Wednesday, August 19, 2015

u.s. hasn't had a strategic grain reserve since 2008...,


LATimes |  Grain silos sport quaint silhouettes on country roads, but these stores of corn, soybeans and wheat have played an essential role in the history of drought, flood and frost, and they suggest a solution to the specter of inflation. No one questions why the United States maintains a Strategic Petroleum Reserve. The very threat of bringing reserves to the market can moderate the spiking price of crude oil. But when it comes to food prices, our country cannot even threaten to bolster the national supply because the United States does not possess a national grain reserve.
Such was not always the case.

The modern concept of a strategic grain reserve was first proposed in the 1930s by Wall Street legend Benjamin Graham. Graham's idea hinged on the clever management of buffer stocks of grain to tame our daily bread's tendencies toward boom and bust. When grain prices rose above a threshold, supplies could be increased by bringing reserves to the market — which, in turn, would dampen prices. And when the price of grain went into free-fall and farmers edged toward bankruptcy, the need to fill the depleted reserve would increase the demand for corn and wheat, which would prop up the price of grain.

Following Graham's theory, President Franklin D. Roosevelt created a grain reserve that helped rally the price of wheat and saved American farms during the Depression. In the inflationary 1970s, the USDA revamped FDR's program into the Farmer-Owned Grain Reserve, which encouraged farmers to store grain in government facilities by offering low-cost and even no-interest loans and reimbursement to cover the storage costs. But over the next quarter of a century the dogma of deregulated global markets came to dominate American politics, and the 1996 Freedom to Farm Act abolished our national system of holding grain in reserve.

As for all that wheat held in storage, it became part of the Bill Emerson Humanitarian Trust, a food bank and global charity under the authority of the secretary of Agriculture. The stores were gradually depleted until 2008, when the USDA decided to convert all of what was left into its dollar equivalent. And so the grain that once stabilized prices for farmers, bakers and American consumers ended up as a number on a spreadsheet in the Department of Agriculture.

Now, as the United States must confront climate change, commodity markets riddled by speculation, increased import costs, hosts of regional conflicts and the return of international grain tariffs and export bans, we have put our faith entirely in transnational agribusiness and the global grain market.