With poorly administered reserve policies, that certainly has been the case. It is a matter of keeping the market release rules out of the way of normal price fluctuations. During the latter years of the Farmer-Owned-Reserve, release rules were totally eliminated, sabotaging the reserve concept. On the other hand, it is important to note that during the 1998-2001 period prices remained well below the cost of production in the absence of reserves.

To be fair to consumers, the reserves have to be large enough to protect them against unacceptably wide swings in prices. The reserve program should be creditable enough so as to minimize disruptions in international trade from the imposition of trading restrictions and hoarding by exporting and importing countries. To be fair to farmers, the floor price level needs to be high enough to ensure that they can earn the bulk of their livelihood from the marketplace.

Daryll E. Ray holds the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and is the Director of UT’s Agricultural Policy Analysis Center (APAC). Harwood D. Schaffer is a Research Assistant Professor at APAC. They can be reached at dray@utk.edu and hdschaffer@utk.edu