Crop choices Narrow

[farmaholic]

https://youtu.be/FHDwRECFL8M

[Hamloc]

Their is a profit if all land is paid for and equipment cost min and just shift to neutral and enjoy the down turn.

I certainly agree but 1 problem. I have a son who would like to farm full time and any new land in my area that comes up for rent is $100 per acre, not sure my pencil is that sharp lol. Obviously my neighbors are better at math than me!

[tweety]

Ritchie Bros is always looking for more work, so there is that option for ya

[chuckChuck]

The input industry championed the three-decade push for all-out production
Planned production reductions would eat into their bottom line, making them an unpopular policy topic

By Harwood D. Schaffer and Daryll E. Ray
Published: January 3, 2018
Opinion

Why are supply management programs such an anathema to so many people? Part of the reason can be traced to events that took place 34 years ago.

Between the 1981 crop year and the 1982 crop year, corn ending stocks increased 1.0 billion bushels (12.2 per cent of production) to 3.5 billion bushels with grain reserves growing to 3.0 billion bushels and prices falling to the loan rate of $2.55 per bushel (all figures U.S. funds).

“On January 11, 1983, President Reagan announced that the U.S. Department of Agriculture would implement a payment-in-kind (PIK) program to help reduce government grain surpluses and to improve farm income.”

Secretary of Agriculture John Block explained, “PIK is basically simple. Farmers who take out of production additional acres over what they agree to take out under the current program will receive as payment a certain amount of the commodity they would have grown on these acres. The commodity is theirs to do with as they wish. Commodities for the PIK program will come from farmer-owned reserve, regular loan or CCC-owned stocks.

“We have a threefold objective with PIK. Reduce production, reduce surplus stock holdings, and avoid increased budget outlays that would otherwise be necessary under price support programs.”

Farmers responded positively to the program. Production problems during 1983 resulted in farmers taking more acres out of production than anticipated. In the end, 32.2 million corn acres were taken out of production and the harvest fell by nearly 50 per cent to 4.2 billion bushels.

With reduced acreage, purchases of input supplies fell drastically, fewer machinery repairs were needed, and reduced production resulted in less grain going through the marketing channels. The impact on Main Street and the agribusiness sector was immediate as was the response.

At that point, the agribusiness sector began to pay more attention to agricultural policy and the design of commodity programs. Blame for reduced sales was directed toward supply management programs which used acreage reduction programs to keep from accumulating excessive stocks.

Agribusiness wanted to see an agricultural sector which used all its capacity all the time so they would not have to deal with periodic government-induced reductions in demand for their products and services.

The way to achieve that goal was to lay the groundwork for the elimination of farm programs, especially those that used acreage reduction programs. That goal was achieved with the passage of the 1996 Farm Bill which eliminated “farm programs as we know them.” When it turned out that farm programs were needed, they favoured revenue support programs.

Today, we are experiencing the fourth year of low crop prices. With crop prices below the full cost of production, farmers are looking for every way they can find to reduce production costs. That means they are shopping more carefully for seeds and farm chemicals, purchasing no more than they absolutely need. They are buying fewer new tractors, combines, and pickup trucks.

As a result, the agribusiness sector is facing the same problem that it did in 1983. Demand for their products and services, except for repairs, has fallen and they have had to reduce their workforce. They have had to lower the price of inputs and profitability in the agribusiness sector has fallen. Merger talks are in the air as they seek ways to survive in a tight market.

Ironically, agribusiness is facing a similar set of problems (reduced demand for agricultural inputs) in a different farm policy environment. In 1983, it was low 1982 marketing year prices coupled with unforeseeable production difficulties that were the problem and not the government acreage reduction program per se. Without a wet spring in some parts of the country and a dry summer in other parts of the country, the 1983 acreage reduction under PIK would not have been nearly as large.

The common underlying problem between 1983 and 2017 is low prices.

The solution is to design a farm program that counteracts prices that are well below the full cost of production.

Harwood D. Schaffer is director of the Agricultural Policy Analysis Center at the University of Tennessee. Daryll E. Ray is the centre’s retired director and an emeritus professor at the University of Tennessee.

[chuckChuck]

If we are going to have a farm program, supply management makes the most sense
Revenue supports could break the cycle of over- and undersupply of agriculture commodities
Harwood D. Schaffer and Daryll E. Ray

Published: December 8, 2017

The Texas Farmers Union contracted with the Agricultural Policy Analysis Center to develop a design for the commodity title of the 2018 Farm Bill based on supply management principles.

Supply management, as a way to tackle the chronic price/income problems faced by farmers, has been out of favour in the U.S. for at least the last 20 years, so why bring it up again when it has so little political support?

The chronic price/income problems farmers face reflect the lack of responsiveness to low prices in agricultural commodity markets. Consumers may respond to lower food prices by buying a better grade of meat or food that has more processing but, given an adequate diet to start with, they do not purchase more food. Aggregate food consumption remains fairly stable over a wide price range.

On the supply side, crop farmers do not respond to lower prices by voluntarily taking acres out of production until profitable prices return. In fact, in the face of lower prices, farmers have every incentive to maximize their production so that they can spread their fixed costs out over more bushels, bales, or hundredweight. They certainly are not going to reduce production on rented ground.

If there were sufficient responsiveness to lower prices on the part of either consumers or farmers, the chronic price/income problems that face crop agriculture would not exist and there would be no need for farm programs as we know them.

Given the economic characteristics of crop production we have just described and the need for a stable national food supply, doing nothing is not a viable option, thus, the need for an agricultural policy that meets the needs of both consumers and farmers.

There are two ways to provide financial support for the agricultural sector so consumers have access to an adequate supply of food that meets their needs and farmers are able to remain in production and provide that food: price supports or revenue support. Both methods support farm income, but do it in different ways.

A supply management program supports net farm income by providing price support for the major crops that farmers produce. Depending on their management skills, price supports provide producers with the opportunity to make a reasonable return on their land and labour.

The alternative is to provide income support. The idea is that these supports should not influence production decisions. Income support programs include direct payments, countercyclical payments [i.e. the Counter-Cyclical Program and the Price Loss Coverage (PLC) program], revenue protection programs like the Annual Crop Revenue Election (ACRE) program and the Agricultural Risk Coverage (ARC) program, and crop revenue insurance.

Thus, the argument against a supply management program is philosophical. Opponents of supply management programs in agriculture believe that ideally no program is needed (the premise behind the design of the 1996 Farm Bill) but if there is to be a program, it should support total farm revenue not prices. They believe that revenue support programs intervene less in production decisions. Revenue support programs do not take into account the well-documented economic characteristics of crop agriculture that result in chronic price and income problems.

Supply management programs, on the other hand, take into account the cause of low prices (supply that exceeds demand) by taking a marginal amount of supply off the market so that crop prices rise to a profitable level and if necessary inducing farmers to reduce their production through paid acreage reduction programs.

By taking the economic characteristics of crop agriculture into account, price support programs like the APAC/TFU supply management program only make payments on the small amount of supply that exceeds demand. Revenue support programs, on the other hand, pay on nearly every bushel, bale, and hundredweight of production and historically have ended up being far more costly than price support programs.

After 20 years of denying the economic characteristics of crop agriculture by making farm payments when they weren’t needed and failing to provide adequate support when it is needed, now is the time for members of Congress and farm policy-makers to give price support programs another look. With crop prices well below the cost of production for the foreseeable future, revenue support programs will be too expensive and still provide inadequate support to farmers.

[SASKFARMER3]

Ok chuck let’s bring back the CWB

[Klause]

Their is a profit if all land is paid for and equipment cost min and just shift to neutral and enjoy the down turn.

Oh how nice that would be.


Try being a young guy starting from nothing with mostly rented land and equipment, land, bin payments right now.

It's so much fun ;(

[blackpowder]

Supply management for wheat!
Your kidding right?

Farma. Merely had the jingle in my head. "Movin on up!"

[checking]

Should ask pharma that when living "south of the tracks", how do you get to "move to the east side"!

[chuckChuck]

Ok chuck let’s bring back the CWB

What did the US PIK program have to do with single desk marketing? Nothing. Did you actually read the articles. It said nothing about single desk selling.

What it did say is the problem of low prices has been around before and will likely be around for many more years. And the input suppliers wanted a US farm Bill to make sure they sold lots of inputs rather than deal with oversupply issues by controlling the supply.

I doubt farmers in this country would ever agree to an acreage reduction program but the US had one and it was cheaper and more effective than all their other support programs.

I say go for it, when the market price is lower and saying reduce supply then increase production and try to grow yourself out of the oversupply situation you find yourself in. You will get a chance to see how it works in the next few years barring any weather and production problems.

It is certainly not working in the US.