U.S. Grain Sales:

Inventory Sales Raise Issues for Legislative Consideration

RCED-90-120: Published: May 22, 1990. Publicly Released: Jul 3, 1990.

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Pursuant to a congressional request, GAO assessed whether the Department of Agriculture (USDA) received reasonable prices for the grain it sold during fiscal years 1988 and 1989.

GAO found that: (1) the overall policy USDA used for certificate exchange sales priced grain as close as possible to estimated local market prices; (2) USDA implementing instructions specified that exchange prices should be at or below estimated local market prices; and (3) USDA determined selling prices for exchange sales based on estimates of local market prices. GAO also found that: (1) USDA sale prices for 36 million bushels of grain averaged about 5 cents below local market prices; (2) it could not measure the reasonableness of the sale prices in relation to the need to reduce inventories; (3) USDA grain sales were instrumental in reducing costly federal grain inventories; and (4) the U.S. grain stock policy did not address such issues as inventory size, USDA authority to release grain stocks, or how to avoid future excessive inventories.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Congress has enacted and USDA has implemented part three of the recommendation. Congress has not taken any action on parts one and two. An accomplishment report is being prepared for part three. Since Congress is not expected to act on the farm bill until 1995, the recommendation should be closed.

    Matter: Resolving questions on federal grain sales and inventory management, such as those that are discussed in this letter, could have significant implications for future farm policy. Over the next few months, Congress will be considering changes to the nation's farm policy as it deliberates over the 1990 farm bill. Therefore, as part of those deliberations, Congress may wish to consider addressing questions concerning: (1) how high or low federal grain stocks should be allowed to go before actions are taken to decrease or increase them; (2) whether USDA authority for grain sales should be expanded or restricted; and (3) whether USDA farm support programs can or should be modified to avoid the buildup of unnecessarily large inventories.


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