One camp asserts that since the fundamental factors leading to instability still exist, more production switching logically leads to more price instability. These fundamental factors include the fact that small shifts in quantity produced will result in a relatively larger percentage change in price and the tendency of farmers to make individual production decisions based on current prices. That is, many farmers will, because the price of corn, for example, is high at planting time, expect it to be high at harvest. If a significant number of farmers come to the same conclusion and plant corn, then future harvest prices will be depressed as the market recognizes the aggregate positive supply impact of the farmers' individual decisions. The other camp, arguing that there is less price instability under the 1996 Bill, believes that farmers have become more sophisticated than to base production on current prices.
Flexibility allows farmers to adjust production patterns to demand and price expectations.
In addition, they assert that flexibility inherently makes supply more price responsive, also resulting in less price instability. Moreover, it is suggested that, over time, U.S. farm prices have become a function of global market conditions making them less sensitive to shifts in U.S. production. In the concluding section of this paper, the authors will provide their perspective on the price risk debate. Through outright government purchases of commodities into reserve stock programs. Recently, these reserves have been limited in quantity, by law, and have been designated as emergency reserves only.