Embargoes, Surplus Disposal, and U.S. Agriculture: A Summary

Embargoes did not cause the farm crisis of the 1980's, and an aggressive export subsidy program to reduce surplus commodity stocks would not have prevented it. The cause more likely rests with radical changes in such worldwide economic conditions as recession, high interest rates, and the value of the dollar. The short-term embargoes of the 1970's, implemented to correct short supplies and high prices, stabilized markets and had little lasting effect on trade, prices, and farm income. The longer term 1980 USSR embargo, implemented for foreign policy reasons, barely changed U.S. and world trade levels, but did alter trade flows as the USSR replaced lost U.S. exports from other sources. U.S. policies to protect farmers from the cost of the embargo more than offset any immediate damage. A general export subsidy to dispose of stocks would be more expensive than existing programs although farm income would remain basically unchanged and world price variability would increase. If the subsidy's goal was to maximize income minus subsidy costs, targeted subsidies could do so at lower costs than current programs but would be difficult to implement and would not eliminate stocks. If the goal was to eliminate stocks, then targeted subsidies could not improve income sufficiently to offset Government costs.