Global program seeds idea of 8 billion bushel grain production cutback

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SALEM, Ohio – Fifteen years ago, Saskatchewan agribusinessman Ken Goudy organized the demand and use of generic glyphosates by Canadian farmers. This time around, after relocating to Iowa, his goal is to change grain prices on the world market.

The program Goudy organized, Focus on Sabbatical, is gaining momentum – and skepticism – after delegates’ visits to Australia, Argentina and Brazil, and meetings across the United States and Canada.

Goudy proposes an unusual solution to farmers’ financial problems – a solution that depends on farmers in five countries voluntarily cutting production by 8 billion bushels in grain and oilseeds.

Feedgrain production would be reduced by up to 4.5 billion bushels, wheat production by 2 billion bushels and oilseed production by 1.5 billion bushels. The cut would be done one year out of every four or five, creating cycles of higher prices, Goudy said.

“It’s no secret that grain prices aren’t that great, and farmers are only hurting themselves,” Goudy said. “They’re working together unintentionally to provide a comfortable surplus of grain – assuring themselves rock-bottom commodity prices. The program gives them an opportunity to work together to control the only grain trade factor they can, which is production.”

“It’s also been said that farmers can’t organize on such a large scale, but I did it all over Canada and I will certainly try to globally,” he said. “Organization provides economic power needed to face monopolies.”

From conception. First conceived two years ago, the idea has spread across the globe as Goudy traveled to meetings in Brazil and Argentina, and sent representatives to Australia to meet with producers there.

“In the United States, we’re finding that farmers aren’t interested in cutting soybean production to give the market to Brazil,” he said, noting the scale of cuts proposed are much larger than government set-aside programs of the past.

However, because Brazilian farmers seed their soybean crop months ahead of their North American counterparts, the largest acreage cut for soybeans could be in Brazil. North American farmers would likely reduce acreage planted to corn and wheat, Goudy said.

January visits with the Brazilian farm union, cooperatives, and large farmers showed “considerable interest in getting better prices.”

Goudy admits the task is difficult since “individual farmers are not willing to stay out of the reduction race if it means less income for themselves.”

Production cuts. “Unlike a major drought, which invariably pushes market prices higher, the distinct advantage to an announced 8 billion bushel cut in production is the ability to pay farmers up front,” Goudy said.

He claims the program has the potential to double grain prices a year before the actual production cut, and a limited grain supply would keep prices and demand high for an extended time.

“With such a significant cut in production, the grain trade and ag industry would have no recourse but to drive up prices for the previous year’s harvest in order to curb consumption and compensate for the next year’s shortfall.

“Naturally, when farmers know the cut is coming, they and the speculators will also help drive up prices by withholding grain sales and buying long positions in the market,” he said.

Getting off the ground. To get the program off the ground, Goudy continues to travel in search of interested farmers. If enough interest in shown, an investment company will be formed. A targeted number of shares – one share per acre to total 8 billion – will be sold, and if the number isn’t met, all money will be returned and the program will shut down.

Membership in the program would cost a one-time $250 fee in addition to the cost of acre shares. The jackpot would in turn be used to invest in farmer-owned investment companies to rent land in South America – providing the continent’s farmers their compensation for not planting – and to purchase grain and futures to increase returns.

Enrollment and per-acre fees would serve as a compliance mechanism, Goudy said.

“We’ve got to ensure that they don’t go to the fields. If they break their word, they’re going to forfeit their investment,” he said. “When push gets to shove, will farmers hold to their commitment? That’s what we’ve got to figure out.”

Goudy estimates that thousands of dollars would be saved by eliminating planting costs alone during the off year, estimated at $100 to $120 per acre in the Corn Belt.

“On top of that, farmers would be more than covering their investment, making more dollars per acre for two years running,” he said.

Politics and economics. “The issue that’s raised with any voluntary program like this one is that participants will have to deal with free riding,” said Carl Zulauf, Ohio State University agricultural economist.

“I’m foreseeing that something will have to be done to address people who benefit from the program without paying their dues,” he said.

If enough farmers participate, the supply curve will shift to the left and create higher prices and incentives to go against agreements, Zulauf said.

The program has not attempted to gain endorsement from any national commodity groups.

“We need to bring people in from both sides. Too many times it’s the organizations against free enterprise, and we don’t need the politics,” Goudy said.

Ohio interest. Nick Heitz, a grain farmer from Wapakoneta in Auglaize County, Ohio, is involved in the planning stages of the program and served as a delegate to Brazil earlier this year.

“When we went down there, they thought we were being bullies from the United States. But once we explained how it would work – and it would take cooperation from all five countries to make it work – we started to see that the farmers understood and are in favor of this,” he said.

Higher prices will afford them better roads, as will proposed payments up front – payments that are nearly double what current land rent costs are in Brazil.

“The other issue that North American farmers should consider is that feeding cheap grain makes cheap livestock and cheap land. Once you dig yourself into that hole, it’s a long road to get out,” Heitz said.

“As farmers, it’s nobody’s fault that there’s a surplus. Maybe what we need is something to improve the mechanism to regulate prices. After all, the price of oil is controlled by regulating supply. There’s no reason the same thing can’t be done with grain,” he said.

For more information on Focus on Sabbatical, contact Goudy at 515-450-1516 or e-mail fosamerica@uswest.net.

(You can contact Andrea Myers at 1-800-837-3419, ext. 22, or by e-mail at amyers@farmanddairy.com.)

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