Recent declines have been from last year s high prices. Some say the new farm bill has increased the potential for price volatility. My own view is different. The FAIR Act s planting flexibility provisions allow farmers to be more responsive to changing market conditions than was the case in the past. If anything, this will probably reduce the potential for large swings in prices.
Producers are more concerned about the volatility of farm incomes than simply prices.
Dr. Keith Collins, USDA s Chief Economist, is here today to help us better understand the subject. Some say that the government must protect farmers and others from excessive volatility. A traditional idea is to stabilize farm prices with a government operated grain reserve, which accumulates stocks during periods of surplus and releases them during periods of shortage. Unfortunately, the concept rarely works this way in practice. Historically, reserves have been managed so as to withhold stocks from the market.