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Show November, 1968 M Discussion Mgsricukmrcsl Agricultural producers have consistently declared a desire for a stabilized fair price.1 Market prices are a combination of a number of complicated factors. These natural laws operate in the market place without regard to agricultural programs. Price confuses a number of issues in that "it is the end product or the result of the supply demand levels. In other words, prices cannot, have not, nor will they ever be controlled as such. It is the levels that are manipulated by planners to seek a predetermined price. supply-dema- supply-dema- Page 3 UTAH FARM BUREAU NEWS For example, U.S. cotton produc- of Prices If the production of a commodity is decreased by design to raise the price, other areas are tion has been reduced from about 16 million bales to 10 million bales per year. This reduction in bales produced did not Increase price because the demand was reduced. Programs designed to stabilize prices and guarantee certain levels of income to the producers must deal with all these factors of supply, demand, substitutes, imports and prices. There never has been, nor will there ex-por- st, nd nd The problem starts with the five basic costs that must be paid. These five basic costs are as follows: (1) the cost of goods and services bought from others; sometimes called outside purchases; (2) the cost of human energy used up in making the products and finding customers for them; sometimes called wages and salaries; (3) cost of tools wearing out; somtimes called depreciation, depletion and obsolescence; (4) cost of payments by government; sometimes called taxes; (5) the cost of using tools; sometimes called proThese five costs are alfit. ways paid by the customer under any economic system. They are commonly referred to as the selling price or the cost to the consumer. It can also be said that profit is not a fixed cost (such as rent), but unless it is paid by the customer, the business must fail. Another way of stating this truism is that profit is the amount of money that the consumer is willing to pay for something he otherwise would not have. In a socialist society, these five costs outlined above are paid and the only difference from the market price system is the work-labe- ls placed upon them. In the competitive society, the five costs are collected from the customer who voluntarily gives up the money needed to cover them. In a socialist society where government owns and operates or controls the operation of business, the selling price may be set by government bureaus at a level below the amount needed to cover all the cost. When this is done the government enterprise need not fail (as with private business) because the losses can be re- encouraged to grow more of the commodity and substitutes will be developed. If production is reduced price goes up and demand goes down. ever be, a system devised that can satisfactorily plan all of these items. All programs designed to stabilize prices and Improve income and based on certain assump tions which are never correct. In reality, all government designed programs to raise agriculture prices above market level in the rearrangement and relabeling of various factors. For example, if government pays to an agriculture producer $100, that $100 as far as the producer is concerned is a part of the market price and will have the same effect as if the producer had received the $100 in the market place. From the consumers point of view the $100 is paid in taxes. Due to the cost of extracting and redistributing tax money, it is by far the most inefficient system available to man. In other words, the farmer will receive less and the consumer will pay more if he considers the taxes paid. The conclusion is that any money spent by government to assist a commodity in any area is always sub- tracted from the market price and never added to it in the long run. The last, and certainly not th least, consideration is an understanding of why a producer produces a commodity for sale. The reason simply stated is to produce a surplus in order that the surplus (profits) may be used to secure other goods and services wanted or needed by the individual. In a society where a part of the market price of any commodity is channeled through government. personal and economic freedoms will also be controlled by that government. As a practical matter in agriculture today, prices are being manipulated primarily through the regulation of exports and imports. Each pound of meat Imported into the United States serves to increase the supply and at any given point will reduce the market price to the producer. It is also true that each pound of meat exported will reduce the supply and will serve to raise the domestic price. It is a fact that the consumer is the one that sets the price. It is true that total supply is a major factor but it does not alter the fact that the consumer still determines the price in any given situation by choosing not to buy or to buy a substitute. As long as agriculture continues to follow a program of reducing production to increase price, the net profits on investment will continue to remain at the bottom of the scale. When political authority is used to establish a stabilized fair always be price, the level will This conlower than normal. clusion is based on the fact that one of five voters is a producer and 4 are parasites. ordered covered by Increasing personal taxes. This means that under any economic system the customer pays all the cost of business even though under socialism the price can appear lower. Under socialism the payment known as dividends become interest pay- ments on the government debt incurred to purchase tools. It is important to note that in the past every effort to socialize the tools of production has resulted in higher overall cost to the people. A review of what has been said above reveals that the customers willingness to pay the cost of production will determine the supply available. 5 important things Leland J. Roper and William D. Iverson know about Country Mutual Life: market. It is also true that any change in the supply would Immediately change the price assuming that the demand would remain the same. Total supply is the sum of production, Imports, minus exports. Because of the related facts concerning health and smoking, Country Mutual was the first company in Utah featuring a premium discount for NON-SMOKER- Life agent . . . he's as near as the Yellow Pages. EP;M bGreau INSURANC COUNTRY MUTUAL INSURANCE DISCOUNT rs. 3. HOME OWNED Country Mutual Life is a Utah company with your best interest at heart. Over the years they have developed strength, in- tegrity and soundness. Where policy holders are able to participate in the profits accumulated. This is paid in the form ofdividendsas declared by the directors, without additional premium MUTUAL COMPANY costs. Contact your Country Mutual S non-smoke- 4. This is illustrated in the following illustration. The lesson is that price is a result of the supply demand balance. Looking first at the demand side of the picture above, it is impossible to determine the many factors that make up the demand at any one point. Buying power of the consumer is certainly one of the largest factors involved. Any change in any one of the thousands of items on the demand side assuming that the supply is the same, would change the price in the 1. LOW COST Country Mutual Life offers the lowest cash outlay for whole life premiums in the industry. A fact well worth considering when buying life insurance. 2. The po- litical solution is to take from the one and give to the four. A one to four ratio is a winning majority in any race. |