The National Farmers Union (NFU) has recently released the final report from a study by the University of Tennessee Agricultural Policy Analysis Center on the effects that a Market-Driven Inventory System (MDIS) would have on U.S. agriculture. Phase I of the study, released in September 2011, examines the effects MDIS would have had on extreme crop price volatility and government payments from 1998 to 2010, while Phase II projects the effects of MDIS from 2012 to 2021.
“The study found that MDIS would cost significantly less than current agricultural policies while preserving net farm income at current levels,” said NFU President Roger Johnson. “From 1998 to 2010, MDIS would have saved taxpayers nearly $100 billion compared to the polices that were in place. From 2012-2021, current farm programs are projected to cost $65 billion while MDIS is projected to cost $26 billion, a savings of $39 billion.”
The price of corn, soybeans, and wheat would have received a bump under MDIS policies. Corn prices would have been 26 cents per bushel higher, wheat prices would have been 48 cents per bushel more, and soybean prices would have increased by $1.09. Also under MDIS policies, exports would have been $20 billion more. MDIS combines a system of farmer-owned commodity inventories, set-asides, and loan rates to help decrease the volatility in the market.
“Decreasing volatility significantly benefits family farmers because it provides a better indication of the true market value of their products and allows them to make more informed decisions about their operation,” said Johnson. “Reduced volatility also benefits ranchers, ethanol producers, and other end-users by moderating extreme prices for their input costs and helping ensure that they are not put out of business due to factors out of their control. Consumers will also realize a benefit from decreased volatility. While commodity costs are not a large portion of food prices, MDIS will stabilize the portion of food prices that is related to commodity costs. MDIS will significantly reduce the cost of federal payments to U.S. farmers and ranchers, preserve net farm income, and benefit a variety of stakeholders. No other farm bill policy proposal addresses a long-term price collapse and significant market price volatility. We urge members of Congress to implement MDIS in the 2012 Farm Bill so that these benefits may be realized as soon as possible.
Click here to view the full report