Federal Dairy Programs: Long-Term Market Solutions Needed to Solve the Surplus Problem

GAO discussed the Department of Agriculture's (USDA) efforts to control dairy product surpluses. GAO noted that: (1) annual purchases under the USDA price support program dramatically increased from $251 million in 1979 to $2.6 billion in 1983, contributing to unprecedented milk production levels; (2) USDA did not effectively implement its dairy cattle termination program, had insufficient cost data to calculate bonus amounts, and experienced difficulties in exporting live animals; (3) although the Milk Diversion Program and the Dairy Termination Program saved the government some money and reduced milk production, those programs only provided short-term solutions to the dairy surplus problem; (4) the government stocks of dairy products, as of March 1991, increased about 79 percent from 1990 and commercial stocks of dairy products were higher than in the past 10 years. GAO believes that a long-term alternative is needed to encourage and facilitate dairy farmers' transition into a more market-oriented industry.