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Grain Reserves: Common-Sense Farm Policy

Grain Reserves: Common-Sense Farm Policy

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Published by Food and Water Watch
Farming is a tough job. Farmers deal with unstable weather patterns and have just a few buyers for most crops. This leads to boom-and-bust swings between bumper crops and dire shortages. Income isn't guaranteed, and farmers are required to put a lot on the line to get their crop into the ground.
Farming is a tough job. Farmers deal with unstable weather patterns and have just a few buyers for most crops. This leads to boom-and-bust swings between bumper crops and dire shortages. Income isn't guaranteed, and farmers are required to put a lot on the line to get their crop into the ground.

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Published by: Food and Water Watch on May 23, 2014
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Grain Reserves: Common-Sense Farm Policy
The uncerainy o weaher and price volailiy affecs all armers, bu armers who grow sorable saple crops like whea, corn, soybeans, oas and sorghum are especially vul-nerable o wild price swings. For over a decade, U.S. arm policy has encouraged armers o plan as many o hese saple “commodiy” crops as possible. Bu our arm policy no longer has any proecive measures o manage his increased producion or o preven dramaic price crashes or armers when here is a glu o crops on he mar-ke a he same ime. Even hough he prices paid o armers may plumme i here is oo much supply on he marke, mos armers sill overproduce. So i armers don’ benei rom overproducion, who does? I’s he corporae ood manuacurers and acory arms ha buy he grains, someimes or less han hey cos o produce, and hen process and sell hem a a huge markup o con-sumers. Unsurprisingly, i’s also hese corporae agriculure ineress ha have he poliical sway o lobby Congress or policies ha keep prices low, markes volaile and overproduc-ion unchecked. Governmen paymens o commodiy crop producers (pay-mens made every year regardless o crop prices) have served as a sopgap measure since 1996 o keep armers in business when prices plumme because o overproducion. The 2014 Farm Bill ended direc paymens o mos commodiy crop producers and insead emphasized subsidized crop insurance as he primary arm saey ne. Missing rom he inal bill are he real reorms we need, including resoring grain reserve programs ha were hisorically used o provide sabiliy or armers and o rein in overproducion o hese crops.The Unied Saes mainains a Sraegic Peroleum Reserve o supplemen he counry’s energy needs in imes o emer-gency, bu we no longer have such a program or he ood supply. Because here’s no policy mechanism o manage he overproducion o saple grain producs, especially corn, i’s resuled in a lood o corn ha has drasically changed our ood sysem. The oversupply o corn provides eed or acory-armed animals, creaes cheap high-rucose corn syrup or processed oods, produces ehanol o mix wih gasoline, and dumps excess corn on inernaional markes, where i can ruin he marke or amily armers in hose counries.
How Did We Get Here?
During he Grea Depression, he New Deal esablished grain reserves o help preven wide swings in he availabiliy (and price) o saples because o weaher, disaser or unusually good harvess. Reserves have been used or housands o years o ensure ood securiy. During exremely producive years, he governmen reserve purchased armers’ surplus o sorable grain crops, which prevened prices rom collapsing when armers brough heir enire crop o marke all a he same ime. I armers had a bad year because o drough or pes inesaion, he reserve could release he surplus grain ono he marke. Thus, wih he supply o grain remaining relaively seady rom year o year, prices never dipped oo low in good years or rose oo high when harvess were poor. Evening ou he volailiy in agriculural markes was a long-erm benei o armers and consumers. During he 1980s, agribusiness-driven agriculural policy iniiaives began o replace he programs o he New Deal. The 1985 Farm Bill began o dismanle he New Deal arm
F
arming is a ough job. Farmers deal wih unsable weaher paterns and have  jus a few buyers for mos crops. This leads o boom-and-bus swings beween bumper crops and dire shorages. Income isn’ guaraneed, and farmers are required o pu a lo on he line o ge heir crop ino he ground.
    
FOOD
 
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saey ne by reducing he number o acres ha armers were required o leave unplaned. I also sared o phase ou he crop-reserve purchase program. This boh brough new acreage ino producion and allowed excess socks o ener he marke, which increased supply and lowered prices paid o armers. These changes were sold o he arm communiy wih promises ha he excess supply would go o hungry expor markes around he world. Bu he promised increase in earnings rom expor prois, based only on heory and no evidence, never maerialized — armers jus los money.
The End of Reserves
The 1996 Farm Bill signiicanly changed U.S. agriculural policy and compleed many o he ree-marke effors inii-aed in he 1980s. Unil 1996, he ederal governmen made emergency “deiciency” paymens o producers o whea, eed grains, coton and rice o make up he difference i seesaw-ing marke prices ell below arge prices se in he Farm Bill. The 1996 Farm Bill capped his spending or he irs ime, guaraneeing armers a series o ixed bu declining paymens ha were no linked o how much hey were growing.
1
 The 1996 Farm Bill also abolished he naional sysem o holding grain in reserve.Insead o buying or selling grain in reserves o sabilize naional supply, he ederal governmen paid armers direcly wih ixed paymens based on heir hisoric producion o speciied commodiy crops — bu no heir producion ha year. There was no mechanism in place o preven armers rom planing as much as hey could, and prices ell accord-ingly. Farmers harvesed 7.5 million more acres o corn and 7.6 million more acres o soybeans in 1997 han in 1995.
2
 As a resul o his drasic increase in producion, crop prices plunged. By 1999, he real price o corn was 50.0 percen below 1996 levels, and he soybean price was down 40.9 percen.
3
 By he 2002 Farm Bill, i was clear ha hese ixed bu declining paymens weren’ enough — armers could no make a living based solely on he marke. Congress resored a more expensive and weaker arm saey ne paymen sysem o provide some proecion rom crashing prices.
4
As or he whea held in reserves, i was ranserred o a humaniarian ood bank and global chariies under he governance o he U.S. Deparmen o Agriculure. Because i was no longer buying armers’ surplus crops, he reserve was gradually depleed unil 2008.
5
 Figure 1 ells he sory: in conras o he promises made in he 1980s and 90s, agriculure markes do no sel-correc. As corn prices have coninued o plumme in he las 20 years, armers are sill producing roughly he same acreage in hopes o greaer reurn.
6
 They hope o make up or he low price or each bushel by selling more bushels. Wihou incenives o ollow land se-aside programs or use sraegic grain reserves, mos armers won’ decide on heir own o limi heir produc-ion in order o correc a marke ha hey don’ conrol.
Timeline
1933
 Agriculural Adjusmen Ac o 1933 creaes he Commodiy Credi Corporaion (CCC), which ses minimum prices ha processors and oher buyers mus pay or commodiy crops. Volun-ary acreage reducion programs discourage armers rom overproducing.
1954
Agriculural Ac o 1954 auhorizes a CCC-run grain reserve or oreign and domesic ood securiy.
1965
 Food and Agriculural Ac o 1965 auhorizes a long-erm diversion o acreage o reduce over-producion.
1977
 Food and Agriculural Ac o 1977 esablishes a armer-owned reserve or grain.
1985
 Food Securiy Ac o 1985 eliminaes he CCC grain reserve.
1996
 Federal Agriculure Improvemen and Re-orm Ac o 1996 marks he inal shif oward “marke-oriened” arm policy. I eliminaes acreage reducion programs and armer-owned grain reserves, and inroduces direc paymens o armers as a differen kind o “saey ne” ha allows marke prices o say very low. Mar-ke prices or corn and soybeans drop by nearly hal by 1999.
2002
Farm Securiy and Rural Invesmen Ac o 2002 makes direc paymens permanen.
2014
 Agriculural Ac o 2014 ends direc paymens and emphasizes subsidized crop insurance as he primary saey ne.
SOURCE: Food & Water Watch analysis of National Agricultural Statistics data; price index calculated on real 2010 dollars.
Figure 1: Indexed Corn Price and Acreage
(1995 = 100)
Corn Harvested AcresCorn Real Price Received1401201008060402001990199520002005

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