The National Farmers Union (NFU) has released the final report from a study by the University of Tennessee Agricultural Policy Analysis Center on the effects that a Market-Driven Inventory System (MDIS) would have on U.S. agriculture. Phase I of the study, released in September 2011, examines the effects MDIS would have had on extreme crop price volatility and government payments from 1998 to 2010, while Phase II reviews the effects of MDIS from 2012 to 2021.

“The study results very clearly indicate that MDIS would preserve net farm income at current levels while significantly decreasing the cost to taxpayers,” said NFU President Roger Johnson. “From 1998 to 2010, the farm programs that were in place cost $152 billion, while MDIS policies would have cost $56 billion over that same period. From 2012-2021, current farm programs are projected to cost $65 billion while MDIS is projected to cost $26 billion, a savings of $39 billion.”

From 1998 to 2010, the value of U.S. exports would have increased by $20 billion under MDIS policies. Also, corn prices would have been 26 cents per bushel higher, wheat prices would have been 48 cents per bushel more, and soybean prices would have increased by $1.09. MDIS combines a system of farmer-owned commodity inventories, set-asides, and loan rates to help decrease the volatility in the market.

“Decreasing volatility significantly benefits family farmers because it allows them to make more informed business decisions and have a better idea of the prices to expect, while also eliminating the periods of unsustainably low commodity prices,” said Johnson. “Reduced volatility also benefits ranchers, ethanol producers, and other end-users by moderating extreme prices for their input costs and helping ensure that they are not put out of business due to factors out of their control. “While commodity costs are not a large portion of food prices, consumers will benefit from reduced volatility as well because MDIS will stabilize the portion of food prices that is related to commodity costs. MDIS will significantly reduce the cost of federal payments to U.S. farmers and ranchers, preserve net farm income, and benefit a variety of stakeholders. This is the only policy proposal that addresses a long-term price collapse and significant market price volatility. We urge members of Congress to implement MDIS in the 2012 farm bill so that these benefits may be realized as soon as possible.”

For the latest information on the study, see here.