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Embargoes, Surplus Disposal, and U.S. Agriculture

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  • Economic Research Service

Abstract

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 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

Suggested Citation

  • Economic Research Service, 1986. "Embargoes, Surplus Disposal, and U.S. Agriculture," Agricultural Economic Reports 308016, United States Department of Agriculture, Economic Research Service.
  • Handle: RePEc:ags:uerser:308016
    DOI: 10.22004/ag.econ.308016
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    References listed on IDEAS

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    1. William H. Meyers & Michael D. Helmar & S. Devadoss, 1986. "FAPRI Trade Model for the Soybean Sector: Specification, Estimation, and Validation," Center for Agricultural and Rural Development (CARD) Publications 86-sr2, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Chambers, Robert G. & Just, Richard E., 1982. "An investigation of the effect of monetary factors on agriculture," Journal of Monetary Economics, Elsevier, vol. 9(2), pages 235-247.
    3. Aniss Bahrenian & S. Devadoss & William H. Meyers, 1986. "FAPRI Trade Model for Feed Grains: Specification, Estimation, and Validation," Center for Agricultural and Rural Development (CARD) Publications 86-sr1, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    4. G. Edward Schuh, 1984. "Future Directions for Food and Agricultural Trade Policy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(2), pages 242-247.
    5. Aniss Bahrenian & S. Devadoss & William H. Meyers, 1986. "FAPRI Trade Model for Feed Grains: Specification, Estimation, and Validation," Food and Agricultural Policy Research Institute (FAPRI) Publications (archive only) 86-sr1, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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