Minnesota Farmers Union

(May 22, 2009) - For the first time in years, the possibility of establishing reserve stocks has come to the fore - even if it means that the Secretary of Agriculture and a major farm group have come out against them. There was a time when the issue of reserve stocks was so far off the table that opponents did not even bother to denounce them.

The event that brought the issue of reserve stocks to the table was the dramatic price bubble in grain and oil prices that started developing in the last half of 2006. As prices soared, many developing countries saw food riots and a number of countries took actions to protect their food markets by restricting the international trade of some commodities.

In the face of those events, some have been giving reserve stocks a new look as a means of mitigating those problems by having adequate supplies available to meet sudden increases in demand - like ethanol - as well as sudden decreases in production - crop failures in Australia and the Ukraine, as occasionally these two type of events happen at the same time creating a "perfect storm."

Without going into the details of a reserve at this time, we would instead like to look at the issue of reserves from the perspective of various market participants. This week we would like to look at reserves from the perspective of grain farmers.