward trend through May in that market.
Manufacturers' production of farm-type wheel tractors through
July was over 115,000 units, 4.4 percent greater than 1 year earlier.
Shipments through July were over 116,000 units, nearly 2 percent
greater than cumulative January-July shipments in 1975. The overall
rate of farm machinery production through July of this year exceeded
the rate for all of 1975. Inventories of tractors, combines, and hay
balers were above their July 1975, levels, while stocks of forage
harvesters were lower.
(81)






82

September 15 prices paid for tractors and other self-propelled farm
machinery were 10 percent higher than a year earlier and 38 percent
higher than in 1974. While the rate of price increases has slowed
considerably, the rate of increase remains strong relative to other
price indicators.
It seems likely that further price increases, only slightly lower
than those of this year, are in store for 1977 if demand remains strong.
However, with a somewhat less favorable outlook for farm income,
demand could soften and dealers and manufacturers could begin to
accumulate larger inventories which could lead to softening of prices
later in 1977. Nonetheless, lower interest rates on intermediate term
loans could help stimulate demand even with lower crop price and
income expectations.
On balance, 1977 looks like a repeat of 1976 with a slight slowdown
in sales and perhaps a slower rise in prices.

FUEL
While prices of gasoline are up slightly over those paid a year ago,
it is difficult to forecast with any certainty its price movement over
the next several months. The OPEC countries have been advocating
price increases ranging from 0 to 30 percent with 10 to 15 percent
being the most common increase discussed. Until OPEC meets in
December, we can only estimate that 1977 fuel prices might rise 5
to 10 percent over this year's level. Although earlier in the year it
appeared that price and allocation regulations on gasoline would be
removed, no action on the issue has been taken to date.
Price and allocation regulations on No. 2 heating oil, diesel fuel, and
other middle distillates ended June 30, 1976. Price response to this
action is uncertain, but FEA Administrator Zarb assured Congress
that FEA would take action if prices for this winter's heating oil
rose more than 2 cents per gallon. It seems doubtful that diesel prices
will rise by more than 1 or 2 cents per gallon for the remainder of
1976 and early 1977.
LP gas supplies have increased substantially over inventories of a
year ago. The American Petroleum Institute reports that inventories
at the end of September totaled 95.1 million barrels versus 89.4 million
barrels on September 31, 1975. This reflects an increase in inventories
of 61/ percent from a year ago, 20 percent since May of 1976. Farmers
should continue to keep their LP storage facilities at capacity as a
hedge against natural gas shortages and to maintain supplies for crop
drying and other needs throughout the winter.
Natural gas continues to be in short supply with interstate pipelines
projecting curtailments near 30 percent of requirements for the com-
ing winter heating season. The curtailments will be felt most severely
in the East, the Southeast, and the Gulf Coast areas. While, end use
purchasers in those areas served by intrastate pipelines should ex-
perience little difficulty in obtaining supplies, they can expect to pay
higher prices for it than last year. Prices received by producers of
intrastate aas are likely to be in the vicinity of $1.65 per thousand
cubic feet. New contract sales to interstate pipelines are down in 1976,
while average prices paid to interstate producers increased to an aver-






83

age of $1.01 per thousand cubic feet. The higher price in the interstate
market is a reflection of an authorization under the FPC's optional
pricing procedures, which allows producers to seek new contracts at
prices above the national ceiling.
The schedule of price increases for interstate natural gas announced
by the FPC has yet to go into effect. These increases would raise the
regulated price from 52 cents to $1.42 per thousand cubic feet for gas
from wells producing for interstate commerce since January 1, 1975,
and to $1.01 for gas from wells producing since January 1, 1973. At
this point in time deliberations concerning the price rise are still on-
going, and the final decision is pending. Producers may file with the
FPC to be considered for the new rates, but must include in their
application a clause which provides for refunding any excess pay-
ment they receive after a final decision is made as to the legality of
the prices.
PESTICIDES
Pesticide production for 1976 was up about 10 to 15 percent over
last year. Raw material shortages virtually disappeared and the few
reported shortages were attributed to inadequate capacity. Herbicide
and insecticide production increased about 15 percent. Fungicide pro-
duction was close to 1975 levels.
While supplies of pesticides were adequate for 1976, the 15 to 20
percent increase in supplies over last year resulted from a 10 to 15
percent increase in production and substantially greater inventory
carryover. Insecticide supplies were up about 30 percent over last
year. Herbicide supplies were up 15 to 20 percent. Fungicide supplies
were close to year earlier levels.
Domestic demand for pesticides in 1976 was up 5 to 10 percent over
a year ago. The expansion in corn and cotton acres was the most
important factor contributing to increased pesticide use. More wheat
acres also added to their demand.
Crop acreages are the most significant factor affecting levels of
pesticide use. If 1977 acres are comparable to 1976, insecticide and
fungicide use in 1977 should be close to 1976 levels. Herbicide use
should be up because of the general trend to use herbicides more
intensively.
Prospects are good that supplies of agricultural pesticides will be
sufficient for the 1977 crop season at nearly stable prices. Manufac-
turers of agricultural pesticides are adding to capacity and have some
current unused capacity. Manufacturers added about 20 percent to
overall pesticide capacity in 1976. In 1977, they expect to add another
20 percent to herbicide capacity and 5 percent to insecticide capacity.
Regulatory actions are becoming an increasingly important factor
in assessing the use and availability of pesticides. In recent years,
EPA cancellations and suspensions have contributed to significant
changes in the use of certain pesticides. Also, for the near future, there
are regulatory requirements which may have a considerable effect on
f the availability and use of certain pesticides.
d The EPA action to suspend the production of chlordane and hepta-
Schlor for most uses is probably one of the most significant. However,
the final fate of chlordane and heptachlor has not been determined.






84

Cancellation proceedings are now in progress with the possibility of
a final decision by the end of the year.
The other significant regulatory action affecting the near future,
is the final implementation of the Federal Insecticide, Fungicide, and
Rodenticide Act (FIFRA) Amended. All aspects of the new act are
to be in force by October 1977. By this time all private and commercial
applicators must be certified and all pesticides that were registered
before 1972 must be reregistered.
The reregistration of pesticide products adds to the uncertainty
associated with the availability of certain pesticides. The costs asso-
ciated with reregistering pesticide products will encourage pesticide
manufacturers to drop registrations on certain products. Pesticide
producers are unlikely to reregister products with limited uses or
products that are not very profitable. As a result, when the law is
fully implemented, pesticides for very specialized uses or for uses on
minor crops may not be available.
The certification of pesticide applicators will require farmers to
make a decision, whether or not, they want to become certified appli-
cators. If they are now using certain restricted use pesticides, certi-
fication will be necessary. If he chooses to forego certification, he will
be required to use alternative pesticides in his pest control program
or have restricted use pesticides applied by a certified custom
applicator.
The lack of certification has several implications to farmers. The
use of custom applicators to apply pesticides. formerly applied by
farmers, could mean higher costs and less timely applications. The use
of alternative pesticides could also mean higher costs for pesticide
materials and less effectiveness in controlling pests.

FERTILIZER
The fertilizer market has been quite dynamic. Significant move-
ments in prices, quantities produced and consumed, production capaci-
ties, and inventories have been recorded. The direction, magnitude,
and timing of responses of these variables is a strong indication that
supply-demand market forces are operative in fertilizer markets.
Increased demand and short supplies in 1973-74 resulted in high
prices for fertilizers in 1974 and 1975. These high prices, in turn,
acted as a stimulus to further increase production capacity. On the
first of January 1976, domestic anhydrous ammonia capacity totaled
18.8 million tons, up 1.3 million over a year earlier. Also, January 1,
wet process phosphoric acid capacity amounted to 9 million tons of
P20,, up 30 percent from January 1. 1975. This increased capacity and
output, coupled with high inventory levels meant that farmers had
more fertilizer at significantly lower prices in the 1975/76 planting
season.
During the 1975/76 fertilizer year, farmers delayed nurchases of
fertilizers. Fertilizer shipments from July 1975 through the end of
February 1976. in 15 States where monthly data are available, were
off 9 percent from the previous year. Meanwhile. inventories of fertil-
izer materials accumulated at the manufacturing level, and manu-
facturers cut prices in order to move the accumulated inventory. In







85

March and April, shipments increased by 54 and 48 percent over those
for March and April 1975. By mid-April 1976, the index of fertilizer
prices had dropped 19 percent from the 1975 level, and total ship-
ments for the 15 States through the end of June were 16 percent above
the 1975 level.
Data for the 1975/76 crop year show that farmers used record
amounts of fertilizer. Gross tonnage consumed was almost 48.9 mil-
lion tons, about 15 percent higher than comparable 1974/75 totals, and
4 percent above the 1973/74 record of 47.1 million tons. Consumption
of nitrogen was up 20 percent, P205 use increased 16 percent and KO
about 17 percent. Use of nitrogen, P20,, and KO rose 13, 2, and 2
percent above previous record levels.
Increased use seems to be continuing into the 1976/77 fertilizer year.
Monthly reports in the 18 States now reporting reveal that fertilizer
shipments in July and August were up over 18 percent over the pre-
vious year's totals.
Retail fertilizer prices which peaked in April of 1975, are continu-
ing to decline. The average price paid by U.S. farmers for anhydrous
ammonia dropped 5 percent from April 15 to October 15, 1976. Also,
fall prices of concentrated superphosphate and muriate of potash were
down about 8 percent and 2 percent respectively from prices paid dur-
ing the spring planting season.
With fertilizer production capacities generally up from a year ago
and with relatively large inventories still being held at the primary
and intermediate production levels, the general outlook for thp 1976/77
crop year is that fertilizer supplies will be sufficient to prevent any
upward movement in prices and more likely give stimulus to further
decline, even in the face of increased fertilizer use. However, in each
of the three primary nutrient markets there are circumstances pend-
ing which could alter this general outlook. These uncertainties will be
mentioned as the 1976/77 outlook for each nutrient is reviewed.
Nitrogen.-U.S. anhydrous ammonia production capacity is ex-
pected to increase by close to 1 million tons by the end of 1976. In
addition, several new plants (5-6) are scheduled to come onstream in
1977, and a few (3-4) existing production facilities will be expanded.
In addition, one new ammonia plant in Canada has recently come on-
stream and two more are scheduled to be operational in 1977. The
domestic production capacities for urea, ammonium nitrate, and di-
ammonium phosphate are also expected to be up 9 to 15 percent. In-
ventories of nitrogen fertilizer material are high and are expected to
increase into February 1977. As a result, prices for nitrogenous fer-
Stilizers are expected to be lower even with increased levels of use.
However, uncertainties in the natural gas industry could alter this pic-
ture slightly. Natural gas is an important feedstock in the production
of anhydrous ammonia, and most domestic ammonia manufacturers
have long-term contracts with natural gas suppliers.
As noted earlier, the Federal Power Commission has announced sub-
Sstantial rate hikes for natural gas moving in interstate markets. As
current natural gas contracts expire and are renegotiated, some am-
monia producers may find themselves paying significantly more for
their primary input. With increased nroduction cann vity at home, and
in Canada, where supplies of natural gas are plentiful and prices are






86

lower, some domestic ammonia producers may be caught in a cost-
price squeeze resulting in shutdowns of older plants and a reduction
in ammonia capacity. Natural gas curtailments could also cut produc-
tion if an unusually severe winter occurs. However, given current in-
ventories and capacity no shortages should be anticipated.
Phosphorus.-While supplies of phosphate rock and phosphate
fertilizer materials are plentiful, some market uncertainties exist as
the phosphate industry is currently undergoing a period of adjust-
ment and working off accumulated inventories.
Phosphate rock producers, anticipating an increase in the demand
for their product because of increases in domestic phosphoric acid pro-
duction capacity, increased output last year by about 7 percent over
1974 levels. However, quantities of rock sold or used domestically are
down 3.7 percent so far this year. Also, the usually strong export
market for rock has been off. January through August exports were
down about 15 percent from those of the same period last year. Conse-
quently, September 1 inventories of phosphate rock were 55 percent
higher than inventories of that date 1 year ago.
With prices for phosphate fertilizers down sharply and generally
abundant supplies of P205 on hand, some phosphoric acid facilities
shutdown or slowed production in order to reduce inventory. The pro-
duction of phosphoric acid, in January through August 1976, was
slightly higher than output for the same period 1 year earlier. How-
ever, January through August 1976, production levels represents 58
percent of annual capacity, while the 1975 output represented about
67 percent.
Potassium.-Although September 1 inventories of KO in the
United States and Canada were down about 17 percent from a year
ago, U.S. inventories alone with 5 percent higher, while total U.S. and
Canadian production capacities have increased since January 1, prices
have recently come down and supplies of potash are expected to be
sufficient for the 1976/77 crop year although at lower prices.
Demand for potash by U.S. farmers averages between 4.5 and 5
million tons and exports have approximated 800,000 tons of K20 an-
nually. Domestic production capacity will be about 3.1 million tons on
January 1, 1977, and the United States has, in recent years, imported
about 75 percent of its potash needs from Saskatchewan. At present,
the Provincial Government is in the process of assuming control of
one-half of the potash production capacity in Saskatchewan. The po-
tential effects of the entry of the Provincial Government into the Sas-
katchewan industry are as yet unknown. But, U.S. manufacturers are
seeking new domestic sources of supply and exploring the possibility
of importing potash in greater amounts from other world producers.
As of January 1, 1977, combined U.S. and Canadian production
capacity will total 11.8 million tons of KO per year. If Canadian price
and output levels remain stable, supplies of potash should be more
than sufficient to meet the needs of both nations in 1976-77 and on
into the future.






87

FERTILIZER DEMAND
On the demand side of the fertilizer market it is too early to develop
refined estimates of fertilizer use. However, we can anticipate some
factors which may be important. The high prices for the current soy-
bean and cotton crops will increase acreage of both next year relative
to corn, wheat, and feed grains. But, because the cotton and soybean
crops use less fertilizer per acre some cutback in use can be expected.
In addition, fertilizer/crop price ratios have increased because of de-
clining corn and wheat prices and such a change implies that farmers
may use less fertilizer per acre. Also, farmers will find little incentive
to acquire their fertilizer much before planting time, thus, putting
further pressure on fertilizer manufacturers to reduce prices and offer
seasonal discounts for early purchases. On the plus side, for demand,
application rates are not expected to decline much, if any, and total
crop acreage planted should equal the 1975-76 acreage. Thus, we can
anticipate fertilizer use equal to or slightly above the current year.













RURAL AMERICA AND ENVIRONMENTAL QUALITY:
ISSUES AND POTENTIAL IMPACTS
(By Lyle P. Schertz, Deputy Administrator, Economic Research Service,
USDA*)


Environmental issues are here to stay. But energy and growth
issues are also here to stay. The confluence of these problems causes
conflicts: production vs. quality of the environment, urban vs. rural
America, and environmentalists vs. energy developers. Involved are
divergencies between costs and benefits of individuals and those pre-
ceived by society. Over many years our research and information
systems have supported private decisionmakers. Now, public decision-
makers need expanded support with biological, physical, and eco-
nomic research. This support should be equivalent to research sup-
port provided in the past for private decisions in U.S. agriculture and
public decisions on agricultural policy. Some adjustments have been
made. But further reorientation and expansion of our research and
related information systems are needed. In this way both environ-
mental and growth aspects of problems can be effectively considered
and social, as well as private costs and benefits of alternative deci-
sions can be accurately evaluated.

ENVIRONMENT IN RURAL AMERICA HAS BECOME EVERYONE S BUSINESS
Pollution problems in rural America have both rural and urban
roots.-And the bitter fruits of the pollution in rural America affect
all Americans. For example, demands of urban America have led to
urban sprawl, strip mining, super highways cutting diagonally across
sections of farmland, and unsightly recreation developments. Thus,
these demands have led to pollution in rural America.
Responsibilities come closer to the agricultural community, how-
ever, as we observe instances of runoff of fertilizer, erosion, sedimenta-
tion, and disposal of animal wastes in open streams. Pollution from
pesticides is an example of activity in rural America that can affect
both rural and urban Americans. If these compounds are improperly
used workers, farm operators, rural residents and consumers can be
seriously harmed.
In some cases the causes and the effects are so intertwined that
responsibilities are difficult to pin down. For example, while farms
have been a source of nitrogen and phosphorus found in runoff water,
fertilizer runoff from urban developments, as well as sediment from
activities such as building construction and roadbuilding, may be
major contributors of pollutants of water.
*This paper draws freely on a continual exchange with colleagues in the Economic
Research Service, other agencies of the U.S. Department of Agriculture and throughout the
profession.
(88)







S9

Another example relates to the operation of our markets. Profit
usually has been the underlying motivation that causes pollution.
Decisionmakers-farmers, manufacturers, developers, towns, and
cities-operate in a market system in their quest for profits and efforts
to minimize costs. But this system often does not reflect the indirect
costs of environmental damage or the full benefits of possible alterna-
tive ways to produce and consume goods and services. Thus, impetus
is given to private decisions which conflict with environmental quality
and ignore the spillover effects on the rest of society.
Also, the development and use of energy and the economic growth
needed to meet insatiable U.S. and world demand for goods are inter-
twined with environmental questions. These questions do not recog-
nize rural/urban boundaries.
Why did people begin to care more?-There are major reasons why
society has been increasingly concerned about environmental issues-
to the point of confrontation in some cases.
Land, water, and air were being increasingly polluted-in some
cases, to the point that the effects could be easily recognized by lay
people for what they were-abuses of the environment and other
people in society. The capacity of land, water, and air to assimilate
residues without pollution increasingly diminished. Many technolo-
gies were developed with limited regard for damage to air, water,
and land. There were instances where livestock lots were sited so that
wastes flowed into the streams, city dumps were located without re-
gard for sanitation, and in some cases pesticides were sprayed without
regard for pollution of streams.
S Technologies played their parts, too, in increasing the potential for
pollution. For example, an ever increasing number of pesticides were
developed, fertilizers became readily available at prices consistent
with low-energy prices, and new livestock feeding and disease control
techniques made it possible to feed livestock in large units.
Technologies also brought people closer together and, therefore,
increased their sensitivity to how others affect the environment. At
one time, we as citizens of our communities had only passing concern
for the quality of resources in other States and localities. The shrink-
ing of our Nation in terms of transportation and communications
expanded our concerns beyond the limits of our neighborhoods be-
cause it is elsewhere that we will vacation within the year and else-
where that we may transfer our residence within the decade.
n And then, too, science pinpointed specific examples of pollution
and harm to health and the environment, thus increasing our concerns.
I Other major reasons for the increased concern for the environment
are associated with the dramatic increase of the economic values of
Snatural resources such as clean water, productive and esthetic land,
Sand clean air. The increases in value were partially caused by the
losses from pollution. But the increased economic values were also
r the result of larger population, increased incomes, and changes in the
Sways people use leisure time. Furthermore, the competitive arena for
e these resources and their products spread across the Nation and, in
Ssome instances, the world.
The balance between public goals, for economic growth and those
i for quality of life shifted somewhat in the 1970's. Environmental






90

goals began to be advocated apparently without regard for possible
tradeoffs in terms of availability of goods and services. This approach
may have been sustained for a longer time had energy prices remained
low. But the rapid rise in energy prices, escalation of commodity
prices, and general inflation caused a closer examination of the costs
of achieving environmental goals. The obvious question was asked,
"Could a relaxation of environmental quality goals restrain inflation
and conserve energy?" In response there has been relaxation, but not
abandonment of environmental quality goals.
Concerns have becomnw ivntitutionalized.-Until recently, environ-
mental problems were usually considered secondary to other goals
and activities for which we had established institutions. For example,
the 1971 Annual Report of the Council of Environmental Quality
stated:
"Air and water pollltion control programs were once the
stepchild of health agencies. Solid waste management had no
larger image than the local garbage collector and the city
dump. Pesticides were considered part of agricultural activ-
ity, while radiation was dealt with in the overall context of
atomic energy. Increasing noise and the spread of toxic sub-
stances through the environment were generally ignored since
no agency was responsible. The nature of many of the prob-
lems of improper land use especially in critical areas, was
largely unrecognized." [1]
But, as we know, this situation has changed dramatically in recent
years. Increased public concerns for the country's environment have
been institutionalized in a series of legislative acts, organizations, and
regulations.
The National Environmental Policy Act of 1969 created the
Council on Environmental Quality (CEQ) and institutionalized
"environmental impact statements" for "major Federal actions
significantly affecting the quality of the human environment." [2]
The Office of Environmental Quality was established in 1970
with the Environmental Quality Improvement Act to support the
work of the CEQ and to assure that all Federal agencies conduct-
ing or supporting public work activities affecting the environment
"shall implement the policies established under existing law .. ."
[3]
The Environmental Protection Agency (EPA) and the National
Oceanic and Atmospheric Administration (NOAA) were estab-
lished in 1970. [4]
The Federal Water Pollution Control Act Amendments of 1972
established the National Commission on Water Quality and
dramatically focused policy on specific discharge requirements,
with the ultimate goal of eliminating all discharge of pollutants
into water by 1985. [5]
Other Federal legislation was approved dealing with air, pesticides,
noise, drinking water, coastal zone management, occupational safety,
and health.
These institutional and policy changes at the national level are a sign
of the growth in importance and the public's recognition of the impor-
tance of environmental problems.





91

Federal activity represents only a part of the Nation's institution-
alization of environmental concerns. Such a list does not reflect the
actions at the State and local levels where so much of the action is under
Federal legislation or where all of the action is in those areas where
there is no, or limited, Federal legislation; e.g. strip mine legislation,
land use controls, and solid waste management.
Still further, lists of Federal activities do not reflect the role private
citizens and private interest groups have come to play.
Rachel Carson's Silent Spring, published in 1962, was a landmark
work in calling public attention to environmental issues. The changing
attitudes of America's youth in the late 1960's caused a tremendous
increase in concern for the environment, and that interest has been
growing steadily ever since.
The Sierra Club, one of America's pioneer environmental groups
saw its membership triple between 1965 and 1970, and has expanded at
a rate of 10,000 a year during the 1970's. Other older groups, like the
Audubon Society and the National Wildlife Federation have also
grown very rapidly over the past decade. Important new environmen-
tal groups, like the Friends of the Earth, the Environmental Defense
Fund, and the League of Conservation Voters have also sprung up
recently.
Other books and periodicals have focused public attitudes. Since
Silent Spring is the title of one of the many significant books on
environmental issues that have been published since Carson's classic.
Others are Barry Commoner's Closing Circle, Garrett DeBell's En-
Svironmental Handbook and quite recently, Erik Eckholm's Losing
Ground. New periodicals include the Rodale Press's "Environmental
Action Bulletin," the bi-weekly "Man Not Apart," and the monthly
"Environment."
In totality, and in many cases individually, these activities at the
nation, State, and local levels clearly demonstrate that the environ-
ment and the interrelations between what happens on farms and in
rural America in terms of the environment are the concern of other
people in rural America and in urban America. Further, it demon-
strates that the people being ultimately affected, or their spokesmen,
now have a major voice in policies and programs affecting these prac-
tices. The policies and programs are no longer the stepchildren of the
institutions peopled by agriculturalists.
S Hindsight suggests that the agricultural community with its long
tradition of conservation, which included vigorous efforts to conserve
soil and water, could have dealt more aggressively with pollution
Sgenerated in rural America. Such an approach might have retained
more of the related programs in institutions aligned with rural Amer-
s, ica. However, the institutional arrangements are not likely to be re-
ts versed. The challenge to rural Americans is to accept these activities as
legitimate concerns of society, to make adjustments to modify pollution
when its effects are serious, and to avoid panic when they are not. And
above all, to have the wisdom to know the difference.
The expansion of environmentally related institutions is directly
associated with (1) the divergencies between private and social bene-
r. fits and costs, and (2) the public's increasing sensitivity and concern
for those benefits and costs that are not reflected in private transactions.



78-885 0 76 7





92

Decisionmakers in these institutions must deal with these divergencies.
They need research and information support equivalent in quality and
quantity to the support that the Federal and State governments have
traditionally provided for private decisions in U.S. agriculture and
public decisions on agricultural policy. Such support will require
reorientation and expansion of research efforts.

RURAL AMERICA IIASN T FELT THE ENVIRONMENTAL CRUNCH--YET
To date, production in rural America has not been restrained sub-
stantially by environmental initiatives. Several factors account for
this limited effect.
The most obvious problems were given priority.-For example, at-
tention was focused on DI)T and its persistence, feedlot runoff, and
agricultural processing wastes, such as that from poultry processing
plants. The economic advantages of continuing to pollute in these
traditional ways were already diminishing.
DDT for many years was a principal pesticide used in cotton pro-
duction. However, at the time it was banned many cotton pests were
developing resistance to it and its use was declining. This decline was
accelerated with the availability of substitute chemicals.
Large feedlots were obvious polluting enterprises. The sheer volume
of waste had already prompted the operators to consider improved
techniques for handling it. Many had already anticipated the pollution
problems and had built the necessary equipment. Further, there were
substantial economies of scale for this equipment and the average and
marginal costs in terms of animal units for large feedlots were rela-
tively low.
Efforts to deal with point sources of rural wastes, such as food proc-
essing plants, have often involved the utilization of "user charges"
to encourage improvements in the quality of water and better manage-
ment of wastes. A study of a poultry processing plant points up how
economic incentive programs in a dynamic setting have increased
efficiency while reducing pollution. For example, technical changes
made in the handling of water and the management of wastes in this
plant in southeastern United States resulted in a one-third reduction
in water use and a two-thirds reduction in daily waste load. [6]
Discretion was used.-In many cases, regulations and incentives
were imposed in situations where alternative techniques of production
that were less destructive of the environment were available and
utilized at the time the regulations were imposed.
For example, original EPA proposals on feedlot waste handling
called for restraints on all feeding operations. But in the end EPA
regulations are applicable only to those feedlots having a capacity
of at least 1,000 animal units or feedlots with a capacity of 300 animal
units or more that are discharging or have a high potential for dis-
charging wastes. Thus, only a relatively small number of feedlots
are being affected.
To date only a few pesticides have been eliminated from agricul-
tural use and at the national level the impacts have been limited. For
example, though the use of DDT was banned for general agricultural
use, the ban had only limited effects on production.