NO POLICY FOR OR AGAINST CERTIFICATES -- OMB
The U.S. Office of Management and
Budget does not have a policy position one way or another on
whether the Agriculture Department's commodity certificate
program should be expanded or contracted, an OMB official said.
    Speaking at the National Grain and Feed Association's
annual convention, Ron Landis, chief of OMB's agricultural
branch, said instead of an across the board policy for or
against certificates, OMB has worked and will continue to work
very closely with USDA in determining how many certificates
should be sent out in each government farm payment.
    "Recent evidence by the General Accounting Office and the
Congressional Budget Office suggest that certificates can and
do increase budget exposure," Landis said.
    But Landis also noted that certificates have numerous
beneficial impacts.
    These benefits are helping maintain U.S. price
competitiveness, freeing up storage space and saving the
government storage and handling costs.
    The major drawback to certificates, said Landis, is that
they increase budget exposure relative to cash through use of
the pik and roll marketing strategy.
    In the pik and roll strategy, a farmer puts his grain under
loan, redeems it with certificates, then keeps the difference
between the price he paid for certificates and the county loan
rate.
    However, if the benefits of certificates outweigh the added
costs, OMB officials said they will support continuation of the
program.
    "OMB says certificates have a very positive effect on the
market, but the question is do those positive benefits outweigh
the added costs. If they do, then the certificate program is
good," an OMB official told Reuters.
    Landis calculated that the redemption of each certificate
worth 1,500 bushels results in 176 dlrs in storage savings for
wheat farmers, 270 dlrs for corn farmers and 92 dlrs for
soybean farmers. The pik and roll strategy represents a benefit
of about 35 cents per bushel per farmer, he said.
    But Landis also noted that recent studies by CBO suggest
that an additional one billion dlrs of certificates released to
the market could result in outlays of 1.15 dlrs in cash for
every dlr released in certificates.
    OMB is concerned that too many certificates released onto
the market could cause prices to drop too low and government
costs to increase too much.
    But Landis said OMB has not determined what amount of
certificates would be excessive.
 Reuter
