National Farmers Union (NFU) President Roger Johnson testified this week before the U.S. Senate Committee on Agriculture, Nutrition and Forestry to discuss risk management and commodities in the 2012 Farm Bill.
“Every family farmer, rancher and consumer benefits from a strong and effective safety net for commodities,” Johnson said. “Commodity prices do not remain high and do not always return a profit to our producers. When prices fall, and we know they will, it is critical that a price-based safety net be in place, because we know that long lasting drops in commodity prices and artificially high price peaks are harmful to the entire production supply chain, in both domestic and international markets.”
In an effort to offer Congress a plan that might be more effective and less expensive than what is currently in place, NFU commissioned the University of Tennessee’s Agricultural Policy Analysis Center (APAC), to help develop a farm program that would moderate extreme price volatility in commodity markets while allowing farmers to receive their income from the marketplace rather than from government payments, saving the federal government a significant amount of money in the process.
The plan NFU proposes is known as the Market-Driven Inventory System (MDIS).
“MDIS is an agricultural commodity program that mitigates price volatility,” said Johnson. “It provides advantages to livestock producers and the biofuels industry. In addition, it would reduce government expenses, increase the value of crop exports and maintain net farm income over time. The central feature of MDIS is a voluntary, farmer-owned and market-driven inventory system based on recourse loan rates set a level below total cost of production but above variable costs.”
According to the study by APAC, during the 1998 to 2010 time period, actual government payments for the eight program crops (corn, wheat, soybeans, grain sorghum, barley, oats, cotton and rice) totaled $152.2 billion, excluding crop insurance premium subsidy payments. If MDIS had been in place during this time, farmers would have received $56.4 billion from the government (in storage payments), while earning roughly the same net farm income over the period as historically received. Taxpayers could have saved nearly $100 billion. If current programs were continued from 2012 to 2021, government payments would total $65 billion over those 10 years. With MDIS in place, government payments are estimated to total $26 billion, or 60 percent less.
“NFU will remain engaged during the coming weeks and months as more decisions are being made related to the 2012 Farm Bill,” said Johnson. “We will continue to work with Congress on coming to an agreement that will benefit family farmers in times of market crashes or when disasters strike so that the United States can continue to provide a consistent, safe and abundant food supply to its residents and the world.”