April 11, 2008

Tight supplies, strong demand renew US grain reserve debate

 

 

Strong demand for US grain and fears about potential shortages are stirring up renewed talk about the merits of reviving domestic, government-subsidized reserves.

 

US grain industry members are deeply divided about the issue, with supporters arguing that stockpiles would boost food security and provide relief to end users when prices are high.

 

Growers largely oppose national reserves, as they benefit when tight supplies push prices skyward.

 

The debate has been ongoing since the government eliminated its Farmer-Owned Reserve programme in 1996 as a result of a shift in policy about holding grain.

 

However, the issue has generated more sparks lately amid concerns about the possibility for production shortfalls at a time of expanding demand, including from federally mandated requirements for production of corn-based ethanol, industry members said.

 

Even producer groups with seemingly similar interests cannot agree about the value of large-scale reserves.

 

The National Corn Growers Association, with about 33,000 dues-paying members, is strongly opposed to rebuilding government-subsidized stockpiles, while the American Corn Growers Association, which has 13,000 to 14,000 members, is in favor of reserves.

 

Although negotiations for the US Farm Bill do not include proposals for new reserves, it is probably one of the key things to be worked on, said Larry Mitchell, director of governmental affairs for the American Corn Growers Association.

 

The National Corn Growers Association, meanwhile, believes the government should stay out of the business of holding crops and allow the grain industry to manage its own risk and inventory, said Jon Doggett, the group's vice president of public policy.

 

Producers and industry members can decide for themselves how much grain should be stored and sold, he said.