WE CAN SOMETIMES LEARN A GREAT DEAL FROM things that don't happen. The present farm situation is a case in point. For those who haven't been paying attention, corn and wheat prices are now near record levels and could go higher. Just last week, the Agriculture Department cut its estimate of the 1996 U.S. corn crop by 4.7 percent. We are already hearing warnings about a dangerous new spurt in retail food prices or, worse, the onset of a prolonged era of global food scarcity. I am skeptical that such a ""food crisis'' looms, and if these grim forecasts don't materialize, it will speak volumes about how the farm economy actually operates.
Let's concede that some grocery prices will temporarily move higher and that, going into a new century, we face serious problems feeding a growing world population. But the farm economy has powerful mechanisms of self-correction and expansion. Markets work, if left tolerably free. Farmers strive to raise output and cut costs. The result is that prices gradually drop and that people eat better or spend less on what they eat. Look at the record. In the United States, Americans spent only 11 percent of their disposable income on food in 1995. In 1970 that figure was almost 14 percent; in 1940 it was 21 percent. The decline is all the more remarkable because Americans now spend almost 40 percent of their food dollar away from home in restaurants, carryouts and fast-food chains. That's up from 26 percent in 1970 and 15 percent in 1940. Nor is this sort of progress confined to the United States or rich nations. Developing countries have also made huge gains. Glance at the table above. It shows that between 1961 and 1994, the population of developing countries roughly doubled, while grain production nearly tripled. As a result, grain output per person rose a third. To be sure, these overall figures mask vast differences among countries, and millions of people -- especially in sub-Saharan Africa and South Asia -- remain on the brink of starvation. Still, diets have improved dramatically in many poorer countries.
The great engine of expanded food production has been the spread of scientific farming: improved seeds, more fertilizer, greater irrigation, better pesticides. In a recent book, food analyst Dennis Avery of the Hudson Institute listed some of these gains. In the 1920s U.S. corn farmers produced an average of 27 bushels an acre; in 1994 American corn yields hit a record 139 bushels an acre. Chinese rice yields more than doubled between the 1940s and the 1980s, from 2.2 tons per hectare (2.47 acres) to 5.7 tons. In India, a new variety of sunflower seed doubled yields to 0.6 tons per acre within the past decade.
The specter now raised by some analysts is that this process is essentially complete and that the world is reaching its natural limits of food production. Water scarcity and diminishing returns from fertilizer will hobble harvests. Lester Brown of the Worldwatch Institute in Washington sketches such a future and contends that exploding food demand in China will create vast -- and unattainable -- import needs. China's food production will actually decline in the next century, he thinks, because industrialization will remove large amounts of land from crops.
The reason that Brown's dire prophecies seem unconvincing is that predictions like them, dating to Thomas Malthus (1766-1834), have never come true. They overlook people's capacity to change. Farmers and governments (which finance much farm research) react to emerging stresses. Mark Rosegrant of the International Food Policy Research Institute finds Brown's projections ""totally implausible.'' Even using unfavorable assumptions, he puts China's import needs in 2020 some 60 percent lower than Brown.
What's at issue now is whether the world can avoid an immediate ""food crisis.'' Global grain prices are high because global grain reserves are low. The drop in grain stocks resulted mainly from bad weather and bad policy. After a bumper 1994 harvest, the U.S. government reduced planting acreage for corn and wheat. Big mistake. Unexpectedly strong exports and poor weather then combined to drain grain stocks. But the system is already responding. Higher prices encourage added supply. Farmers plant more, use added fertilizer. American acreage restrictions have been lifted. The latest crop report is slightly misleading. The estimated harvest reduction is a drop from an earlier estimate of this year's crop. Even with the lower figure, the U.S. corn crop is expected to be 18 percent higher than in 1995. Total worldwide grain production (including corn, rice and wheat) is estimated to be 6 percent higher than in 1995. Extra supplies should blunt price increases.
True, the commodity price surge is now pushing up the retail prices of baked goods, meats and milk products. But the impact is muffled by the farm sector's very efficiency. In 1994 only 21 cents of every dollar Americans spent on food represented the farm value of crops or livestock. Other costs (freight, processing, packaging) are larger. Competition also has a muffling effect. Despite high grain prices, breakfast-cereal companies are engaged in a ferocious price war. Of course, it's possible to imagine a food disaster. Maybe we'll have more bad weather. Maybe Brown is correct. No one can know for sure. What's comforting is that farmers have regularly disproved prophets of scarcity.
