apca a market directed inventory system (mdis) national farmers union february 29, 2012 daryll e....
DESCRIPTION
APCA Policy Description MDIS Specifications for Study Period – Initial corn loan rate set at midpoint between variable and full cost of production – Indexed with a prices paid by farmers index – Other crop loan rates set to historic ratios with corn – Release price is set at 160% of loan rateTRANSCRIPT
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AP CA
A Market Directed Inventory System
(MDIS)
National Farmers UnionFebruary 29, 2012
Daryll E. Ray and Harwood D. SchafferAgricultural Policy Analysis Center
University of Tennessee Institute of Agriculture
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AP CA
Policy DescriptionObjectives – Bulk of revenue from market receipts– Reduce government payments while
maintaining farm income– Reduce price volatility
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AP CA
Policy DescriptionMDIS Specifications for 1998-2010 Study Period– Initial corn loan rate set at midpoint between
variable and full cost of production– Indexed with a prices paid by farmers index–Other crop loan rates set to historic ratios
with corn– Release price is set at 160% of loan rate
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AP CA
Policy DescriptionMDIS Specifications for 1998-2010 Study Period–MDIS maximums• Corn – 3 billion bushels• Wheat – 800 million bushels• Soybeans – 400 million bushels
– Farmer storage payment rate 40¢/bu./yr– Set-aside available if needed– Eliminate Direct Payments, LDPs, & CCPs
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AP CA
8 Crops - Government Payments
$0
$5
$10
$15
$20
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Historic Baseline
MDIS
$ Billion
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AP CA
8 Crops – Government PaymentsAverage Per Year Over Each Period
$0
$2
$4
$6
$8
$10
$12
$14
$16
1998-2005 2006-2010 1998-2010
Historic Baseline
MDIS
$ Billion
$14.8
$4.8
$6.8
$3.6
$11.7
$4.3
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AP CA
Corn Prices
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Historic Baseline
Release Price
Loan Rate
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AP CA
Corn Prices
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Historic Baseline
MDIS
Release Price
Loan Rate
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AP CA
Corn PricesAverage Per Year Over Each Period
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
1998-2005 2006-2010 1998-2010
Historic Baseline
MDIS
$2.05
$2.68
$4.02$3.71
$2.81$3.07
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AP CA
Corn Exports - Quantity
0
500
1000
1500
2000
2500
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Historic Baseline
MDIS
Million Bu.
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AP CA
Corn Exports - Value
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010$0
$2
$4
$6
$8
$10
$12
Historic Baseline
MDIS
$ Billion
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AP CA
Corn Value of ExportsAverage Per Year Over Each Period
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
1998-2005 2006-2010 1998-2010
Historic Baseline
MDIS
$ Billion
$3.9
$4.8
$8.3$7.7
$5.6 $5.9
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AP CA
MDIS Stocks
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
500
1000
1500
2000
2500
3000
3500Corn
Wheat
Million Bu.
Soybeans
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AP CA
Corn – Value of Production plus Government Payments
Average Per Year Over Each Period
$0
$10
$20
$30
$40
$50
$60
1998-2005 2006-2010 1998-2010
Historic Baseline
MDIS
$ Billion
$26.4$28.2
$51.5$46.5
$36.1 $35.2
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AP CA
Realized Net Farm IncomeAverage Per Year Over Each Period
$0
$10
$20
$30
$40
$50
$60
1998-2005 2006-2010 1998-2010
Historic Baseline MDIS
$ Billion
$49.8 $50.8$55.8
$51.5 $52.1 $51.1
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AP CA
Summary of FindingsOver the Study Period, 1998-2010, with MDIS in Place: – Government payments 60% lower– Increased crop prices and increased reliance
on market receipts– Value of exports $4.9 billion higher– Lower price volatility benefitting:• Consumers• Crop farmers• Livestock producers and industrial users
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APCA
Policy in an Uncertain Future
Two sets of analyses: – A “future” represented by the 2012
USDA baseline (Baseline)– A “future” roughly patterned after the
historical experience of 1996-2010 and the supply variation we experienced
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AP CA
Corn Prices
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
Baseline
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AP CA
8 Crops – Value of Production
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$50,000
$100,000
$150,000
$200,000
Baseline
Million $
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AP CA
8 Crops – Value of Exports
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Baseline
Million $
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AP CA
8 Crops – Government Payments
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
Baseline
Million $
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AP CA
Value of Production + Government Payments - Cash Expenses: 8 Crops
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$25,000
$50,000
$75,000
$100,000
$125,000
Baseline
Million $
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AP CA
Realized Net Farm Income
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$25,000
$50,000
$75,000
$100,000
$125,000
Baseline
Million $
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APCA
Policy in an Uncertain Future
Two sets of analyses: – A “future” represented by the 2012
USDA baseline– A “future” roughly patterned after the
historical experience of 1996-2010 and the supply variation we experienced
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AP CA
Policy in an Uncertain Future
Four Shocked Scenarios: – A “future” roughly patterned after the
historical experience of 1996-2010 and the supply variation we experienced• Shocked Baseline: Shocked yields, current farm
programs
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AP CA
Corn Yield Shock
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210
20
40
60
80
100
120
140
160
180
200
Baseline
Yield Shock
Bu/Ac.
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AP CA
Corn Prices
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
Baseline
Shocked Baseline
Below $3.00
Above $7.00
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AP CA
8 Crops - Government Payments
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
Baseline
Million $
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AP CA
Value of Production + Government Payments - Cash Expenses: 8 Crops
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$25,000
$50,000
$75,000
$100,000
$125,000
Baseline
Million $
Shocked Baseline
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AP CA
Realized Net Farm Income
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$25,000
$50,000
$75,000
$100,000
$125,000
Baseline
Shocked Baseline
Million $
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AP CA
Policy in an Uncertain Future
Shocked Scenarios: – A “future” roughly patterned after the
historical experience of 1996-2010 and the supply variation we experienced• Shocked Baseline: Shocked yields, current farm
programs• Shocked No DP: Shocked yields, no direct
payments
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AP CA
8 Crops - Government Payments
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
BaselineShocked No DP
Million $
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AP CA
Value of Production + Government Payments - Cash Expenses: 8 Crops
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$20,000
$40,000
$60,000
$80,000
$100,000
Baseline
Shocked Baseline
Shocked No DP
Million $
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AP CA
Realized Net Farm Income
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$25,000
$50,000
$75,000
$100,000
$125,000
Baseline
Shocked Baseline
Shocked No DP
Million $
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AP CA
Policy in an Uncertain Future
Shocked Scenarios: – A “future” roughly patterned after the
historical experience of 1996-2010 and the supply variation we experienced• Shocked Baseline: Shocked yields, current farm
programs• Shocked No DP: Shocked yields, loan rates
unchanged, no direct payments• Shocked New LR No DP: Shocked yields, higher
loan rates, no direct payments
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AP CA
8 Crops - Government Payments
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
Baseline
Shocked New LR No DP
Million $
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AP CA
Value of Production + Government Payments - Cash Expenses: 8 Crops
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$20,000
$40,000
$60,000
$80,000
$100,000
Baseline
Shocked New LR No DP
Shocked Baseline
Million $
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AP CA
Realized Net Farm Income
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$25,000
$50,000
$75,000
$100,000
$125,000
Baseline Shocked New LR No DP
Shocked Baseline
Million $
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AP CA
Policy in an Uncertain Future
Shocked Scenarios: – A “future” roughly patterned after the
historical experience of 1996-2010 and the supply variation we experienced• Shocked Baseline: Shocked yields, current farm
programs• Shocked No DP: Shocked yields, loan rates
unchanged, no direct payments• Shocked New LR No DP: Shocked yields, higher loan
rates, no direct payments• MDIS (Market Driven Inventory System): Shocked
yields, higher loan rates, no DP, reserve stocks
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APCA
Policy DescriptionMDIS Specifications for 2012-2021 Study Period
– MDIS corn loan rate set at $3.50– Other crop loan rates set to historic
ratios with corn – Minimize distortion– Release price is set at 160% of loan rate
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APCA
Policy DescriptionMDIS Specifications for 2012-2021 Study Period
– MDIS maximums• Corn – 3 billion bushels• Wheat – 800 million bushels• Soybeans – 400 million bushels
– Farmer storage payment rate 40¢/bu./yr– Eliminate Direct Payments, LDPs, & CCPs
except for rice and cotton
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AP CA
Corn PriceLoan Rate and Release Price
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00Release Price
Loan Rate
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AP CA
Corn PriceLoan Rate and Release Price with Baseline
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
Baseline
Release Price
Loan Rate
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AP CA
Corn PriceLoan Rate and Release Price with Scenarios
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
Baseline
Shocked Baseline Release Price
Loan Rate
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AP CA
Corn PriceLoan Rate and Release Price with Scenarios
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
Baseline
Shocked Baseline
MDIS
Release Price
Loan Rate
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AP CA
Corn PricesAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
Shocked Baseline
MDIS
$3.43
$4.07
$5.75$5.29
$4.59$4.68
![Page 47: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/47.jpg)
AP CA
Corn PricesAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
Shocked New LR No DP
MDIS
$3.54
$4.07
$5.89
$5.29
$4.71 $4.68
![Page 48: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/48.jpg)
AP CA
MDIS Stocks
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20200
250
500
750
1000
1250
1500
1750
2000
2250
2500
Corn
Wheat
Million Bu.
Soybeans
![Page 49: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/49.jpg)
AP CA
8 Crops – Value of Exports
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Baseline
Shocked Baseline
MDIS
Million $
![Page 50: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/50.jpg)
AP CA
8 Crops - Value of ExportsAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Shocked Baseline
MDIS
$ Billion
$29.9
$35.4
$46.5 $47.0
$38.2$41.2
![Page 51: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/51.jpg)
AP CA
8 Crops - Value of ExportsAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Shocked New LR No DP
MDIS
$ Billion
$30.1
$35.4
$47.4 $47.0
$38.8$41.2
![Page 52: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/52.jpg)
AP CA
8 Crops - Government Payments
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
Shocked
Shocked New LR No DP
MDIS
Million $
![Page 53: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/53.jpg)
AP CA
8 Crops – Government PaymentsAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$2
$4
$6
$8
$10
$12
$14
$16
Shocked
MDIS
$ Billion
$4.9 $3.0$2.3
$4.9
$2.6$4.9
![Page 54: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/54.jpg)
AP CA
8 Crops – Government PaymentsAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$2
$4
$6
$8
$10
$12
$14
$16
Shocked New LR No DP
MDIS
$ Billion
$14.8
$3.0$0.2 $2.3
$6.5
$2.6
![Page 55: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/55.jpg)
AP CA
Value of Production – 8 Crops
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$50,000
$100,000
$150,000
$200,000
Baseline Shocked Baseline
MDIS
Million $
![Page 56: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/56.jpg)
AP CA
8 Crops – Value of ProductionAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
Shocked
MDIS
$ Billion
$96.5
$116.9
$151.4 $148.1
$124.0$132.5
![Page 57: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/57.jpg)
AP CA
8 Crops – Value of ProductionAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
Baseline New LR No DP
MDIS
$ Billion
$98.0
$116.9
$155.0 $148.1
$126.4 $132.5
![Page 58: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/58.jpg)
AP CA
Value of Production + Government Payments - Cash Expenses: 8 Crops
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$20,000
$40,000
$60,000
$80,000
$100,000
Baseline
Shocked Baseline
MDIS
Million $
![Page 59: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/59.jpg)
AP CA
Value of Production + Government Payments - Cash Expenses: 8 Crops
Average Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$10
$20
$30
$40
$50
$60
$70
Shocked
MDIS
$ Billion
$16.0
$33.8
$66.7
$59.5
$41.4$46.6
![Page 60: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/60.jpg)
AP CA
Value of Production + Government Payments - Cash Expenses: 8 Crops
Average Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$10
$20
$30
$40
$50
$60
$70
Shocked New LR No DP
MDIS
$ Billion
$26.4
$33.8
$64.2$59.5
$45.3 $46.6
![Page 61: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/61.jpg)
AP CA
Realized Net Farm Income
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021$0
$25,000
$50,000
$75,000
$100,000
$125,000
Baseline
MDIS
Shocked Baseline
Million $
![Page 62: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/62.jpg)
AP CA
Realized Net Farm IncomeAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
Shocked MDIS
$ Billion
$59.2
$70.6
$92.4$88.5
$75.8 $79.5
![Page 63: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/63.jpg)
AP CA
Realized Net Farm IncomeAverage Per Year Over Each Period
2012-2016 2017-2021 2012-2021$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100Shocked New LR No DP
MDIS
$ Billion
$67.9 $70.6
$90.6 $88.5$79.2 $79.6
![Page 64: APCA A Market Directed Inventory System (MDIS) National Farmers Union February 29, 2012 Daryll E. Ray and Harwood D. Schaffer Agricultural Policy Analysis](https://reader035.vdocument.in/reader035/viewer/2022081521/5a4d1b257f8b9ab059996d60/html5/thumbnails/64.jpg)
Agricultural Policy Analysis Center The University of Tennessee 310 Morgan Hall 2621 Morgan Circle Knoxville, TN 37996-4519
www.agpolicy.org
Thank You