Vilsack: All Ideas, Including Farmer-Owned Reserve, Should be Part of Farm Bill Debate

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All ideas for US farm policy, including the long-dormant Farmer-Owned Reserve (FOR), need to be a part of the next farm bill debate, according to USDA Secretary Tom Vilsack.

While labeling the FOR that ended in 1996 a “radically old idea,” Vilsack told members of the National Farmers Union (NFU) in Washington that all ideas should be part of the mix in debating the next farm bill. “It may be time for that kind of conversation to take place,” Vilsack said when asked about bringing back the FOR. “As they deal with the next farm bill, that needs to be part of the conversation. All the ideas need to be put on the table and there needs to be a robust conversation about all this with the understanding that you don’t start the conversation with, ‘Golly, how much money can we save, how much money can we squeeze?’”

Congress suspended the FOR program in the 1996 Farm Bill, according to a recap of the bill by the Economic Research Service (ERS), as part of an effort to boost supplies available for export. “Expiration of authority for ARPs (Acreage Reduction Programs) and suspension of the Farmer-Owned Reserve benefit exports by no longer limiting production and marketings in times of large supplies,” ERS said in a summary of the bill.

Background on FOR from ERS: The Food and Agriculture Act of 1977 directed the Secretary to administer a farmer-owned reserve program for wheat and, at his discretion, for feed grains through an extended price support loan program of 3-5 years duration. To induce participation, the Secretary was authorized to pay the annual storage costs of grains, as well as to waive or adjust interest rates. Grain producers received 25 cents for a bushel of wheat, corn, sorghum, or barley placed in storage, and 19 cents for a bushel of oats. The quantity of wheat held in the reserve was to be not less than 300 million nor more than 700 million bushels, but the upper limit could be adjusted to meet any U.S. commitments to an international grain reserve. Since no minimum amount was specified for producer-held feed grains, the Secretary was given the option of implementing either a reseal program or extended loan program. Storage payments could be discontinued for wheat whenever the average market price reached between 140 and 160 percent of the current loan for wheat. The loan could be called whenever the market price for wheat reached 175 percent of the current loan rate.

The current market/price situation facing farmers has an estimated 10 percent of farmers in financial difficulty, and Vilsack said he has already deployed all the tools he can, including the purchase of dairy products from the market, help for cotton ginning and more as he seeks to address the situation of “too much stuff and not enough demand.”

While using the Commodity Credit Corporation (CCC) authorities could be an option that would provide Vilsack broad authority to act, the USDA chief told NFU members Congress has restricted those abilities. “So if you’re looking for something today that you can do, that doesn’t reopen the farm bill because there’s an indication from this Congress that they have not appetite for doing that,” he noted, “the one thing they could do, is via the appropriations bill, is releasing that restriction so we can more aggressively use CCC. That would be helpful.”

On trade, Vilsack fielded a question about keeping Brazilian beef out of the US due to fears over the potential that could introduce foot and mouth disease (FMD) into the US. However, he simply said, “We’re going to have to have a disagreement on this,” particularly when it comes to the issue of getting US beef into markets like China.

“It’s really irritating to me, to be honest with you, when folks come into my office and say, ‘Open up that market. Get that beef into that country. Do whatever you have to do. But oh, by the way, don’t let anything come into our country,’” Vilsack stated. “I can’t make the case in any other country to open up their market unless I’m willing to show a willingness to do it, if it’s safe, if it’s appropriate, all those caveats.”

Comments: Restoring the FOR is probably one of the least-likely options that the current Congress would explore in terms of the next farm bill, if for no other reason than the potential costs associated with paying farmers to store grain and allowing its release only when prices hit a certain level. Prior history regarding the FOR showed the bulging reserve stocks were a “wet blanket” on commodity markets as prices neared trigger/release levels. And the actions by the Obama administration in 2012 to use the CCC authority in what was viewed as a bid to help a lawmaker in their reelection bid is what prompted the restrictions placed on that authority by Congress – again, another unlikely action that would be backed by the current Congress. Vilsack does make a valid case on the beef trade issue, one that is still not finalized in terms of allowing Brazilian beef to enter the US as the reviews and actions needed to make that happen are still in progress.

NOTE: This column is copyrighted material; therefore reproduction or retransmission is prohibited under U.S. copyright laws.