apca a market directed inventory system (mdis) national farmers union february 29, 2012 daryll e....
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AP CA
A Market Directed Inventory System
(MDIS)
National Farmers UnionFebruary 29, 2012
Daryll E. Ray and Harwood D. SchafferAgricultural Policy Analysis Center
University of Tennessee Institute of Agriculture
AP CA
Policy DescriptionObjectives – Bulk of revenue from market receipts– Reduce government payments while
maintaining farm income– Reduce price volatility
AP CA
Policy DescriptionMDIS Specifications for 1998-2010 Study Period– Initial corn loan rate set at midpoint between
variable and full cost of production– Indexed with a prices paid by farmers index–Other crop loan rates set to historic ratios
with corn– Release price is set at 160% of loan rate
AP CA
Policy DescriptionMDIS Specifications for 1998-2010 Study Period–MDIS maximums• Corn – 3 billion bushels• Wheat – 800 million bushels• Soybeans – 400 million bushels
– Farmer storage payment rate 40¢/bu./yr– Set-aside available if needed– Eliminate Direct Payments, LDPs, & CCPs
AP CA
8 Crops - Government Payments
$0
$5
$10
$15
$20
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Historic Baseline
MDIS
$ Billion
AP CA
8 Crops – Government PaymentsAverage Per Year Over Each Period
$0
$2
$4
$6
$8
$10
$12
$14
$16
1998-2005 2006-2010 1998-2010
Historic Baseline
MDIS
$ Billion
$14.8
$4.8
$6.8
$3.6
$11.7
$4.3
AP CA
Corn Prices
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Historic Baseline
Release Price
Loan Rate
AP CA
Corn Prices
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Historic Baseline
MDIS
Release Price
Loan Rate
AP CA
Corn PricesAverage Per Year Over Each Period
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
1998-2005 2006-2010 1998-2010
Historic Baseline
MDIS
$2.05
$2.68
$4.02$3.71
$2.81$3.07
AP CA
Corn Exports - Quantity
0
500
1000
1500
2000
2500
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Historic Baseline
MDIS
Million Bu.
AP CA
Corn Exports - Value
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010$0
$2
$4
$6
$8
$10
$12
Historic Baseline
MDIS
$ Billion
AP CA
Corn Value of ExportsAverage Per Year Over Each Period
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
1998-2005 2006-2010 1998-2010
Historic Baseline
MDIS
$ Billion
$3.9
$4.8
$8.3$7.7
$5.6 $5.9
AP CA
MDIS Stocks
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
500
1000
1500
2000
2500
3000
3500Corn
Wheat
Million Bu.
Soybeans
AP CA
Corn – Value of Production plus Government Payments
Average Per Year Over Each Period
$0
$10
$20
$30
$40
$50
$60
1998-2005 2006-2010 1998-2010
Historic Baseline
MDIS
$ Billion
$26.4$28.2
$51.5$46.5
$36.1 $35.2
AP CA
Realized Net Farm IncomeAverage Per Year Over Each Period
$0
$10
$20
$30
$40
$50
$60
1998-2005 2006-2010 1998-2010
Historic Baseline MDIS
$ Billion
$49.8 $50.8$55.8
$51.5 $52.1 $51.1
AP CA
Summary of FindingsOver the Study Period, 1998-2010, with MDIS in Place: – Government payments 60% lower– Increased crop prices and increased reliance
on market receipts– Value of exports $4.9 billion higher– Lower price volatility benefitting:• Consumers• Crop farmers• Livestock producers and industrial users
APCA
Policy in an Uncertain Future
Two sets of analyses: – A “future” represented by the 2012
USDA baseline (Baseline)– A “future” roughly patterned after the
historical experience of 1996-2010 and the supply variation we experienced
AP CA
Corn Prices
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
Baseline
AP CA
8 Crops – Value of Production
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$50,000
$100,000
$150,000
$200,000
Baseline
Million $
AP CA
8 Crops – Value of Exports
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Baseline
Million $
AP CA
8 Crops – Government Payments
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
Baseline
Million $
AP CA
Value of Production + Government Payments - Cash Expenses: 8 Crops
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$25,000
$50,000
$75,000
$100,000
$125,000
Baseline
Million $
AP CA
Realized Net Farm Income
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$25,000
$50,000
$75,000
$100,000
$125,000
Baseline
Million $
APCA
Policy in an Uncertain Future
Two sets of analyses: – A “future” represented by the 2012
USDA baseline– A “future” roughly patterned after the
historical experience of 1996-2010 and the supply variation we experienced
AP CA
Policy in an Uncertain Future
Four Shocked Scenarios: – A “future” roughly patterned after the
historical experience of 1996-2010 and the supply variation we experienced• Shocked Baseline: Shocked yields, current farm
programs
AP CA
Corn Yield Shock
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210
20
40
60
80
100
120
140
160
180
200
Baseline
Yield Shock
Bu/Ac.
AP CA
Corn Prices
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
Baseline
Shocked Baseline
Below $3.00
Above $7.00
AP CA
8 Crops - Government Payments
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
Baseline
Million $
AP CA
Value of Production + Government Payments - Cash Expenses: 8 Crops
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$25,000
$50,000
$75,000
$100,000
$125,000
Baseline
Million $
Shocked Baseline
AP CA
Realized Net Farm Income
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$25,000
$50,000
$75,000
$100,000
$125,000
Baseline
Shocked Baseline
Million $
AP CA
Policy in an Uncertain Future
Shocked Scenarios: – A “future” roughly patterned after the
historical experience of 1996-2010 and the supply variation we experienced• Shocked Baseline: Shocked yields, current farm
programs• Shocked No DP: Shocked yields, no direct
payments
AP CA
8 Crops - Government Payments
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
BaselineShocked No DP
Million $
AP CA
Value of Production + Government Payments - Cash Expenses: 8 Crops
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$20,000
$40,000
$60,000
$80,000
$100,000
Baseline
Shocked Baseline
Shocked No DP
Million $
AP CA
Realized Net Farm Income
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$25,000
$50,000
$75,000
$100,000
$125,000
Baseline
Shocked Baseline
Shocked No DP
Million $
AP CA
Policy in an Uncertain Future
Shocked Scenarios: – A “future” roughly patterned after the
historical experience of 1996-2010 and the supply variation we experienced• Shocked Baseline: Shocked yields, current farm
programs• Shocked No DP: Shocked yields, loan rates
unchanged, no direct payments• Shocked New LR No DP: Shocked yields, higher
loan rates, no direct payments
AP CA
8 Crops - Government Payments
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
Baseline
Shocked New LR No DP
Million $
AP CA
Value of Production + Government Payments - Cash Expenses: 8 Crops
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$20,000
$40,000
$60,000
$80,000
$100,000
Baseline
Shocked New LR No DP
Shocked Baseline
Million $
AP CA
Realized Net Farm Income
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$25,000
$50,000
$75,000
$100,000
$125,000
Baseline Shocked New LR No DP
Shocked Baseline
Million $
AP CA
Policy in an Uncertain Future
Shocked Scenarios: – A “future” roughly patterned after the
historical experience of 1996-2010 and the supply variation we experienced• Shocked Baseline: Shocked yields, current farm
programs• Shocked No DP: Shocked yields, loan rates
unchanged, no direct payments• Shocked New LR No DP: Shocked yields, higher loan
rates, no direct payments• MDIS (Market Driven Inventory System): Shocked
yields, higher loan rates, no DP, reserve stocks
APCA
Policy DescriptionMDIS Specifications for 2012-2021 Study Period
– MDIS corn loan rate set at $3.50– Other crop loan rates set to historic
ratios with corn – Minimize distortion– Release price is set at 160% of loan rate
APCA
Policy DescriptionMDIS Specifications for 2012-2021 Study Period
– MDIS maximums• Corn – 3 billion bushels• Wheat – 800 million bushels• Soybeans – 400 million bushels
– Farmer storage payment rate 40¢/bu./yr– Eliminate Direct Payments, LDPs, & CCPs
except for rice and cotton
AP CA
Corn PriceLoan Rate and Release Price
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00Release Price
Loan Rate
AP CA
Corn PriceLoan Rate and Release Price with Baseline
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
Baseline
Release Price
Loan Rate
AP CA
Corn PriceLoan Rate and Release Price with Scenarios
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
Baseline
Shocked Baseline Release Price
Loan Rate
AP CA
Corn PriceLoan Rate and Release Price with Scenarios
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
Baseline
Shocked Baseline
MDIS
Release Price
Loan Rate
AP CA
Corn PricesAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
Shocked Baseline
MDIS
$3.43
$4.07
$5.75$5.29
$4.59$4.68
AP CA
Corn PricesAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
Shocked New LR No DP
MDIS
$3.54
$4.07
$5.89
$5.29
$4.71 $4.68
AP CA
MDIS Stocks
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20200
250
500
750
1000
1250
1500
1750
2000
2250
2500
Corn
Wheat
Million Bu.
Soybeans
AP CA
8 Crops – Value of Exports
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Baseline
Shocked Baseline
MDIS
Million $
AP CA
8 Crops - Value of ExportsAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Shocked Baseline
MDIS
$ Billion
$29.9
$35.4
$46.5 $47.0
$38.2$41.2
AP CA
8 Crops - Value of ExportsAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Shocked New LR No DP
MDIS
$ Billion
$30.1
$35.4
$47.4 $47.0
$38.8$41.2
AP CA
8 Crops - Government Payments
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
Shocked
Shocked New LR No DP
MDIS
Million $
AP CA
8 Crops – Government PaymentsAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$2
$4
$6
$8
$10
$12
$14
$16
Shocked
MDIS
$ Billion
$4.9 $3.0$2.3
$4.9
$2.6$4.9
AP CA
8 Crops – Government PaymentsAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$2
$4
$6
$8
$10
$12
$14
$16
Shocked New LR No DP
MDIS
$ Billion
$14.8
$3.0$0.2 $2.3
$6.5
$2.6
AP CA
Value of Production – 8 Crops
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$50,000
$100,000
$150,000
$200,000
Baseline Shocked Baseline
MDIS
Million $
AP CA
8 Crops – Value of ProductionAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
Shocked
MDIS
$ Billion
$96.5
$116.9
$151.4 $148.1
$124.0$132.5
AP CA
8 Crops – Value of ProductionAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
Baseline New LR No DP
MDIS
$ Billion
$98.0
$116.9
$155.0 $148.1
$126.4 $132.5
AP CA
Value of Production + Government Payments - Cash Expenses: 8 Crops
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$20,000
$40,000
$60,000
$80,000
$100,000
Baseline
Shocked Baseline
MDIS
Million $
AP CA
Value of Production + Government Payments - Cash Expenses: 8 Crops
Average Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$10
$20
$30
$40
$50
$60
$70
Shocked
MDIS
$ Billion
$16.0
$33.8
$66.7
$59.5
$41.4$46.6
AP CA
Value of Production + Government Payments - Cash Expenses: 8 Crops
Average Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$10
$20
$30
$40
$50
$60
$70
Shocked New LR No DP
MDIS
$ Billion
$26.4
$33.8
$64.2$59.5
$45.3 $46.6
AP CA
Realized Net Farm Income
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$25,000
$50,000
$75,000
$100,000
$125,000
Baseline
MDIS
Shocked Baseline
Million $
AP CA
Realized Net Farm IncomeAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
Shocked MDIS
$ Billion
$59.2
$70.6
$92.4$88.5
$75.8 $79.5
AP CA
Realized Net Farm IncomeAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100Shocked New LR No DP
MDIS
$ Billion
$67.9 $70.6
$90.6 $88.5$79.2 $79.6
Agricultural Policy Analysis Center The University of Tennessee 310 Morgan Hall 2621 Morgan Circle Knoxville, TN 37996-4519
www.agpolicy.org
Thank You
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