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Farm Surpluses and Foreign Policy*

Published online by Cambridge University Press:  18 July 2011

Bruce F. Johnston
Bruce F. Johnston
Affiliation:
Food Research Institute, Stanford University
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Extract

GOVERNMENT stocks of surplus agricultural commodities, which reached a record level of over nine billion dollars in February 1956, have moved to the center of the stage in recent agricultural legislation and discussions of the farm problem. Reasons for this prominence are numerous. Most obvious perhaps is simply the reaction against the apparent waste of resources in building up huge stocks for which no clear use is in sight. Merely to maintain stocks of this magnitude is a costly undertaking and has necessitated an uneconomic expansion of storage facilities. Little wonder, then, that more and more attention is being devoted to finding means for disposing of this vast mass of agricultural products acquired by the United States government as a prop to farm prices.

Type
Research Article
Information
World Politics , Volume 10 , Issue 1 , October 1957 , pp. 1 - 23
Copyright
Copyright © Trustees of Princeton University 1957

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References

1 Total of stocks pledged against outstanding loans and purchase agreements and Commodity Credit Corporation stocks in inventory.

2 See Gale Johnson, D., “Reconciling Agricultural and Foreign Trade Policies,” Journal of Political Economy, LV (December 1947), pp. 567–71CrossRefGoogle Scholar; idem, Trade and Agriculture: A Study of Inconsistent Policies, New York, 1950; and Report to the President and the Congress, submitted in 1954 by the Commission on Foreign Economic Policy (“Randall Commission”), pp. 28–34.

3 The President's Commission on Foreign Economic Policy asserted that “Ways of achieving desirable farm policy goals can be found without resort to the kind of inflexible price supports or fixed prices which hold the prices of our farm products above the level of world prices”; but the Commission considered the task of offering suggestions to that end as beyond its terms of reference. Op. cit., p. 32. The book by D. Gale Johnson cited above devotes several chapters to this problem of trying to “show how the inconsistencies can be resolved wimout sacrificing the achievement of the important goals in either policy area.” Op. cit., p. v.

4 Foreign outcries against our import restrictions reached a peak in 1952 when the Netherlands and Denmark reacted against embargoes on cheese imports imposed in accordance with the “Andresen amendment” to the Defense Production Act of 1951. It came almost as a liberal gesture when this amendment was allowed to lapse in 1953 and we replaced die outright embargoes with import quotas under the provisions of Section 22 of the Agricultural Adjustment Act of 1933.

5 Current data on the CCC investment in agricultural commodities are given in Commodity Credit Corporation, Report of Financial Operations and Conditions, monthly. A convenient summary of monthly data for the period July 1947-March 1957 is contained in U.S. Department of Agriculture, Commodity Stabilization Service and Commodity Credit Corporation, Price Support Program. Charts and Tables. Selected Activities through quarter ending March 31, 1957.

6 Quoted by Timoshenko, V. P. in “Wheat Subsidization and Exports: The Experience of 1938–39,” Wheat Studies of the Food Research Institute (Stanford University), XVII, (October 1940), p. 45n.Google Scholar

7 It is scarcely necessary to point out that it is impossible to define a “fair historical share” in any satisfactory manner. The most “normal” feature of international trade in agricultural products is the manner in which exports and imports of individual countries fluctuate from year to year, reflecting changes in domestic crops and foreign exchange positions. In the case of cotton, U.S. authorities can, however, point to a rather steady decline in our share of world cotton exports as our price-support program has encouraged expanded production abroad and placed this country in the role of a “residual supplier.”

8 For a more complete summary of legislation authorizing the various types of special export programs, see Prospects of Foreign Disposal of Domestic Agricultural Surpluses, A Staff Study, directed by the Interagency Committee on Agricultural Surplus Disposal, May 1956, pp. 40–49.

9 The Farmer's Weekly (Perth), October 11, 1956.

10 Ibid.

11 The Mercury (Hobart), October 5, 1956, and The Land (Sydney), October 11, 1956.

12 Quoting the press summary in the Canberra Times, April 25, 1956.

13 FAO, Disposal of Agricultural Surpluses (Commodity Policy Studies, No. 5), June 1954, p. 41.Google Scholar

14 Quoted from “Agreement and Exchange of Notes Between the United States of America and Brazil, Signed at Rio de Janeiro, November 16, 1955,” Department of State Publication 6200, p. 14.

15 Prospects of Foreign Disposal of Domestic Agricultural Surpluses, op. cit., p. 59.

16 George Broomhall's Corn Trade News, weekly and American edition, October 17, 1956.

17 USDA, Foreign Agricultural Service, “Title I, Public Law 480 Commitments Pass Two Billion Dollar Mark,” FSD-240–56, October 23, 1956; and USD A press releases 2258–56, dated August 1, 1956, and 1545–57, dated May 16, 1957; USDA, Agricultural Marketing Service, The Cotton Situation, February and April 1957.Google Scholar Wheat exports under Title I of Public Law 480 rose from 2.5 million metric tons in the 1955/56 crop year to nearly 4.0 million tons in the first ten months of 1956/57; rice shipments rose from 120,000 tons in 1955/56 to close to 750,000 tons; and Title I exports of cotton rose to 1.3 million bales in the first ten months of 1956/57 from 468,000 bales in 1955/56. This is but a fraction of total cotton exports; mainly as a result of the sales of CCC stocks, cotton exports are expected to exceed 7 million bales in 1956/57, as compared with 2.2 million bales during the 1955/56 marketing year.

18 Benedict, M. R., Farm Policies of the United States, 1790–1950, New York, 1953, p. 407.Google Scholar

19 The seriousness of the impact would, of course, depend on how rapidly or gradually the liquidation was effected. In the case of wheat, a program to divert from 200 to 300 million bushels of wheat to feed use each year would lead to a decline in feed prices which feed grain producers would regard as painful but which could scarcely be regarded as “disastrous.”

20 USDA, Disposition of Stocks of Agricultural Products Held by the Commodity Credit Corporation, A Report Developed in the U.S. Department of Agriculture Pursuant to Public Law 480, 84th Congress, Transmitted to the President of the Senate and the Speaker of the House of Representatives, August 27, 1956, Part A, pp. 3–4.

21 Ibid., Part B, pp. 1–14.

22 “Preliminary Report and Analysis of the Need for Strategic Stockpiling of Food in the United States and Its Territories and in Foreign Countries,” ibid., Part C.

23 Ibid., Part C, p. 7.

24 Ibid., Part C, p. 9.

25 Ibid., Part C, p. 2.

26 Ibid., Part C, p. 3.

27 Ibid.

28 Although whole grain wheat is not suitable for human consumption, it can be crushed with simple equipment—even a kitchen meat grinder—and can then be used in a quite palatable and digestible porridge.

29 Disposition of Stocts…, op.cit., Part C, p. 21, gives estimates for these and a number of other products based on Army Technical Manual No. 743–200, Changes 2.

30 Hirshleifer, Jack, “Some Thoughts on the Social Structure After a Bombing Disaster,” World Politics, VIII, No. I (January 1956), p. 212.Google Scholar

31 “Preliminary Report and Analysis of the Need for Strategic Stockpiling of Food …,” op.cit., p. 17.

32 Ibid., p. 18. Italics in original.

33 FAO, Uses of Agricultural Surpluses to Finance Economic Development in Under-Developed Countries. A Pilot Study in India (Commodity Policy Studies, No. 6), June 1955, p. 44.Google Scholar

34 “Agricultural Surpluses for Economic Development,” Journal of Political Economy, LXIV (February 1956), pp. 69n, 71n.

35 FAO, Committee on Commodity Problems (CCP), Consultative Sub-Committee on Surplus Disposal, Report of Working Party on National Reserves (CCP 57/1, Addendum I, CCP/CSD/56/65 Revised, mimeo.), Rome, January 9, 1957.Google Scholar

38 “Agricultural Surpluses for Economic Development,” op.cit., p. 71n.

37 Ibid., p. 72.

38 Uses of Agricultural Surpluses …, op.cit., p. 3.

39 Report of the Council of FAO, Twentieth Session, 27 September—October 1954 November 1954, Appendix c, p.86.

40 If the only politically feasible alternatives were (a) price-support programs leading to surplus accumulation and foreign disposal and (b) a Soil Bank scheme which achieved a comparable reduction in domestic supplies at a cost likely to differ very little from the cost of the price-support program, my value judgment would favor alternative (a). But my pessimism has not matured to the point where I regard those as the only feasible alternatives.

41 For a discussion of “political pricing” of wheat as practiced by various exporting and importing countries and the distortion of the world price structure for that commodity, see Farnsworth, Helen C., “International Wheat Agreements and Problems, 1949–56,” Quarterly Journal of Economics, LXX (May 1956), pp. 238–48.Google Scholar

42 The proposals for an International Commodity Clearing House considered and rejected by the FAO Conference in the fall of 1949 are of some interest in this connection. More recently the FAO has urged the creation of a “World Food Capital Fund.” See FAO, Functions of a World Food Reserve—Scope and Limitations (Commodity Policy Studies, No. 10), 1956, pp. 36–39Google Scholar; and a statement by Sen, B. R., Director-General of the FAO, on “Functions of a World Food Reserve,” made before the Second Committee of the U.N. General Assembly on January 22, 1957.Google Scholar

43 Prospects of Foreign Disposal of Domestic Agricultural Surpluses, op.cit.

44 USDA, Foreign Agricultural Service, Increasing U.S. Farm Exports, November 1956, p. 14.Google Scholar

46 Ibid., p. 14.