Let me turn to the risk management programs. Every year, farms must provide their financial statements. Then a reference margin is established, making the math possible over five years. There are all sorts of ways to account for both good and bad years.
What worries me is that, in agriculture, you can have five bad years in a row. For instance, corn may sell for $50 or $70 below the production cost for five years. Corn may sell for $150 per tonne for five years. In that case, the risk management program basically becomes obsolete, because there are no fluctuations or points of reference.
However, agriculture had some good years, such as 2014-15 and 2015-16, for both grain and meat. Yet I am told that the program considers the reference for the production cost rather than the real reference. So say the price of corn reaches $300 one year, then drops to $295 the second year, and stabilizes at $150 the following years. The amounts of $300 and $295 are then brought down to $225.
Is it true that the reference is for the production cost or is the actual cost of the commodities really taken into account?