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United States General Accounting Office
GAO
Briefing Report to the Chairman,
Subcommittee on Agricultural Research
and General Legislation, Committee on
Agriculture, Nutrition, and Forestry, U.S.
Senate
June 1989
CROP PRODUCTION
Outlook for PostDrought Recovery
During 1989
GAO/RCED-89-161BR
GAO
United States
General Accounting Oftice
Washington, D.C. 20548
Resources, Community, and
Economic Development Division
B-235636
June 6, 1989
The Honorable Kent Conrad
Chairman, Subcommittee on Agricultural
Research and General Legislation
Committee on Agriculture, Nutrition,
and Forestry
United States Senate
Dear Mr. Chairman:
As requested in your August 29, 1988, letter and in
subsequent discussions with your office, we obtained
information on the (1) likelihood of normal wheat, corn, and
soybean crops in 1989 following the severe drought of 1988
and (2) potential effects of a 15-percent decrease in wheat
and corn production in 1989. The 1988 drought was among the
worst in this century and left several regions of the nation
with below-normal soil moisture going into the fall and
winter.1
In summary, it is difficult to predict potential wheat,
corn, and soybean production, because the timing and level
of future precipitation are unknown. If inadequate soil
moisture and precipitation cause below-normal crop
production, it is likely that crop supplies (including
available stocks) would tighten, prices would rise, and use
(consumption) would decrease.
In october 1988, u.s. Department of Agriculture (USDA)
officials anticipated that an average level of precipitation
would occur in 1989 and that, as a result, normal crops
nationwide would be produced. However, USDA estimated in
May 1989 that u.s. wheat production for 1989 would total
2.05 billion bushels, which is some 500 million bushels
lower than expected in December 1988. The lower estimate is
mainly caused by below-normal precipitation in Kansas,
Oklahoma, and Texas--leading producers of winter wheat.
Also, state climatologists are not optimistic about the
harvest for wheat and other crops grown in the Northern
1The 1989 winter wheat crop was planted in the fall of 1988
and will be harvested by mid-July 1989. The growing season
for corn and soybeans starts in the spring, and these crops
are harvested in the fall.
B-235636
Plains region.2 For corn and soybeans grown in the Corn
Belt3 and Lake States4 regions, state climatologists believe
that it is too early to determine whether a normal crop will
be produced.
A simulation by USDA's Economic Research Service (ERS)
estimated the potential effects of a 15-percent decrease in
1989 wheat and corn production from levels expected in
December 1988. The simulation suggests that wheat and corn
prices would rise 18 and 36 percent, respectively, from the
levels expected in December 1988. Total (domestic and
export) wheat use would decline by 11 percent and corn use
by 10 percent from expected levels. Wheat stocks as a
percentage of total use would decrease from the expected
level of 22 percent to 20 percent. Between 1972 and 1988,
the median level was 43 percent. corn stocks as a
percentage of total use would decrease from an expected
level of 22 percent to 18 percent. Between 1972 and 1988,
the median level was 23 percent.
Section 1 of this briefing report provides background
information on droughts and federal and state weatherforecasting activities. Sections 2 and 3 provide a detailed
presentation of our analysis in response to your questions.
SCOPE AND METHODOLOGY
Our work was performed between September 1988 and May 1989.
To examine the likelihood of normal crop production
following the 1988 drought and the effects of a 15-percent
decline in crop production, we interviewed officials at
USDA's ERS, Agricultural Stabilization and Conservation
Service, National Agricultural Statistics Service, and the
National Oceanic and Atmospheric Administration (NOAA)/USDA
Joint Agricultural Weather Facility. We also interviewed
crop and weather analysts at USDA's World Agricultural
Outlook Board and its Interagency Commodity Estimates
Committee. To obtain weather forecasts for 1989, we
2 Kansas, Nebraska, North Dakota, and South Dakota.
3 rllinois, Indiana, Iowa, Missouri, and Ohio.
4Michigan, Minnesota, and Wisconsin.
2
B-235636
interviewed officials at NOAA's National Weather Service
(NWS). We obtained crop production and outlook studies done
by the Federal Reserve Bank of Kansas City and the
President's Interagency Drought Policy Committee. To obtain
indications on states' outlooks for 1989 wheat, corn, and
soybean production, we interviewed 12 state climatologists-5 from the Corn Belt, 4 from the Northern Plains, and 3 from
the Lake States regions.
We requested USDA's ERS to simulate a 15-percent decrease in
1989 wheat and corn production from levels expected in
December 1988. We asked ERS to perform the simulation
because ERS regularly provides crop supply, demand, and
price analyses for USDA and the agricultural industry. We
did not independently test or evaluate the simulation
methodology or results.
We discussed the results of our work with USDA and NWS
officials, who reviewed parts of the draft report for
technical accuracy. However, at the request of your office,
we did not obtain formal agency comments on this report.
As agreed with your office, unless you publicly announce its
contents earlier, we plan no further distribution of this
report until 7 days from the date of this letter. At that
time, we will send copies to the Director, Office of
Management and Budget; Secretary of Commerce; Secretary of
Agriculture; Administrator, Agricultural Stabilization and
Conservation Service; and other interested parties. Major
contributors to this briefing report are listed in appendix
I.
Sincerely yours,
John W. Harman
Director, Food and
Agriculture Issues
3
CONTENTS
LETTER
1
SECTION
1
2
3
INTRODUCTION
Droughts in the 20th Century
Weather-Forecasting Activities
and Organizations
POTENTIAL FOR NORMAL CROP PRODUCTION IN
1989
Overview
Wheat Outlook
Corn and Soybean Outlook
National Weather Forecast for May
Through July 1989
6
6
10
12
12
16
17
17
ESTIMATED EFFECTS OF A 15-PERCENT DECREASE
IN CROP PRODUCTION
Results of Simulation
19
19
MAJOR CONTRIBUTORS TO THIS REPORT
24
APPENDIX
I
TABLES
1.1
3.1
Comparison of Corn, Soybeans, and Wheat
Yields, 1980-88
Effects of a 15-Percent Reduction From
Expected Levels of Wheat and Corn
Production in 1989
9
20
FIGURES
1.1
Drought Severity Index--July 23, 1988
7
1.2
Percentage of Contiguous United States
Having Extreme or Severe Drought From
1900 Through July 23, 1988
8
1.3
Crop Moisture Index--May 13, 1989
10
2.1
Wheat Yields--1930 Through 1988
13
2.2
Corn Yields--1930 Through 1988
14
4
2.3
Soybean Yields--1930 Through 1988
2.4
u.s.
Precipitation Forecast--May Through
July 1989
15
18
ABBREVIATIONS
ASCS
ERS
GAO
NOAA
NWS
P.L.
RCED
USDA
Agricultural Stabilization and Conservation Service
Economic Research Service
General Accounting Office
National Oceanic and Atmospheric Administration
National Weather Service
Public Law
Resources, Community, and Economic Development
Division
U.S. Department of Agriculture
5
SECTION 1
INTRODUCTION
This section describes and compares the 1988 drought with
other droughts in this century and discusses federal and state
weather-forecasting activities.
DROUGHTS IN THE 20TH CENTURY
The 1988 drought ranks among the nation's worst droughts in
this century. Hot, dry weather during the spring and summer of
1988 spread rapidly across a large area of the nation.
By the end
of June 1988, about 35 percent of the contiguous United States was
abnormally dry. By late July 1988, extreme or severe drought
conditions peaked as 43 percent of the nation succumbed to arid
conditions. The u.s. Department of Commerce's National Oceanic and
Atmospheric Administration (NOAA)/U.S. Department of Agriculture
(USDA) Joint Agricultural Weather Facility data show that the
Northern Plains and Corn Belt regions were among the hardest hit
areas. This is shown in figure 1.1.
6
Figure 1.1:
Drought Severity Index--July 23, 1988
MOISt
Legend
IIIII Extreme Drought (Worse Dryness)
f:~~}t:;:~;}:J Severe Drought
c::::J Moderate Drought
~Near Normal
c:::::J MOISt tAs Marked)
Source:
NOAA/USDA Joint Agricultural Weather Facility.
As shown in figure 1.2, droughts occur in a percentage of the
country nearly every year and have been more severe in the 1930s,
1950s, and again in 1988.
7
Fiqure 1.2: Percentage of Contiguous United States Having
Extreme or severe Drought From 1900 Through July 23. 1988
65
60
55
July 23. 1988 " " "
so
45
430..
40
c
35
rf
30
:'l
25
20
15
10
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
Years
Source:
NOAA's National Weather Service.
1980 Droughts
The 1988 drought was not the first in the 1980s. As shown in
table 1.1, previous droughts occurred in 1980 and in 1983.
Although corn, soybean, and wheat yields (bushels per acre) were
affected by the droughts, corn has shown a greater percentage of
reduction in yields because of drought than the other two crops.
Corn yields in 1988 were down over 29 percent from 1987 levels,
8
soybean yields about 21 percent, and wheat yields about 10
percent.
Table 1.1:
1980-88
Comparison of Corn. Soybeans. and Wheat Yields,
Corn
Soybeans
Wheat
---(bushels per acre)--1980a
1981
1982
1983a
1984
1985
1986
1987
1988a
91.0
108.9
113.2
81.1
106.7
118.0
119.3
119.4
84.6
26.5
30.1
31.5
26.2
28.1
34.1
33.3
33.7
26.8
33.5
34.5
35.5
39.4
38.8
37.5
34.4
37.7
34.1
aDrought year.
Source:
USDA.
1989 Crop Moisture Levels
The NOAA/USDA Joint Agricultural Weather Facility reported on
crop moisture levels throughout the nation as of May 13, 1989.
(See fig. 1.3.)
It identified several winter wheat states
(Kansas, Nebraska, and Texas) as having slightly to excessively dry
crop moisture levels1 caused by the 1988 drought and continuing
lack of precipitation in 1989. Several major corn and soybean
states in the Corn Belt and Lake States regions were having
favorably to abnormally moist crop moisture conditions.
1 crop moisture levels are based on short-term crop needs versus
available water in a 5-foot soil profile.
9
Figure 1.3:
1111!1
Abnormally Mo1st
C:::J
C:=J
Wet
I</;:}~
/J
C:=J
crop Moisture Index--May 13, 1989
Favorably Mo1st
Abnormally Dry
Slrghtly Dry
~ Severely Dry
~ Excess1vely Dry
Source:
NOAA/USDA Joint Agricultural Weather Facility.
WEATHER-FORECASTING ACTIVITIES AND ORGANIZATIONS
NOAA's National Weather Service (NWS) is responsible for
collecting and reporting the nation's climate and weather data.
NWS' Climate Analysis Center produces 6-to-10 day, 30-day, and 90day forecasts.
USDA has broad responsibilities relating to the development
and use of climate and weather information in executing its
program responsibilities.
Its Economic Research Service (ERS) and
National Agricultural statistics Service are the principal
10
agencies that forecast and provide information on agricultural
commodities supply, demand, and price.
The NOAA/USDA Joint Agricultural Weather Facility produces a
weekly weather and crop bulletin. This bulletin contains, among
other things, national weather and agricultural summaries,
measures of drought severity, and individual state summaries on
weather and crop outlook.
State climatologists provide information on state weather and
soil moisture conditions to local governments and corporations.
According to the President of the Association of state
Climatologists, most state climatologists are full-time professors
at state colleges and universities. Some state climatologists
produce a monthly publication of their state's weather and soil
conditions.
11
SECTION 2
POTENTIAL FOR NORMAL CROP PRODUCTION IN 1989
This section provides the outlooks for wheat, corn, and
soybean production for 1989. As of May 1989, the prospects for
normal production of winter wheat were well below normal in many
states. No one knows for sure what the prospect for corn and
soybeans planted in the spring will be. Historical trends
indicate that overall corn and soybean production will probably
rebound in 1989, but parts of the relevant growing regions remain
under dry conditions.
OVERVIEW
Predicting potential crop production is difficult because the
timing and level of future precipitation are unknown. According to
officials of ERS and USDA's Agricultural Stabilization and
Conservation Service (ASCS), an average level of precipitation in
the growing season will be sufficient to produce an average crop
for wheat, corn, and soybeans nationwide in 1989. Precipitation in
the growing season is the most important factor affecting crop
yields, they said.
In addition, they told us that the level of
soil moisture before the growing season begins is not a good
indicator of subsequent crop yields, although the crop is more
vulnerable with below-normal soil moisture. They said that the
northwest had low soil moisture in 1987 and going into 1988.
However, the states in the northwest had a good 1988 crop because
precipitation came at the right time.
According to ERS officials, no one knows for sure whether the
1989 crops will rebound because of the difficulty in predicting
weather. However, historical data of major crops indicate that a
rebound is the most likely outcome on a nationwide basis.
(See
figs. 2.1, 2.2, and 2.3, respectively.)
12
Figure 2.1:
Wheat Yields--1930 Through 1988
40 Bushels per Acre
30
20
10
1930
1940
1950
1960
Crop Years
Source: USDA.
13
1970
1980
1988
Figure 2.2:
120
Corn Yields--1930 Through 1988
Bushels per Acre
110
100
90
eo
70
60
50
40
30
20
10
0
1930
1940
1950
1960
Crop Years
Source:
USDA.
14
1970
1980
1988
Soybean Yields--1930 Through 1988
Figure 2.3:
40
Bushels par Acre
30
20
10
0
1930
1940
1950
1960
Crop Years
Source:
USDA.
15
1970
1980
1988
According to a December 1988 study by the Federal Reserve
Bank of Kansas City, which tracks agricultural conditions in the
midwest, crop yields are likely to rebound in 1989 under normal
weather conditions. The study states that a return to normal
weather patterns is the most likely scenario for the 1989 growing
season. However, the study stated that much of the nation remains
affected by the 1988 drought because of below-normal precipitation
in the fall.
The depleted soil moisture in the driest areas of the
nation, such as the Corn Belt and the Northern Great Plains, has
not been recharged by fall rains. Therefore, in the absence of
adequate soil moisture, the 1989 crops will be especially dependent
on spring rains and timely precipitation throughout the growing
season.
The President's Interagency Drought Policy Committee, which
was created to examine problems caused by the 1988 drought,
reported on December 30, 1988, that historical data suggest that
crop production should rebound in 1989 and grain stocks should
start to reaccumulate. The Committee reviewed the period 1950
through 1987 to see how production changed in years following a
year when production declined 15 percent or more. They found
that, on average, corn production rebounded by 42 percent and
stocks grew 42 percent; soybean production rebounded by 17 percent
and stocks grew 30 percent; and wheat production rebounded by 20
percent and stocks grew 31 percent.
We asked 12 state climatologists for their forecasts on
whether an average level of precipitation would produce an average
crop in 1989. Six state climatologists from the Lake States and
Corn Belt regions said that their states would have an average crop
with an average level of precipitation during the growing season in
1989. Four state climatologists from the Northern Plains region
said that an average level of precipitation would not produce an
average crop in their region in 1989. The remaining two state
climatologists from the Corn Belt region made no forecast.
WHEAT OUTLOOK
As of May 1989, USDA's outlook is for lower-than-expected
wheat production. USDA estimates that u.s. wheat production would
total 2.05 billion bushels--some 500 million bushels lower than
expected in December 1988. Lower wheat production is expected, in
part, because of dry conditions in the major winter-wheat-producing
states of Kansas, Oklahoma, and Texas. As of May 16, 1989, the
NOAA/USDA Joint Agricultural Weather Facility forecasted that
winter wheat production would total 1.43 billion bushels--an apercent decrease from 1988 levels. Yield prospects are for an
average of 34.9 bushels per acre, down 4.3 bushels from last
season. This would be the lowest average winter wheat yield since
1978.
16
The four state climatologists in the Northern Plains region
said that their states would have below-normal crop yields with an
average level of precipitation in 1989 because of low levels of
soil moisture. For example, the North Dakota state climatologists
said that an average level of precipitation will not produce an
average crop in his state in 1989. North Dakota normally receives
its largest amount of precipitation during the fall season and not
in the spring. However, precipitation was below normal in the fall
of 1988. He also said that there is an SO-percent probability that
reduced crop yields will occur in his state and crop yields, if
lower, could be anywhere between 5 and 50 percent of normal
yields.
CORN AND SOYBEAN OUTLOOK
In May 1989, the NOAA/USDA Joint Agricultural Weather
Facility reported that crop moisture levels are favorably to
abnormally moist in the Lake states region and much of the Corn
Belt region. In the Corn Belt region, Missouri and southwestern
Iowa have slightly dry crop moisture levels. Replenishment of soil
moisture will be difficult in these states because the National
Weather Service is forecasting below-median precipitation there for
the period May through July 1989.
In March 1989, state climatologists in the Corn Belt and Lake
States regions said that it was too early to determine whether
their states will have an average corn and soybean crop in 1989.
However, six of the eight climatologists in these regions said
that, if they receive an average level of precipitation in the
growing season, they will have average crops. The other two state
climatologists did not make a forecast.
NATIONAL WEATHER FORECASTS FOR MAY THROUGH JULY 1989
Excess precipitation is unlikely for the Northern Plains
region and much of the Corn Belt and Lake States regions for the
period May through July 1989, according to NWS. This period is
critical for the completion of the winter-wheat-growing season and
for most of the corn- and soybean-growing season. NWS' 90-day
outlook for May through July 1989, figure 2.4, shows a large area
of the nation with equal or less-than-equal chances of exceeding
median precipitation.1 Above-median precipitation is forecasted
only for the areas in and near Idaho and Utah and the eastern parts
1"Equal chances" means that there is too little information for NWS
to predict whether precipitation will be above or below the median
level. ''Below-median" means that there is less than a 45-percent
chance of at least median precipitation. "Above-median"
represents a greater than 55-percent chance of at least median
precipitation. NWS' median is estimated from 30 years (1951-80)
of data on total inches of precipitation in the same 90-day period.
17
of Ohio and Michigan through the northeastern states. Below-median
precipitation is forecasted for the eastern parts of the Dakotas,
Nebraska, and Kansas, the western parts of Illinois and Wisconsin,
and the entire states of Minnesota, Iowa, and Missouri. Equal
chances of accumulating above- or below-median precipitation are
forecasted for the remainder of the nation.
Figure 2.4:
u.s. Precipitation Forecast--May Through July 1989
55"'c Chance
C=:J Above
1:::::;::}:::::::1 Below
c:::J Equal
Source:
NWS.
18
SECTION 3
ESTIMATED EFFECTS OF A 15-PERCENT DECREASE IN CROP PRODUCTION
To examine the potential impact of below-normal wheat and
corn production, we requested that ERS simulate a 15-percent
decrease in 1989 production from expected, or baseline, levels
that were estimated in December 1988. This section presents the
results of that simulation. This section also discusses the
changes that May 1989 estimates of production and stock levels may
have on the relevance of the simulation.
RESULTS OF SIMULATION
If reduced soil moisture and minimal precipitation cause a
15-percent decrease in 1989 wheat and corn production, higher
prices, lower use, and lower stock levels would be expected. ERS'
simulation indicates that wheat and corn production would be
reduced by 375 million bushels and 1.2 billion bushels,
respectively, from levels estimated in December 1988. Because of
higher prices for both crops, total wheat and corn use would be
reduced by 11 and 10 percent, respectively, from expected levels.
Export use (relative to baseline levels) would decline
proportionately more than domestic use.
In the domestic market,
food and seed use would decline proportionately less than feed
use.
Prices of wheat and corn would be more than 15 percent
higher in the simulation. Wheat prices would increase 18 percent,
and corn prices would be 36 percent higher.
Under the simulated 15-percent decrease in production, ending
wheat stocks (the amount in public and private storage at the end
of the marketing year) would be reduced by 91 million bushels,
which is about 17 percent lower than the baseline level. Wheat
ending stocks of 458 million bushels would be the lowest since the
1974-75 crop year, when 435 million bushels remained in storage.
Wheat stocks of 458 million bushels represent 42 percent of
domestic wheat use and 20 percent of total use.
Between 1972 and
1988, the median level of wheat stocks as a percentage of total
use was about 43 percent.
The simulation shows that ending corn stocks would be reduced
by 440 million bushels, or about 26 percent lower than the baseline
level. Corn ending stocks of 1.274 billion bushels represent 18
percent of total use. Between 1972 and 1988, the median level of
corn ending stocks as a percentage of total use was about 23
percent.
Table 3.1 shows USDA's expected 1989 levels for supply, use,
and price and ERS' estimated results under the simulated 15percent reduction in wheat and corn production.
In developing the
19
baseline level, USDA expected normal weather conditions to
prevail.
Table 3.1: Effects of a 15-Percent Decrease From Expected Levels o(
Wheat and Corn Production in 1989
Wheat
Expected
15-percent
level
reduction
(millions of bushels)
Corn
Expected
15-percent
level
reduction
(millions of bushels)
Domestic supply:
Beginning stocks
Production
Imports
528
2,550
15
528
2,175
20
1,446
8,000
1,446
6,800
3
3
Total supply
3.093
2.723
9.449
8.249
270
849
260
830
4,600
1.260
4,200
1.175
1.119
1. 090
5,860
5.375
1,425
1.175
1.875
1. 600
Total use
2,544
2.265
7.735
6.975
Ending stocks
549
458
1, 714
1,274
Ending stocks/use
0.22
0.20
0.22
0.18
Season average price
(per bushel)
$3.60
$4.25
(per bushel)
$1.95
$2.65
Harvested acres
(in millions)
67.1
64
(in millions)
67.8
67.3
Domestic use:
Feed & residual
Food & seed
Domestic total
Exports
Yield
(bushels per acre)
38
34
(bushels per acre)
118
101
Note: The data are estimated levels for the 1989/90
marketing year, which ends on May 31, 1990, for wheat
and August 31, 1990, for corn.
20
The simulation shows that, while production of both crops
would decrease by 15 percent, prices, use, and ending stocks do not
change proportionately. The results indicate that wheat and corn
use would not change much despite considerably higher prices
because their use tends to be price inelastic--in other words, use
would decrease less than 15 percent within the year despite prices
that are more than 15 percent higher. Because wheat and corn use
decrease less than production, stocks would be drawn down to
absorb the demand. In the simulation, as wheat and corn use fall
by less than 15 percent, ending stocks decrease by more than 15
percent.
The simulation also shows proportionately different results
for wheat and corn. Corn prices increase by a greater percentage
than wheat prices, and corn ending stocks decrease proportionately
more than wheat ending stocks.
The results of the simulation indicate that, wheat stocks
would decline proportionately less, in part, because more than half
of u.s. wheat is exported. The simulation assumes that export use
is generally more responsive to price increases than domestic use
because alternative sources of grain tend to be easily accessible
to foreign wheat purchasers. When u.s. grain prices increase
relative to competitors' prices, it is assumed that foreign buyers
would cut back their purchases of U.S. grain, substituting grain
from other countries.l
Under ERS' simulation of a 15-percent decrease in production
from expected levels, ending wheat stocks are estimated to be 458
million bushels. Included in these stocks is a sizable amount of
wheat stocks that are not free to enter the market. These stocks
are contained in the Food Security Wheat Reserve, which the
Congress established to assist developing countries suffering from
emergency food shortages. USDA is authorized to reserve up to 4
million metric tons (147 million bushels) of wheat.2
ERS' simulation includes 147 million bushels that are held in
the Food Security Wheat Reserve. However, a USDA official said
that as of April 1, 1989, USDA was storing less than the 147
million bushels in the reserve. He said that USDA had provided 16
million bushels of wheat from the reserve to eligible countries.
Also, an additional 34 million have been authorized for donations
during this marketing year. Further, he said that USDA has no plan
lrn this analysis, except for the 15-percent decrease in domestic
wheat and corn production, all market conditions remain the same,
including foreign buyers' continued access to alternative commodity
supplies at competitive prices.
2The Food Security Wheat Reserve Act of 1980, P.L. 96-494,
established this wheat reserve.
21
to replenish any of this wheat during the 1989/1990 crop year for
two main reasons. First, high market prices are encouraging
producers to sell their crops rather than forfeit them to USDA
under the price-support loan program. As a result, USDA owns a
limited quantity of wheat stocks that could be assigned to the
Wheat reserve. Second, USDA is not likely to purchase wheat stocks
on the open market and risk disrupting wheat prices. Therefore,
the reserve is likely to be 50 million bushels less than the
authorized maximum.
An ERS official told us that if stocks in the Food Security
Wheat Reserve are assumed to be 50 million bushels less than the
147-million-bushel maximum, more of the 458 million bushels of
ending stocks would be available for the market. This could lead
to a small decrease in wheat prices.
The corn ending stocks in ERS' simulation are estimated to be
1.274 billion bushels. Included in these stocks is a relatively
small amount that is not comprised of free stocks. They are held
by USDA in the Disaster Reserve program. To alleviate distress
caused by a natural disaster, the Con~ress authorized USDA to
reserve 75 million bushels of grains.
According to a Kansas City
Commodity Office official, USDA is storing 75 million bushels of
government-owned feed grains (mainly corn and milo) for the
Disaster Reserve program. He also said that as of April 1, 1989,
this reserve had not been used.
The Farmer-owned Reserve, which the Congress established to
support grain prices, will probably not constrain wheat and corn
stocks from entering the market. 4 The reserve allows stocks to be
held off of the market until market prices reach a designated
"release" level. According to a USDA official, USDA expects
minimal quantities of wheat and corn to remain in the Farmer-Owned
Reserve at the end of the 1989/90 marketing year.
Revised Wheat and Corn Estimates
Monthly updates in USDA's estimates of wheat and corn supply,
use, and prices may have relevance for ERS' simulation of a 15percent decrease in wheat and corn production. As previously
noted, in May 1989, USDA estimated that u.s. wheat production would
total 2.05 billion bushels--some 500 million bushels lower than
expected in December 1988. Lower wheat production is expected, in
part, because of drought conditions in such major winter-wheatproducing states as Kansas, Oklahoma, and Texas. In May 1989, USDA
3The Agricultural Act of 1970, P.L. 91-524, as amended, established
the Disaster Reserve program.
4The Food and Agriculture Act of 1977, P.L. 95-113, created the
Farmer-Owned Reserve.
22
estimated beginning corn stocks to be 1.83 billion bushels--some
384 million bushels higher than expected in December 1988.
Beginning stocks are larger, in part, because 1988 production
proved to be higher and use proved to be lower than levels
estimated in December 1988.
USDA's revised wheat estimate of 2.05 billion bushels of
production is close to the 15-percent simulated level of 2.175
billion bushels. The revised production level has also helped to
move USDA's revised estimates of use, ending stocks, and prices
closer to the 15-percent simulated level. The increase in
beginning corn stocks in USDA's estimates would likely contribute
to lower prices, higher domestic and export use, and higher ending
stocks.
23
APPENDIX I
APPENDIX I
MAJOR CONTRIBUTORS TO THIS REPORT
RESOURCES, COMMUNITY, AND ECONOMIC DEVELOPMENT DIVISION,
WASHINGTON, D.C.
John w. Harman, Director, Food and Agriculture Issues
{202) 275-5138
Jeffrey E. Heil, Assistant Director
Mary c. Kenney, Economist
Robert E. Levin, Advisor
KANSAS CITY REGIONAL OFFICE
Carl Lee Aubrey, Regional Management Representative
Donald w. Birkman, Evaluator-in-Charge
Maria M. Jones, Evaluator
David R. Solenberger, Operational Research Analyst
{022956)
24
United States
General Accounting Office
Washington, D.C. 20548
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