Community Agriculture Alliance: Inventory system helps farmers
April 5, 2012
At the National Farmers Union convention in Nebraska last month, delegates from all parts of the country voiced overwhelming support for a voluntary, farmer-owned, market-driven inventory system as an effective and affordable safety net for farmers. An MDIS will allow crop farmers to receive their revenue from market receipts, reduce government payments and reduce price volatility. It offers a win-win for everyone.
Farmers in Colorado, New Mexico and Wyoming want and need an MDIS in the next Farm Bill. Here's how it would work: The corn loan rate is set at a point between the variable cost of production and the full cost of production, and the loan rates for other crops are set at their historic ratios to corn. When prices are below the loan rate, farmers can take out a government loan, and the portion of their crop they used as collateral goes into a farmer-owned inventory. The release price for the crop is 160 percent of the loan rate. Farmers would be expected to keep the crop in condition, and they would be paid 40 cents a bushel each year for storing it. There are ceilings on how much of a crop can be added to the inventory.
The University of Tennessee's Agricultural Policy Analysis Center has studied the proposal and determined that compared to actual government payments, which averaged about $12 billion per year for the 13-year period from 1998 to 2010, MDIS policies would have reduced government payments to, on average, roughly $4 billion per year, with a savings of more than 60 percent. Not only that, but the MDIS would have stabilized prices. Price volatility would have been reduced, with farmers receiving higher prices in the low-price period (1998 to 2005) and lower prices in the high-price period (2006 to 2010). In the entire period studied, farmers' net farm income would have been nearly identical to what farmers actually received.
Announcing the results of the study, National Farmers Union President Roger Johnson said the MDIS would give farmers protection similar to what they receive now "at a significantly lower cost to taxpayers." The study found that throughout the next 10 years, farmers and ranchers would receive a slightly higher income under MDIS than under current policies while the federal government would spend about 40 percent of what it would if current policies were extended.
In a "cut first and ask questions later" legislative atmosphere, the MDIS offers a sensible method of protecting U.S. agriculture from the economic disasters that have plagued the sector that feeds the country. Join us in advocating for this solution as your legislators begin discussing the 2012 Farm Bill. Every agricultural constituency will thank you, and everyone who eats is involved in agriculture.
Kent Peppler, a fourth-generation farmer in Mead, is president of the Rocky Mountain Farmers Union.