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No parity party hereNo parity party here

What’s this parity thing you all speak of? Here’s what happens when two senior editors try to explain it to the young ’un.

May 17, 2018

3 Min Read
IF/THEN: If the parity price for the corn being planted here is $13, how long until the ground it’s going into is worth $20,000? Then what happens?

Farm trivia time: For 500 points, explain parity! Anyone? Anyone??

I’m willing to bet a significant amount of money that if you’re under 45, you’re getting zero points. If you do claim a few points, it’s because you kinda sorta remember your grandpa talking about it. And he was probably angry.

I asked my husband if he knew what parity was, as he ran out the door to plant corn the other day. “What? I don’t …” And he took off. I’m going to assume he had more important and better things on his mind.

Parity came up in our editorial offices this spring when a reader called and asked why we don’t publish parity prices anymore. I did some inquiring, right after I Googled “parity.”

Bryce Knorr, Farm Progress grain market analyst, explained parity and told me anyone who remembers it “should be in a museum at this point.” No word on whether he was emailing from the American History section or the Natural History section. He added there’s no point in publishing parity prices anymore unless I also wanted to put together a monthly column on buggy whips. Point taken.

Not so at the USDA, where they’re still required by law (Title III, Subtitle A, Section 301(a) of the Agricultural Adjustment Act of 1938) to track and publish parity prices, burying them at the end of the monthly Agricultural Prices report.

Setting prices
Next I asked former Prairie Farmer editor Mike Wilson why he quit publishing parity charts back in the ’80s.

“Because we realized it was pointless and unrealistic and just making people angry.”

Again, very clear.

But what the heck is parity, anyway? The short answer is that it’s price setting, based on the golden age in agriculture from 1910 to 1914, when both ag and the general economy prospered. The idea was that if you established price based on all the costs of production, farmers would get their fair share. For example, here are the March 2018 parity prices, excavated from that USDA report: corn at $13.20, soybeans at $32.60, wheat at $17.60, milk at $52.30, cattle at $335 and hogs at $166.

History may not repeat itself necessarily, but some ideas sure can get recycled.

Mirrored conversations
Seventy years ago, Congress was debating the 1948 Farm Bill — the first after World War II — and it was the first round of a long disagreement over parity policy, reports Jonathan Coppess, University of Illinois. Like today, regional disagreements marked the discussion: Those in the South and Great Plains wanted to continue high, fixed-loan rates (90% of parity) established during the war. Midwesterners, especially Republicans and the American Farm Bureau, wanted to end high fixed-loan rates and the acreage controls that accompanied them.

They were still arguing in 1954. But Coppess observes the fight mirrors today’s regional disputes: 90% parity is like the fixed reference prices in the Price Loss Coverage program, which don’t change over time and is what the Southern commodities want. Flexible parity is like the benchmark price used in the Agriculture Risk Coverage-county program, which will adjust through use of moving averages and is what the Midwestern commodities want.

At the end of the day, there are a lot of things we need in the farm bill, but parity sure isn’t one of them (now that I know what it is). The question may be why USDA still has to spend money calculating parity prices, which, like so many government policies, are obsolete.

That, as Knorr observes, shows how much U.S. farm program policy has changed — and how much it hasn’t.

Comments? Email [email protected].

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