Grain Reserves:

A Potential U.S. Food Policy Tool

OSP-76-16: Published: Mar 26, 1976. Publicly Released: Mar 26, 1976.

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A summary of grain reserve research was made to provide a perspective on agricultural policy, on the newly emerging uncertainty that U.S. grain production can adequately satisfy food needs, and on the factors that need consideration in developing a grain reserve program as part of food policy. Traditionally, U.S. agricultural policy has had three general objectives: maintaining the productive base by attempting to stabilize agricultural prices and maintain farmers' incomes; protecting the domestic consumer by attempting to provide adequate supplies at reasonable prices; and exporting agricultural surpluses for commercial, humanitarian, and political purposes. Adverse weather occurrences, similar to those in 1972 and 1974, would tax existing food supplies, and the United States would be faced with making decisions on domestic price increases and allocations of food abroad. A food reserve that is built during years of plenty and made available during lean years could act as a buffer aginst unpredictable shocks to the food system.

GAO makes the following two assumptions: first, decisionmaking according to preconsidered plans and criteria is preferable to ad hoc decisionmaking; second, planning for decisions is facilitated if there is a buffer between uncertainities of supply and demand. Therefore, the greater the buffering capability, the greater the likelihood of executing a planned decisionmaking process. A system of food reserves is a mechanism of increasing predictability for both producers and consumers during periods of agricultural surpluses or scarcities. A reserve system acts as a buffer against major fluctuations in supply and demand and facilitates establishment of rules for stock accumulation and release.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Since a shortfall of foodstuffs could result in life-and-death decisions by the United States, attention should be given to developing a food reserves policy to act as a buffer and to facilitate decisionmaking in uncertain situations. A primary issue is the balance between food shortages and food surpluses; shortages of food tend to increase prices and benefit farmers and processors at the expense of consumers, while surpluses of food tend to decrease prices and benefit consumers at the expense of farmers. In the consideration of food reserves as a buffer and as a means of balancing producer and consumer interests, at least eight factors must be examined: what should be the scope of a reserve system; what ought to be the objectives of reserve stock management; what levels of reserves are appropriate; what ought to be the relationship between the reserve system and the market mechanism; who ought to control the reserve system; how should reserve financing operate; what should be the relationship between domestic farm policy and a reserve system; and how should the reserve system be coordinated with export control policy.


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