Little Advantage Seen Had '90 Farm Law Applied This Year

November 4, 1999

A co-director of the Missouri-based Food and Agricultural Policy Research Institute says any agricultural policy would have been under pressure during the last four years. Had the 1990 farm law been in effect, he adds, prices would have been higher by a few percentage points this year, but set-aside acreage and increasing government-held grain stocks would be the reason.

Bob Young of FAPRI says another scenario reviewed was to use voluntary producer set-aside options to reduce supplies and increase incomes. If enough land was removed from production, corn prices could have averaged more than $2.40 per bushel this year, wheat prices could have moved toward $3 per bushel, Young says.

"But there are complications," he adds. "The net effect on total U.S. farm income is positive. However, income to the livestock sector would fall due to higher feed prices and adversely impact U.S. exports. At the higher prices, our competitors likely would respond, resulting ultimately in a drop not only in the volume but also the value of our exports."

Before abandoning the 1996 farm law or dramatically changing it, "caution" should be exercised when policy alternatives are developed and proposed, says Young. The government can take over grain, oilseed and cotton stocks as past farm programs have mandated. "But on the other side of the policy, when the government returned these same stocks to the market when supplies started to tighten, any runup in prices was capped."

Changes made to correct a short-term problem "may well send our competitors and our customers to places we would rather they not go," says Young.

Young's comments were included in a bylined article on the web site of the American Farm Bureau Federation at http://www.fb.com/news/fbn/html/amidlife.html.