Brannan Plan

The Brannan Plan was a proposal of "compensatory payments" to American farmers in response to the major post-World War II agricultural problem of large agricultural surpluses stemming from price supports for farmers. The Brannan Plan was named after Charles Brannan, who served as the fourteenth United States Secretary of Agriculture from 1948 to 1953 as a member of President Harry S. Truman's cabinet. It was opposed by conservatives who permanently defeated it.

During World War II, agricultural products were in very high demand by the fact that food was needed overseas. The government encouraged maximum production by setting prices for farm products well above the market-clearing level. This ultimately led to overproduction. While the demand for agriculture during the war was high, these wartime conditions proved to be unrealistic when the war ended. Following the war there were large farm surpluses. Subsequently, prices stemming from the price support became higher than consumers were willing to pay.

Prior to Brannan's proposal, the Agricultural Act of 1948, a revision of the Agricultural Adjustment Act of 1938, had recently been implemented. However, this act had merely extended the price support programs of the wartime law that would soon expire; something had to be improved. With the need for reform, Charles Brannan proposed for "Production and price adjustment with a definite income objective," which quickly became known as the "Brannan Plan." The goal was to provide high prices for corn, wheat, tobacco, cotton, milk, eggs chickens, hogs, beef and lambs. The political assumption was that American farmers were so morally critical to America that they should be given higher incomes, regardless of marketplace supply and demand. The plan was opposed by the business community and by the nearly unanimous farmers organizations, except for the left-wing National Farmers' Union, which was its chief sponsor.

In the free market, the prices that yielded were considered to be unfair to farmers. Under the traditional support system, the government would raise the price to a "parity" price, at which consumers would not be willing to buy as much. In turn, the government would purchase excess supply, leading to large amounts of storage. However, under the Brannan PLan, the government would allow the surplus to be sold for whatever price it would bring. Consequently, the price would drop to that determined by the market, resulting in an elimination of the surplus. To compensate for the low prices, the Treasury would write checks to farmers for the difference between the high parity price and the low new market price. All together, consumers would pay lower prices for farm products, resources would not be wasted producing food simply for storage, and farmers would benefit by receiving the parity price while producing the quantity demanded at the market price for the surplus.

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