Cover: The Economics of United States Grain Stockpiling

The Economics of United States Grain Stockpiling

Published 1977

by John P. Stein, Rodney T. Smith

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We examine rationales for and against U.S. Government intervention in private grain storage, analyze costs and effects of intervention, and comment on political issues and aspects of implementation. Private storage activity already appears to be highly competitive. The influences of grain stock policy on food aid policy and national diplomatic objectives constitute externalities that could justify intervention. We simulate the costs of stabilizing grain prices through subsidization of private storage. Among other effects, price stabilization reduces U.S. export earnings. Beneficiaries of subsidized price stabilization are consumers, particularly foreign consumers and meat-eaters. Price stabilization may raise or lower the mean price level; the resulting welfare effects could dominate the other effects of price stabilization. We recommend subsidization of private stocks over government-managed reserves and separation of stockpiling and aid policies. We include a background discussion of forces contributing to the post 1972 rise in world grain prices. (See also R-2087.)

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