Chicago exchange seeks to aid farms with study of US-European grain glut
Chicago — Farmers didn't need Willie Nelson's Farm Aid program to tell them they're in economic trouble and that the world oversupply of grain is the main reason. Now the Chicago Board of Trade (CBOT), often a target of farm frustration, says it's going to do something about it. Or at least look into it.
At a recent meeting of the European Parliament's Agriculture Committee in Strasbourg, France, Chicago board chairman John F. Gilmore Jr. suggested research on the use of the free market to decrease the grain oversupply. Mr. Gilmore says that European parliamentarians reacted ``very favorably, judging from the comments we got from the speech.''
``What we'll specifically discuss,'' says Gilmore, ``is the oversupply problem of Europe and the United States, and whether or not it is being created by government's policies, and if a free-market system, instead of government subsidies, could do away with oversupplies.''
If the oversupply were distributed to help alleviate world hunger, that would be fine, he says, but that's not the main purpose.
``This is not being done in the environment of a charitable organization. The Chicago Board of Trade is the business environment that the world comes to to organize the pricing of grain markets. It [the proposed program] doesn't have anything to do with where those supplies are distributed. What we'll be discussing is an international pricing system for grain products and not relying on government subsidies.''
Gilmore said the program is not likely to be approved before next fall.
``We will be providing two academics from the US to be part of the CBOT Education Institute -- one might be a professor and one might be from the cash markets -- and they'll develop a paper with two academics selected by the European Parliament,'' he says.
``Each fall 20 or 30 research papers are submitted to the institute, and through our committee system, five or six are chosen and then funded for the following year.''
Gilmore says he expects the international flavor of the research to give it extra impact. ``These papers can be extremely influential; it depends on how the governments receive it.''
This free-market effort, he says, will benefit US and European farmers.
``What we're talking about is decreasing the oversupply problems which create severe low prices. The oversupplies were created by governmental policies. The depressed prices are bad for the farmer; increased prices would cause a freer market and, in the long run, would be helpful to the farmer.''