U.S. food mountains stand firm

Press, 18 March 1983, Page 16

U.S. food mountains stand firm

From ‘The Economist,’ London

Can the United States get rid of its farm surpluses by means other than dumping them on the world market, mostly to hammer the European competition, or by praying for a repetition of the great Russian grain orders of a decade ago?

The Senate Agriculture Committee, which has just been debating the question, thinks it can. Proposals have ranged from the charitable (giving surplus stocks to food banks and soup kitchens) through the inventive (using soyabeans to make petrol substitutes) to the devious (giving spare grain away to poultry farmers to allow then to produce subsidised broiler fowls for the world market).

When it comes to reducing surpluses, almost everyone has a good idea. Whether these can work in practice is another matter.

America used to dispose of its surpluses mainly by trading abroad. A combination of factors — the strong dollar, a world recession, good harvests elsewhere, and political uncertainties have sent farm exports down since 1980, both in volume and value.

Production, however, has gone on going up. The mountainous reserves that overhang the market include nearly 1 billion bushels of wheat, 2.3 billion bushels of feed grain and 2.4 billion pounds of cheese, dried milk and butter.

The Government pays to store it all, either in its own warehouses (for dairy products) or on private farms (for most of the grain). And there it sits. Some of the grain is four years old; much of it has never been fumigated, and the grain beetles and borers are having a high time.

In theory, the grain reserves ought to be triggered periodically out of the storage bins by scarcity in the domestic markets; but there has not been a bad harvest for years. Farmers can make more profit nowadays by storing their grain, and using it as collateral to get loans from the Government, than by trying to sell it. As for the federal policy of guaranteeing the price of milk, but at the same time placing no limit on production, that is an open invitation to farmers to overproduce unwanted dairy products. Reforms of the price-support programmes are constantly in the wind. Even so, that does not help to lessen the surpluses of the moment.

The Reagan Administration has reached the conclusion that if it wants to make a dent in the surpluses, it will have to give at least part of them away. That ought to be easy. Curiously, it isn’t.

The Government distributed 244 million pounds of -surplus butter and cheese to needy Americans last year, in a programme which was widely considered a success; but it cost $344 million to take the goods from Government warehouses to the state distribution points, and to cut the huge kegs into portions that people could carry away. Some states found it too expensive to underwrite the cost of local distribution, which is usually done by charity groups. For those reasons, although the Government is keen to repeat the butter and cheese programme, it will not contemplate the idea for any other surplus commodities such as wheat. They would cost far too much to process.

The same problem appears when there is talk of sending some of the surplus to needy countries abroad. Certain amounts are already sent through the Food for Peace programme, and the United States, for the first time, is about to contribute surplus dairy products to the World Food Programme; it is already donating dairy produce, on a limited scale, to poor countries. If it sent much more, however, the recipients would probably not have the means, or the monev, to handle the goods. The urge to give surpluses away abroad, and the temptation to subsidise exports (a policy from which the Administration still wants to distance itself) are rather closely intertwined. A proposal sponsored by Senator Jesse Helms, and approved by the Senate Agriculture Committee, would require the Agriculture Secretary to sell at least 165,000 tons of surplus dairy products abroad, at subsidised prices, every year until 1985. Other bills suggest that the Government could give surplus stocks to commodity traders, to be blended in with ordinary stocks for private sales overseas. There are a number of variations on the now-notorious Egyptian wheat-flour scheme, in which surplus grain was given to American millers so that highly subsidised flour could then undercut French markets in Egypt. It is a short step from that to the idea of making a straight government-to-government bargain sale of some surplus commodity (such as dried milk for the Soviet Union, which has been suggested), and an even shorter step from there to giving away the stuff.

Little, except propriety, stands in the way of the Agriculture

Secretary doing that. He has full authority to unload surplus commodities on the world market. Consideration for the European allies, however, will probably stay his hand. The Administration is likely to make a show of trying to reduce the stockpiles through domestic policies such as the payment-in-kind system, which would give

farmers Government-owned grain in exchange for reductions in plantings.

Behind the scenes, however, the picture may be different. If the ordinary flow of trading cannot take the surpluses away, the ordinary courtesies of America’s trading policies may have to be changed accordingly.