The Planted Row: Producers foot checkoff bill, reap returns

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Farm Forum

Recently, a reader called and suggested that agriculture would be better served if checkoff dollars came from commodity traders instead of from producers. The caller said traders should pay a cent for every bushel they sell to promote the commodities.

I’ll admit that, at first blush, I liked the idea. I grew up on a farm, after all, and I know how hard farmers work for each dollar. From that dirt-under-fingernails perspective, it can seem like the people who push the numbers around are the ones getting rich off the beans, corn, beef and other agricultural products. However, it’s the farmers and ranchers who are footing the bill for checkoff-backed efforts to increase marketing opportunities.

(When I was in college, I used to wonder how my father could so easily write me a check without complaint for money to live on when my own funds ran low, even though he didn’t have much to spare. Now that I’m a lot older and a little wiser, I realize that years of farming had given him plenty of practice.)

However, if I look at this idea while pretending to be a trader making high volume trades for a few cents profit per bushel, I can see a big downside. Paying a whole cent per bushel would take a huge chunk out of my profit. I’m pretty sure I’d take a hard look at other commodities to trade that had no such fee attached. Even if the fee were less than a cent per bushel, whatever commodity it was attached to would be at a disadvantage to commodities with no checkoff program. In this scenario, a checkoff program might damage the volume of ag products being traded which could have a bad effect on price.

Another option would be to impose a checkoff fee on the purchasers of ag commodities; however, there are some problems with that, as well. U.S. ag commodities could end up with a price disadvantage compared to foreign commodities in markets outside the U.S., which could decrease usage and lower prices. Also, that checkoff fee would likely get passed on to consumers. While I have no problem paying a little higher price for my food to fund some agricultural research, I’m not certain I want to pay for food promotions and increased market opportunities so that, ultimately, my food will cost even more. That’s like paying more for your steak so you can tell more people about the benefits of eating steak, resulting in higher steak prices.

While it might seem like traders are making a lot of money on ag products, I’ve heard it said they don’t really make money unless the prices are moving up or down. Meanwhile, the research funded by checkoff dollars helps create new markets and new products, and all of that directly benefits the farmer. The real question is whether the benefit to each farmer is greater than the amount they pay in checkoff fees. According to a Cornell University study, beef checkoff dollars returned $11.20 to the beef industry between 2006 and 2013 (http://bit.ly/1L42EiH). A Texas A&M University study claims that soybean farmers receive $5.20 for every checkoff dollar they pay (http://bit.ly/1MoFzEs).

As long as checkoff programs are being managed properly and returns on investment are making their way back to those who pay the checkoff fees, I support the programs as they are currently designed.

Contest winner

This week’s Farm Forum 50th anniversary cash giveaway contest winner is Jerry Swift of Willmar, Minn. Jerry will receive a replica windmill and is eligible to win the $5,000 cash grand prize. Prizes are mailed at the end of each month.