In early March 2012, the National Farmers Union (NFU)––the US second largest agricultural union––drafted an alternative to the Farm Bill in the context of its ongoing reform. The option includes several features that are particularly relevant.
The NFU actually proposes the implementation of a market-driven inventory system, or MDIS, intended to stabilize agricultural prices and farmers’ revenues, while significantly lowering Federal budget expenditures.
As mentioned in one of our previous articles1, the simulations carried out by the Agricultural Policy Analysis Center, in a joint study on MDIS with the NFU, showed that if such system had been adopted between 1998 and 2010, 60 percent of the federal government payments to large crops farmers would have been saved over that period, and 46 percent over the 2006-2010 period. The revenues of farmers would have remained about the same, without experiencing the financial turmoil they were exposed to. The simulations conducted for the next ten years (2012-2021) are anticipating savings of 60 percent.
The initiative presents many similarities with momagri’s proposal “Another CAP is possible”.
First, by providing mechanisms to better stabilize prices while cutting budget expenses, the two proposals are consistent with a search for effectiveness. In fact, the simulations conducted by momagri for the period 2006-2010 indicated that its proposals would have saved:
• A total of €40 billion, or 15 percent of the PAC during the same time;
For the years 2011 to 2010, the estimates are leading to similar conclusions by strengthening the effectiveness of such a system over time:
• Over 20 percent of the financial aid paid for grain crops, while maintaining and stabilizing farmers’ revenues.
• Total savings of €92.5 billion, or 18 percent of the CAP budget;
Secondly, the two proposals are based on an identical contra-cyclical rationale that aims to provide farmers with enough room for maneuver and limit government intervention (food security stocks) to cases of force majeure. In both systems, building up and lowering stocks are only triggered when prices are either too low or too high, and thus jeopardize the existence of farms, and possibly confuse market signals for farmers.
• A saving of over 40 percent of financial aid paid to grain crop farmers.
Lastly, the proposals are incorporated in a comparable environment. As we already mentioned it2, the Farm Bill and the CAP must soon be reorganized in a context of harder budget restraint that makes discussions very arduous. Consequently, various experts in the United States and in the European Union are doubtful that a consensus can be reached in 2012 for the Farm Bill, and in 2013 for the CAP.
The proposals made on both sides of the Atlantic by the NFU and momagri are indeed showing that a different agricultural policy is possible.
1 Please see momagri’s article “Impacts of a farm policy do-over for historical 1998 to 2010”, http://www.momagri.org/UK/focus-on-issues/Impacts-of-a-farm-policy-do-over-for-historical-1998-to-2010_1005.html
2 Please see momagri’s article “Similar concerns for the reform of the CAP and the Farm Bill”, http://www.momagri.org/UK/a-look-at-the-news/Similar-concerns-for-the-reform-of-the-CAP-and-the-Farm-Bill_1052.html