Association Perspectives

A Cold Water Dousing to Set-Aside, Marketing Board Schemes 

Hard to believe, but some people still believe in the fallacy that set-aside and/or a single-desk marketing board will cure low grain prices in this country. Two separate schemes pitched recently by a few farmers are evidence of that.

One plan which started in Canada, “Focus on Sabbatical,” would have farmers around the world pay a membership fee to contractually cut their production, which organizers hope would then raise prices.

The other plan, proposed by two N.D. farmers, would have farmers pay a fee to establish a mandatory national farm marketing board to sell U.S. farm commodities.

Both ideas, to put it bluntly, are pipe dreams that ignore political and economic realities.

You’ll recall that the U.S. has been down the set-aside road before (some would say we’re still on it, with 34 million acres enrolled in CRP).  In fact, supply management tools have been utilized with varying degrees of success in the U.S. for over 70 years, according to Joe L. Outlaw and Steven L. Klose, both of Texas A&M University, in a paper on supply management “The 2002 Farm Bill: Policy Options and Consequences,” published last September.

They wrote that marketing quotas were the most effective at achieving the desired policy objective of controlling supplies, and that longer term programs such as the soil bank and conservation reserve programs were more effective at reducing supplies, and resulted in environmental benefits as well, compared to shorter term supply management programs.

“Clearly, the voluntary short-term supply management efforts have been ineffective at substantially reducing supplies,” Outlaw and Klose wrote. “Examples of these types of programs would include voluntary ARPs (Acreage Reduction Programs), dairy diversion and buyout programs, and farmer owned reserve. Mandatory programs such as set-aside and ARPs were also ineffective due to significant slippage.”

Slippage, Outlaw and Klose explain, occurs when there is a difference in the percentage of land removed from production and the percentage reduction in supply. It occurs because producers typically set-aside their poorest land, while farming the remaining acres more intensely.

There’s also the irrefutable reality that if you won’t grow it, somebody else will, whether it’s your neighbor, crop producers in other parts of the U.S., or other parts of the world. The Illinois Corn Growers Association points out that in the 1980s, while set-aside programs cut U.S. crop plantings by 37 million acres, farmers in other countries expanded their crop acreage by 41 million acres.

Bear in mind too, estimates that some 40% plus of land in N.D. is farmed by tenants, with similar land owner/tenant arrangements around the world. You can bet that landowners will work to find a renter, rather than let land sit idle.

As for a mandatory marketing board: Aside from the unrealistic assumption that a socialistic entity could be created and could compete in the American free enterprise system, and the fact that such a notion would not even be politically possible in this country or within the body of the World Trade Organization, there is also the matter of economics.

You’ll recall that a North Dakota wheat pool was proposed just a few years ago, and North Dakota State University even conducted an economic analysis of the idea, published in January, 1999. It concluded that a N.D. spring wheat pool would not be feasible because: 1) hard red spring and hard red winter wheats are highly substitutable; and 2) the pool’s market share in the U.S. hard wheat market would be too small to provide effective market power.

Furthermore, the success of both a spring wheat and durum pool would depend upon cooperation from the Canadian Wheat Board, whose trading practices in and as itself have been deemed unjust by the U.S. Trade Representative. “Without full cooperation from the CWB, the proposed N.D. wheat pools would have extremely limited market power and would have limited potential to increase its revenue,” the NDSU study concluded.

Bottom line: There will always be somebody out there somewhere willing to farm a few more acres if you are willing to give them up. And if you hold out for $4.00 wheat, there will always be somebody out there somewhere willing to sell for $3.95. It is beneficial for producers to work together to find ways to increase their production profits and decrease their business costs. But set-asides and single-desk marketing boards aren’t the answers.

“Association Perspectives” represents the views of the North Dakota Grain Growers Association, South Dakota Wheat Inc., and the Minnesota Association of Wheat Growers, which publishes Prairie Grains along with the Minnesota Wheat Research and Promotion Council.