The potters herald. [volume] (East Liverpool, Ohio) 1899-1982, 1951-02-15
Form PdritY; Whdt 1t Is
And How Il Functions

Washington LPA)-Every dis
cussion of price control swiftly be-
comes a discussion of the price of
food. And every discussion of the
price of food founders on parity
At the mention of parity" the
average citizen throws up his
hands. Parity, he remarks, is a
mysterious something that nobody
understands, something farm
minded Congress does to help the
farmers, something that costs city
folk money. He's partly correct and
at the same time a little unfair.
What brings parity into the food
price picture is provision in the
Defense Production Act which bars
controls on farm prices unless
they're above parity or above the
May 24-June "a, 1850 peak.
Generally speaking, the word
parity covers a policy by which the
Department of Agriculture, in COM
pliance with a series of acts of
Congress, sustains the purchasing
power of farmers. In other words.
parity is an attempt to balance the
prices a farmer receives for his
crops against the prices he must
pay for what he has to buy. (Since
the defense program began, top
labor leaders have been wondering
whether some kind of parity
shouldn't be worked out for indus
trial workers. The controversial
escalator clauses smack of the par
ity idea.)
The Department of Agriculture's
Bureau of Agricultural Economics
calculates parity prices and parity
indices once month. Actually, the
bureaus statisticians C u e
three parities-"new parity" Tin
line with the Agricultural Acts of
194S and 1949), cold parity" Tin
line with earlier acts) and "tran-
sitional parity"
New parity is figured this way
on a specific commodity. (D Mon
thly or seasonal average price re-
ceived by farmers is calculated for
the 10 preceding years. (2) This
average is adjusted" by dividing
it by the 10-year average of the
"index" of prices received by farm
ers Tin calculating the index, the
January 1910-December 1914 price
equals 1907 (3) The adjusted fig
ure is multiplied by the "index" of
prices paid by farmers for long
list of items including interest,
wages and taxes as well as indus
trial products. The result is the
"new parity price. Clear, isn't it ?
Or is it any wonder the food-price
discussions founder?
Here's the way the process works
in practice. Say the 10-year month
ly average price received by farm
ers for hogs is $500 per 100
pounds. And say the 10-year Gin
dex" of prices received by warmers
is 2O2 percent. Divide the $500
by 2.02 and your adjusted" price
becomes $7.52 approximately. Say
the index of prices paid by farmers
is 249 percent. Multiply $7.52 by
2.49 and you'll get approximately
$18.70-the "new parity" (This
was the hog parity in January 1850.
In January 1851, it was $20.6OO
On corn, wheat, tobacco, cotton,
peanuts and rice, cold parity" also
is calculated. Old parity is the eff
fective price if it's higher than
new parity on these products.
Here's how old parity is figured
on peanuts, for instance.
Multiply the August 19O9-July
1914 price received by farmers by
the index of prices paid by farm
ers, excluding wages. (In this in
dex, 1910-1914 prices paid equal
1907
transitional parity" is appli-
cable to mon basic" commodities.
On these commodities, "new parity"
is the effective parity unless it is
below specified percentage of
"old parity" If it is less, the spec
flied percentage makes the price.
This year, the percentage is 80.
Last year it was 95 and next year
it will be 85. ('Transitional parity"
is supposed to keep prices calcu-
lated by the new system from drop
ping sharply below what they'd be
under the old system.)
If the price of a commodity is
below parity, the government may
Support" the price through loans,
outright purchases or a system of
purchase agreements. Between July
and Dec. 81, 1850, the govern
v>,o,,+ Ioe+ 910n 0SO Q0d cunnorfin inp