Page 56 - Farm Bill Series_The 7 Things You Should Know

But for cotton, where the U.S. has had such a small share of the market, a bad U.S. crop won’t be
much of a blip in global trading.

There are also a multitude of financial risks:
What if market prices skyrocket but a farmer
doesn’t have any crops or livestock to sell?
What if interest rates shoot up and he or she
can no longer repay loans on assets or
operating expenses? What if other countries
manipulate their currencies in a way that
make it more difficult to export U.S.
agricultural products?

And finally, one can’t rule out the political
risks that have battered farm incomes around
the globe over the years. What if the
president declares a grain embargo, as
President Jimmy Carter did in 1980 to
respond to the Soviet Union’s invasion of Afghanistan? Grain prices plummeted as a result.
Almost two decades later, the Russian government shut off exports to the world in response to
drought and wildfires at home, sending commodity prices soaring.

As a result, “Wheat prices jumped over 7 percent in less than two months,” noted Stabenow in
her first official address as chairman of the Senate Agriculture Committee in January 2011.
“That’s why, as we look forward to writing the next farm bill, I am fully committed to a strong
safety net,” she told members attending the Michigan Agribusiness Council annual meeting in
2011.

Underlying all of these
risks is a more
fundamental question:
What is the proper role for
the federal government in
managing risks on the
farm?

In the U.S., as well as in
countries around the world,
governments have employed
a wide variety of programs
and tactics to address risks
on the farm, including
disposal of surplus crops
and livestock, limits on
production, payments when prices drop below certain levels, environmental and rural
development payments, ad hoc disaster assistance and crop insurance.

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