Revisiting the well-intended PIK program
"Now that you’ve got a government check for your corn, you can buy us lunch."
The farmer who shared a meal with us laughed and said that the one-cent per-bushel received through the USDA payment to offset market losses due to the on-going tariff fight with China wouldn’t buy many steaks.
"It isn’t exactly the PIK Program,’’ someone else pointed out.
The Payment in Kind Program was authorized in 1983 when Ronald Reagan was in the White House and Congress and the U.S. Department of Agriculture attempted to curtail market-deflating overproduction. Government-held stocks of corn and wheat had reached record levels, a strong dollar coupled with weak economies curtailed exports, and Congress had become increasingly concerned about the cost of farm subsidy spending.
President -Reagan announced the PIK program during the American Farm Bureau Federation’s annual meeting held in January of that year.
USDA ag secretary John Block outlined PIK’s objectives.
"PIK is basically simple,’’ he said at the time. "Farmers who take out of production over what they agree to take out under the current program will receive as payment a certain amount of the commodity they would have grown on these acres. The commodity is theirs to do with what they wish.’’
Newspaper headlines, at least in metropolitan publications, were both bold and simple "Farmers will be paid for not planting.’’ Indeed, one-third of all crop land in the country went unplanted. That was 30 percent more than USDA originally estimated.
Farmers had produced record corn, soybean and wheat crops in 1981 and farm income was in free-fall. The 1982 crop was larger than in the previous year. USDA delivered a record $11.7 billion to farmers in fiscal year 1982 and it was estimated that payments would increase by $3 billion in ’83.
"Once stocks are reduced significantly through the PIK program, then substantial opportunities for price increases will exist,’’ Block said in explaining the administration’s end goal.
Farmers would receive corn and wheat from Commodity Credit Corporation stocks. The program also linked conservation practices with eligibility.
The PIK enrollment deadline was March 15, which provided ample time for farmers to make their decision. USDA projected that corn production would decline by 49 percent through PIK. Although soybeans weren’t part of the program, production of the commodity would drop by 33 percent from 1982’s record.
The law of unintended consequences kicked in during the 1983 growing season. Widespread drought, heat and natural disasters took a toll. Corn and wheat market prices significantly increased as did the cost of the PIK program. USDA estimated that the financial commitment was $10.9 billion. PIK was originally designed to be a two-year program, but only wheat PIK remained after 1983.
The average corn price in January was $2.36 per bushel and increased to $3.30 by October.
Block was unfazed about widespread criticism — livestock producers lost profits due to higher feed costs, fertilizer and crop input suppliers lost business and consumers paid more for food. Farm suppliers lobbied in force to prevent any similar PIK programs.
They were largely successful, although the White House supported and Congress approved, a measure later in 1983 that would allow dairy producers to leave the industry through whole-herd buyouts in return for government cash.
"PIK has proved to be one of the most successful farm programs in history," Block said at the time.
Although the PIK program raised prices, it also increased pressure on Congress to change basic farm policy. Freedom to Farm, which became law in the 1996 Farm Bill and led to fence-row-to-fence-row crop production, uprooted traditional farm policy.
The PIK program, despite boosting prices in 1983, didn’t and couldn’t have been expected to prevent agriculture’s Great Depression.
Thousands of farmers were forced out of business, and along with them, implement dealers, input suppliers and farm equipment manufacturers. PIK was a well-intentioned effort that was diminished by problems that the USDA, grain elevators and farmers couldn’t have foreseen.