The Impact of Target Prices Versus Export Subsidies
RCED-94-79: Published: Jun 7, 1994. Publicly Released: Jun 20, 1994.
Pursuant to a congressional request, GAO reviewed: (1) how the Export Enhancement Program (EEP) has affected the income of wheat producers and grain exporters; (2) whether wheat producers' income would have increased if additional EEP funds had been used for direct income support payments; and (3) the benefits of higher target prices.
GAO found that: (1) EEP has generally increased wheat exports by 3 to 11 percent and raised wheat prices by 0.4 to 12 percent; (2) EEP has increased wheat producers' and marketing firms' income as much as 18 percent; (3) EEP funding can impact the cost of federal commodity programs when it is provided in redeemable certificates rather than in cash; (4) higher target prices would increase producers' net income from wheat production by more than the equivalent level of indirect support through EEP; (5) by increasing market prices, EEP benefits all wheat producers whether or not their wheat acreage is enrolled in the federal wheat commodity program; (6) EEP also discourages foreign competitors from continuing marketing practices that limit access to foreign markets; and (7) increasing exports through EEP would be costly, since the government subsidy on each additional bushel of wheat exported would exceed the farm-level price received for that bushel.