What is in this article?:
- NFU/University of Tennessee Agricultural Policy Analysis Center study looks at farmer owned reserves (FORs).
- Group urges Congress to consider FORs as agriculture legislation is crafted.
Costs and savings
- Government costs would have been lower in large part because the loan rate would have been paid on only the portion of the crop that was put into farmer-owned reserves and not on every bushel that was produced.
- Over the complete study period, the value of exports would have been $4.9 billion higher with farmer-owned reserves in place than under historical conditions for that period.
“Basically, in the report, with corn, wheat and soybeans, higher prices show that export quantity went down by a small percentage. Meanwhile, the value went up by a large percentage. That’s because price went up significantly.
“When you talk about value of exports, price is the issue for most of the crops. While people may say ‘loan rates hurt our exports,’ they actually may reduce the quantity a bit. But the higher prices increase the total revenue from exports.
“We must decide if we want to ship more at a much cheaper price or a little less at a much higher price.”
- Because the U.S. would have held some buffer stocks under farmer-owned reserve policies, importers of U.S. corn, wheat and soybeans would have been assured of a stable supply of storable commodities, reducing the need for countries to protect local supplies of grains.
“During the study period there was no residual supplier in the world. In 2007 into 2008, governments began to shut off exports of their crops with the goal of protecting their populations from going hungry. They didn’t want to sell at a given price only to see the price rise and then be forced to import at a higher price.
“By having stocks in key crops – corn, wheat and soybeans -- in the United States, the other markets settle down. You wouldn’t have governments taking such actions because they know they can get grain from the United States at something close to the release price.
“There would be an upper bound on their risk. If there are no supplies, at all, and they’re scratching up whatever they can find, there’s really no upper bound.
“Politicians don’t get reelected when their constituents starve. That’s how revolutions begin.”