It’s time to restock the national pantry

More than most months, September delivers farmers key numbers – yield per acre, weaning weight, price per pound or bushel – they will live with for the coming months.
Take the USDA’s September Crop Production Report issued Monday, Sept. 12.
The report, jammed between August’s tone-setting, first in-the-field estimate and November’s nearly complete, harvest-hardened numbers, is usually a yawner.
A screamer. This year, however, it turned into a screamer because USDA found 3 percent more corn, 2 percent more soybeans and 5 percent more cotton than it reported only a month before.
The increases pushed already drought-baked, hurricane-spun markets lower because the added supplies, although tiny, were not offset with equal or larger increases in demand.
That spells trouble in inelastic markets like agriculture where minuscule changes it either supply or demand cause massive price changes.
Most of this new production was added to next year’s carryover, the amount that will not be used and, thus, will be carried over into the ’06/’07 production year.
Carryover. One measure of this carryover is the stocks-to-use ratio, the percentage of current production headed for storage relative to what the market will use. The ’05/’06 cotton stocks-to-use ratio is now 33 percent.
That means the production from one out of three American cotton acres this year will still be sitting around this time next year. Such is often the case with cotton.
The 2003 overburden was 17 percent; 2004′s was 28 percent. And yet, in total defiance of market orthodoxy, we grew even more in 2005.
See why the world thinks U.S. cotton policy is nuts?
The story for corn is similar. In September, USDA found 300 million more bushels since its August look-see, making the 2005 corn crop, now estimated at 10.6 billion bushels, the second largest on record.
The bigger crop fattened the 2005 corn stocks-to-use ratio to 19 percent.
Simple math shows that nearly one out of every five bushels of corn, or 2.078 billion bushels, harvested this September will be hanging around next September.
Loan deficiency. It also means corn growers will be faxing big Loan Deficiency Payment requests to their local Farm Service Agency branch.
The current Midwestern corn Loan Deficiency Payment – the difference between the guaranteed government loan price and the local cash market price – hovers near 40-cents per bushel.
At that level, corn growers in the Big Five corn states of Iowa, Illinois, Nebraska, Minnesota and Indiana could claim $2.8 billion in Loan Deficiency Payments if they all had their crops in the bin (where, remember, one-fifth is destined to stay) today.
Whacky?
Sure, but not one ag policy guru in Congress or the Bush administration has proposed any alternative to the current overproduce-and-pay policy.
Subsidy cut. All agree, however, that subsidies will be cut in the 2007 farm bill.
Those cuts, however, do not – cannot – promise similar cuts in production that might lift market prices.
In the past, farmers have viewed subsidy cuts as cause to increase production because they now need more bushels or pounds to deliver the same or greater income.
One way to sop up extra production, boost market prices and cut direct farm subsidies is to rebuild government food stocks.
National pantry. Prior to the 1996 farm bill, USDA, through its Commodity Credit Corp., maintained a national food pantry for use in time of domestic or foreign crises.
Today, though, the commodity’s larder holds only six items: 119.3 million pounds of non-fat dry milk, 600,000 pounds of cheese, 54 million bushels of wheat, 200,000 bushels of corn, 9.1 million pounds of peanuts, and 7.6 million pounds of lentils.
Basically, that’s an empty grocery cart for the government agency in charge of food security for 280 million Americans: 15.4 pounds of food per person – 11 pounds of which is unprocessed wheat.
Food security. A nationwide Katrina-like disaster would deliver a food panic that would make the recent looting in New Orleans look like Mardi Gras.
As such, policy makers must consider restocking the national pantry as part of the 2007 farm bill.
The prudent and practical action could increase farm prices, cut carryover and ensure domestic food security.

About the Author

Alan Guebert was raised on an 800-acre, 100-cow southern Illinois dairy farm. After graduation from the University of Illinois in 1980, he served as a writer and editor at Professional Farmers of America, Successful Farming magazine and Farm Journal magazine. His syndicated agricultural column, The Farm and Food File, began in June, 1993, and now appears weekly in more than 70 publications throughout the U.S. and Canada. He and spouse Catherine, a social worker, have two adult children. farmandfoodfile.com More Stories by Alan Guebert

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