Thursday, October 25, 2012

An alternative grain reserve proposal

This is an interesting proposal for an alternative farm policy for the US based not on the current model of direct payments to farmers to supplement income, nor on the government grain reserves I have advocated for on this blog.  Instead, it proposes a system of farmer-owned grain reserves that would serve the purpose of price stabilization that government reserves would also satisfy, but without saddling the government with huge grain reserves to manage.  The article analyzes what government expenditures and farm income would have been in the period from 1998-2010 had the farmer-owned reserve been in place, and discusses separately the effects of such an alternative policy on different stakeholders.  The government would have spent about a third of what it actually did over the period, and farmer income would have improved slightly.  The system would have better met the needs of everyone involved, with the exception of input vendors and market speculators.

The article also contains a historical overview of US farm and grain reserve policy, as well as a good explanation of why the agricultural economy functions differently than other sectors.

I recommend this article for a good idea of where US farm policy should be headed.  Also, I think one of the co-authors received a prize in the same agricultural development essay competition as I did a few years ago.

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