New Deal agriculture policies were based on the standard of Parity. Under this system, the US Federal Government stood between the farmer and the grain merchant, offering a guarantee to buy storable grain at or near Parity – essentially the average cost of production. With this floor under farm prices, the merchant was compelled to pay the farmer what his product was worth to the nation, not today's market rate, which is set by Wall Street. The ability to issue such loan guarantees is still a feature of permanent US law (US Code Title 7, Sections 601 & 602).
Today the price of wheat, for example, is around $8.40/bushel, but the real cost to produce wheat is $18.30. To the extent that farmers do stay in business, the shortfall in income is made up by commodity speculation and debt. In real terms, most farmers are producing at a loss of about 60% of the value they've produced. That loss is not America’s gain. If the farmer is not profiting by his labors, there is a deficit of credit entering channels of trade at the most fundamental sector of the economy.
We can not let economic depression stand as an argument for "cheap food". The only cheap thing is the price paid to farmers. Commodity speculators and the grain cartel take the rest. It is estimated by the National Organization for Raw Materials that food prices at full parity would rise only about 15%. Compare this to the effect of doubling wages, which the record of the 1940s shows to be a conservative expectation. With federal support for fair pricing, the commodity futures market will close its doors and the burden of food speculation be lifted, as it was during the Second World War.
Lastly, we must contend with the real human and environmental costs of our cheap food economy – from the proliferation of the GMO (Genetically Modified Organism) monopoly to the loss of topsoil, biological diversity, rural populations and the increase of chronic disease.
1. Full Funding for Food Assistance
The needs of the hungry at home and abroad must not be held hostage by the needs of Wall Street. Food Stamps, Food for Peace, emergency aid, school lunch and similar programs must funded at improved levels.
2. Loan Guarantees at Parity
The Secretary of Agriculture must issue non-recourse* loan guarantees at or near parity for major storable commodities. These are to include corn, soy, wheat, oats and rice.
*non-recourse: The commodity is the sole collateral for the contract. The USDA has no recourse to collect other property from the producer.
3. Rebuild Emergency Grain Reserves
Today the US effectively has no strategic reserves of grain. This puts our nation and much of the world at risk of famine. If Parity increases total production, surplus can be directly purchased and stored by the Federal government; to be used to as emergency supply, to regulate supply in years to come, and as continuing foreign aid to countries transitioning to their own self-determination in agriculture.
4. Assistance to New Farmers
A parity system will tend to bring the size of farms in line with the realities of nature. What this year required 1,000 acres might require 50 in the future. While much of this transition will be determined in "the market," we must deal with the dearth of skills and human capital in the farm economy, and the distorted ownership of American farmland. We need federal and state funding to educate and equip new family farmers for success, and we need land reform to make cropland available to farmers and prevent a monopoly of speculators.