y I ~-

FOR THE 1990 FARM BILL

DONATIONS AND OTHER USES OF CCC SURPLUS DAIRY PRODUCTS

Andrew Novakovic. Cornell University

AILhough the surplus situation changed dramatically in 1988, there is no denying lhal lhe U.S. governmcm purchased a large amount of cheese, buuer, and nonfai dry milk \lnder Ihe Dairy Price Support Program (DPSP) in Ihe 19805. In limes of huge surpluses, lhe U.S. has been faced with eithel finding new ways [0 rid itself of a massive stOCkpile or watChing them deteriorate into uselessness. Existing programs to use surplus dairy producLS have been used aggressively. and new programs such as the Temporary Emergency Food Assistance Program (TEFAP) and the Dairy Export Initiative Program (DEIP) were Cleated.

An oflcn heard defense of at leas\ some if nOl most of the purchases made under Ihe DPSP is (hal the U.S. government needs a large share of these produclS for usc in various domestic and intemational programs anyway. This article discusses the options USDA has for using stocks acquired under the DPSP, the amounts o f dairy products involved in recent years, and lhe apparent slnHegies USDA employs in disposing of surplus commodities.

Uses of COllernment Stocks Under the DPSP, manufac turers sell cheese, bUller, and

nonfat dry mJlIe. to the Commodity Credit Corporation (CCC), the business arm of the USDA. The USDA has numerou s options for utilizing these stocks, ranging from selling them b<lck to commercial markets to donating them to domestic and foreign food assistance programs. A basic glossary of Ine te rms USDA uses to describes what it buys and its use options are as follows. Purchases is the term used to refer to the amount of dairy products sold to the cec under the DPSP. Sales refers to dairy product stocks tha t are sold by the eee for at least some money if nOI a full value. Sales may be domcstic (in the U.S.) or export (in a foreign country). ProduCl<; sold for a price above the purchase price are "unrestricted;" sales made below the purchase price are "restricted" to certain uses. in particular as animal feed. Nel removals are calculated as total purchases less yOCL~,s lricted sales. Donalions are products used in domestic or foreign food aid programs, for which no money IS received. A more specific listing and description of the various options for using cce stocks is provided belOW.!

lMaLCrial in this stewon is adapted hom & deraJly Owned Dairy products · uwcolocjcs and DjS!libulion~. Fiscal YealS 1982-88. GAO/RCED-S8·108 FS. U.S. GOl/crnment Accounting Office. February 1988. pp. 18·21. and NMPf Economics Repot!. National Milk Producers Federation. Wuhinglon, D.C .. February, 1989, pp. 5·7.

Sales

Unrestricted:

Section 407 of me Agricultural Act of 1949 authoriz:es USDA to sell dairy stocks at prices above Ihe acquisition price for unrestricted use. The price at which USDA sells typiCally has been a stated or announced price , referred to as the scI/back price, or it may be a price derived from competitive bids. Scllback prices are typically pegged al same percentage above the purchase prices, reanuy 10%. In the event thaI prevailing markel prices exceed 110% of the purchase price, or whatever the percentage allowance is at the time. the sellbac k price will equallhe higher market price. Anyone can purchase CCC stocks at t.he sell back price. provided there are uncommitted inventories avail­able. The purchaser may use the product for any purpose, including resale on the commercial market. When USDA decides to sell commodities ulrough a bid, the highest competit ive bid detennines the price. As in most such auctions, USDA reserves the right to reject any and all bids . From FY 1977 to 19882 unrestricted sales averaged about 1% of tota l purchas~ for both bUiter and nonfat dry milk : lhe comparable figure for cheese was 3%. Re.'wjqed ure:

Section 407 also au thorizes USDA to se ll at lower prices commodities thai have deteriorated in storage and are no longer fit for human consumption. Products sold under Ihis category are restricted for use as animal feed only and are typically discoumed well below the purchase price. UHT Exchange;

Products in ecc stocks have been used as a payment in kind for ulU'a-high temperature ( long shelf life) milk under a special, small-scale program designed for UHT milk. -

eee EXOQrl (Section 1163);

These are temporary sales to foreign governments and private rinns. SDcc i£ic sales amounts were required in Section 11 63 of the Food Security Act of 1985 (FSA).

2In (his paper. hequem references :ue nl3de to fiscal yeu dat3 . The conl/cnLion Ih al is followed hClc is 10 identify the fiscal yeaJ: by the calcndu yur in which (he fiscal period~. For example. fiscal yea! 1988 is the period Oc tober 1. 1987 to September 30. 1988. and so forth.

This paper is va.'" o{ a series enlilled "~niI"Y ~olicyIssuf:S nnd Opti?"S {or ' lie 1990 Farll/ Bill," a project of Ihe Comelt Program on [){lIry Markets IIrld PoliCY 111 cOIIJIII/cIICH1lVllh Jill' Naltorml/Jls tif ule for Livestock lind Dairy Po/icy.

Dairy EX!'ortlncentive Program (DEW):

CCC stocks are used as payments in kind ""der the DELP, which was authorized in Section 153 of tile Food Security Act of 1985. The objective of the DEIP is to provide subsidies to U.S. exporters trying to break into world markets. World prices are usually much lower than U.S. prices: hence some assistance is often needed lO make U.S. expons cost competitive. Even when domestic prices are compeuuve on world markets, many fi(TTIs find it desirable to have USDA serve as an intermediary and carry some of the risk of the transaction, especially when a salc involves a less developed country. Unlike sales in the CCC Export category, no minimum level of use is required by the FSA for the DEIP. Participation in the program is voluntary and depends on the initiative of a commercial seller. Under the DEIP, payments have been made from commercial slOcks as well as CCC stocks. For the purpose of accounting for CCC inventories, in­kind payments made from commercial stocks are nol included. To date, very litlle product has been sold through the DEIP.

Department of Defense:

The CCC can make sales to the Departmcnt of Defense (DOD) for resale in military commissaries and post exchanges overseas.

Domestic Donations

Bureau of Prisons:

These are donations for federal prisons.

Veterans Administration:

These are donations for V.A. hospitals; the V.A. pays for packaging costs.

Department of Defense:

Donations can be made for military troop feeding; however the DOD must certify that the usual quantities of dairy products have been purchased through normal trade channels. The DOD pays for packaging costs.

Schools and Child Feeding:

The primary oullet here is the National School Lunch Program. Other federal programs that are supported include: the Summer Camps Program, the Child Care Food Program, the Summer Food Service Program, and the National Commodity Processing Program.

Charitable Institutions:

In addition lo soup kil£hens and other charitable feeding programs, donations are made to the following: statc rehabilitation centers and prisons, Indian Reservations, the Needy Families Program, the Women, Infant and Children Program, the Nutrition for the Elderly Progrom, the Elderly Feeding Pilot Projects Program, the Disaster.Feed­ing Program, and the Commodity Supplemental Food Program.

Temporary Emergency Food Assistance Program (TEFAP):

Donations can be made lo the needy under Section 202 of the Temporary Emergency Food Assistance Act of

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1983. Donations to the TEFAP are made to the extent stocks are available and not committed to other domestic or international aid programs.

Foreign Donations

Public Law 48QJTitie Ill:

Products are made available to established non-profit agencies under P.L. 480--the Food for Peace Program. Dairy products may be furnished as a unal product or as an ingredient in blended foods.

Section 4 16:

These donations are madc under a recently revived 1966 amendment lo P.L. 430. It allows the CCC lo make direct donations to foreign governments or to public Or private non-profit humanitarian organizations whose purpose is lo assist needy pcople outside of the U.S. These donations arc in addition to donations under other titles of P.L. 480 and allow CCC mOre direct and expedi­tious access to foreign donation outlets. Donations under Section 416 can be made only after domestic donallons have been fully exploited.

Levels of CCC Purchases, Sales, Donations, and Stocks

The acquisition and disposition of dairy products under the DPSP arc illustrated in Figures I to 3 from data presented in Table 1. Diffcrences are apparent across the three supported commodities. Particularly notable is the balance between government product sales and donations and the balance bctween the use of domestic and foreign outlets. Using the sum of reslricted sales, export sales, and all forms of donations as the base, the relative magnitudes of different ways of using CCC stocks are discussed below.

In the case of buner, domestic donations are far and away the mOSt prevalent use, averaging 64% of the total from FY 1977 lo 1988. Donations were fairly evenly split between the National School Lunch program (NSL) and TEFAP. Export sales were as high as 71 % in FY 1981, but averaged 19% for the 12 year pcriod. Almost all export sales fall in the CCC Export category, i.e. exports required under the FSA. Foreign donations were non-existent from FY 1977 lo 1981 but averaged 17% thereafter. Donations to Federal inslitutions--military, veteran's hospitals, and prisons--averaged 4% for this period.

In sharp conlrast, 54% of the nonfat dry milk disposi­tions were foreign donations. Most overseas donations were made through P.L. 480, although Section 416 donations were large when slOcks were at their greatest. Export sales, mostly CCC Exports, were the next largest use category at 24%. Thus, over three-fourths of the nonfat dry milk was used overseas. Domestic donations and unrestricted sales were more important in some years bUl averaged 13% and 9% respectively. TEFAP accounted for almost twice the volume that went through NSL, after 1983. Hence, what domestic donations occurred were heavily influenced by the new program. Donations to federal institutions were trivial. Sales and donations to the military averaged about 1%.

Table I. eee Purchases and Dis:~osi(ions of Da~ Products .

Fisca.l Sales U.S. Donations! Foreign Ending Year Purchases Unresuicted Restricted Export Welfare Federal Donallons2 Stocks

.-- _. ------ -- -- ----- -------- ---- -- --- -- --- -- --- ".-.--. -- ---- --(million pounds )-------------- -- ---- ------ --- ---- ---_ .- __ A ____ • __ - __ _ _ __

~ 1977 248.4 0.0 0.0 0 .0 77.7 8.4 0 .0 162 .2 1978 \47. \ 12.4 0.6 0 .0 82.2 9.2 0.0 204 . \ \979 59.8 \ 3.6 06 0 .0 92.8 9.6 0.0 \47 . 1 1980 235.7 2.7 1.5 0 .9 100.5 \0.3 0.0 266 .5 198 \ 356.5 0.0 0.1 291.9 107.9 10.4 0.0 216.5 1982 383.1 0.0 7.3 29 .3 1 \ 7.5 18.6 \ 3.2 402.7 \983 409. \ 0.0 0.6 5:1.0 284.1 12.8 62.9 391.2 \984 242.5 2.7 0.7 9.3 309.8 15.5 109.0 255.3 \985 293. 1 0.8 1.7 112.1 229.3 9.5 82. \ 140 .0 1986 337.1 5.1 0.2 8 .5 189.4 15.3 53.9 193.8 1987 145.1 1.7 0.1 38.4 194.0 3.6 41.6 82 .3 1988 320.2 0.0 0.1 33 .3 180.3 3.7 18.6 161.3

NQnfat llil! Milk 1977 491.0 52. \ 5.2 1. 0 33.5 0.9 168.3 633.9 1978 338 .9 0.0 51.5 77.2 45.7 0.3 200.7 585.1 1979 202 . \ 0.0 72 .4 12 .4 79 .4 0.3 168.6 447.9 1980 592 .2 0 .0 72 .9 \30.8 52 . 1 0.2 2\ 6.8 548.0 1981 787.0 0 .0 51 .7 192. 1 44 .9 0 .0 2 19 .2 81 l.\ 1982 954.3 0.0 53.7 100.0 54.9 0.5 3 19 .8 1177 . 1 1983 1041.2 0.0 63.4 170.4 77 .7 0.4 512.0 1346.4 1984 767.8 0.0 84.2 \ 15.5 1 15 .4 0 .2 560.2 1204 .0 1985 828.6 0.0 87.6 123.7 119 .0 0.6 702.6 981.4 \9 86 945.1 0.0 87.7 387.3 126.8 0.5 589. 1 696.6 1987 556.8 0.7 88.6 519.8 148.6 0.4 509.6 63. 1 1988 364.3 0.0 10.9 95.4 130.8 0.3 197.6 9.0

Cheese 1977 173.4 0.0 0.0 0.0 99.7 2.0 0.0 69.7 \978 46.5 4.9 0.1 0.0 82.7 1.3 0.0 30.6 1979 12.4 0.3 0.0 0.0 40.9 0.1 0.0 0 .0 1980 343.0 2.1 0.0 0.0 145.1 1.2 0.0 19 5.8 198 1 533.4 6.6 0.0 0.9 164.3 2.9 0.0 554.4 1982 610.6 8.4 1.7 18 .0 324.5 3.2 1\.0 825. 1 1983 832.3 12.3 0.8 23.0 629.5 4.2 22.5 902.7 1984 570 .9 31.5 0.7 3.0 682.6 4.7 34.2 767.6 1985 590.8 35 .9 0 .3 14.2 545.5 3.2 64.4 657.3 1986 571.5 24.6 0.4 2.0 586 .6 5.8 43.4 558.7 1987 261. 1 19 .3 0 .5 16 . 1 66 7.6 6.3 38.3 98.5 1988 305. 7 5.5 0 . 1 32 .2 456.7 8.5 1.3 43.9

I Domestic donations for welfare purposes are those distributed to the needy and to schools and o ther institutions. l1lose for federal purposes ate used by the U.S. military, the federal Bureau of Prisons, and ve teran's hospitals .

2 Products given to foreign governments Of other agencies for we1fue purposes and similar diSLributions under scction 416 of the 1949 Agriculcural Act.

Source: "Dairy Price Support Program," ASCS Commodity Fact Sheel, USDA, various annual issues.

Cheese stocks are disposed of almost exclusivel y through domestic donations. The average use in this cate­gory from FY 1977 to 1988 was 92% and was virtually 100% until foreign donation programs were reinvigorated aftcr 1981. Although substantial quanlilies of cheese were used in NSL, 57% of all the domestic cheese donations over this period were made through TEFAP. Similarly, foreign donations, which averaged only 4.5%, increased to signifi­cant levels when Section 416 was reinvested in 1983. Total overseas uses of CCC cheese stocks--sales plus donations--

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. averaged only 7%. All uses of cheese by the military averaged about 1 %.

Apparent Strategies Jar the Use oj eee StockS Whether or not USDA has a staled or wrillen strategy

for handling surplus stocks, a rationale for product disposi­tion can be discemed from how slocks have been liquidated in the pasL

The first s lrategy has been to use these products in domestic welfare and feeding programs; in particular the

Figure 1. Disposition of CCC Purchases of Butter (Totals may not add due to rounding)

U.S. Federal Donations (9.5%)

Restricted

U.S. Sales

U.S. Welfare Donations (89.6%)

U.S. Welfare Donations (60.4%) \-========~jk(o.4% )

Export Sales

(21.7%)

1977-80 1981-88

Figure 2. Disposition of CCC Purchases of Nonfat Dry Milk (Totals may not add due to rounding)

Donations

(15.2%)

,

Restricted U.S.

Sales (7.9%)

-----, )

U.S. Federal

Donations

Fo,,;,o 000";00' (54.3/ (0. 1 %)

Export Sales

(25.6%)

~--

Foreign Donations (54.2%)

1977-80 1981-88

Figure 3. Disposition of CCC Purchases of Cheese (Totals may not add due to rounding)

Donations

(0.04%)

U.S. Federal Donations

(0.9%) Foreign Donations

U.S. Federal

DOO'1"0' (I.2%)

------:-J

Reticted U.S. U.S. Welfare Donations (98.7%) Sales (0.3%)

1977-80

Foreign Donations (none)

Export Sales

(none)

U.S. Welfare Donations (91.7%) Export Sales (2.5%)

1981-88

National School Lunch program. Usually an adequate outlet for burter and cheese, very little nonfat dry milk is used this way. As massive stocks began to build in the 1980s, tradi­tional outlets for butter and cheese proved inadequate. Bcginning in 1982, a much more aggressive domestic dona­tions program--TEFAP--has been used to reduce government stocks. Although donations under TEFAP have been oriented lOward the needy and are not supposed to displace commercial sales, their magnitude has been large. Cheddar cheese donations have equaled as much as 13% of cheese consumption. USDA analysts estimated that every pound of domesLic cheese donations reduces commercial cheese sales by one-third pound. Every pound of butter donated domes­tically displaces one pound of commercial margarine sales.

A second strategy for the disposition of stocks accumu­lated under the price support program is to use as much product as possible in overseas military commissaries. federal prisons, and veteran's hospitals. This represents a proverbial drop in the bucket.

The third strategy is an export counterpart to the first, i.e., to dispose of surplus products on foreign markets. Foreign disposition is primarily through food aid programs of one son or another. Sales have been made for dollars, for foreign currency, or for other commodities (barter), and many dairy products are simply given away. Mandated Sec­tion 1163 CCC Exports were the primary sales channel. Donations have also been large, but for the receiving coun­tries, which are usually dcveloping countries, donations arc irregular and an unreliable source offood in the long run.

By virtue of the relalive storability and marketability of the respective products, the various disposition channels are used to different degrees for different products. Most CCC cheese has been distributed within the U .S. or to U.S. terri­tories while most surplus nonfat dry milk has been given away or sold at very low prices to foreign governments and agencies. Federal butter supplies are most often used in domestic programs, but dispositions to foreign markets have been fairly high in some years as a result of Section 1163 CCC Exports. When they have taken place, foreign sales of bUller often boil down to a large sale involving the Soviet Union, either in a direct trade or a triangular trade.

Net Removals and Triggered Price Cuts The FSA introduced the concept of adjusting the support

price according to expected levels of net removals. This approach is referred to as a supply/demand adjuster or trigger mechanism, and it is discussed in Leaflet Number 10 in tllis series. The FSA trigger mechanism instructs the Secretary of Agriculture to estimate annual milk equivalent CCC net removals at the beginning of the year) If the estimate

3The milk equivalent sum of dairy product net removals is the figure typically used as the measure of dairy product surpluses, and it is the figure used to adjust prices under the Food Security Act of 1985 (FSA). TheoreLically, a number of methods can logically be used to calculate the milk equivalent of several dairy product sums. In pracLice, milk equivalents are calculated based on the sum of the pounds of milkfat contained in each product and the amount of whole milk required to yield that total amount of milkfat.

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exceeds 5 billion pounds, the Secretary must reduce the suppOrt price 50¢/cwl.

Why a 5 billion pound trigger? There are several possi­ble explanations as to where this particular number origi­nated. The following is one explanation, and it exempliftes the kind of rationale associated with thinking of CCC purchases as necessary for other uses. In the early 1980s, when CCC net removals were increasing rapidly to record levels, questions were raised as to what net removals ought to be; in other words, what level constituted a well-balanced market. Any anSwer is somewhat arbitrary, but some dairy economists suggested that 2 to 3 billion pounds was a reasonable, long term level of CCC purchases. This level may be based on an arbitrary allowance for donations or simply as a cushion or buffer for dairy markets. The now enshrined 5 billion pound figure was derived after industry advocates argued that dairy imports, averaging about 2 billion pounds, should not be held against dairy farmers. Morc recently it has been suggested that the amount of dairy prodUCtS that "the U.S. would have to buy anyway" oughtlO be exempted or added to the 5 billion pound trigger, perhaps making a 7 billion pound trigger.

So How Much Is Needed Anyway? The patterns in Table I indicate that there is very little

"in-house" federal usc (military, pri sons, veteran's hospitals). Domestic and foreign donations represent the largest outlet for CCC s tocks. Given the way programs have been run, it is nOt at all clear how much dairy product would be bought for food aid if there were no suppon program. The history of commodity programs suggests that surpluses come first; food assisk1nce programs come later. Norwood Kerr, a USDA historian, states that: "The extensive domestic and foreign food donation programs that help improve nutrition and relieve hunger began in the 1930s as a way to dispose or. .. sllrplus commodities" (p.2S).4

Because mOSt com modity programs acquire stocks to support farm prices, it would be counterproductive to simply sell government StOCks on commercial markets. That would only displace commercial sales and undermine prices. Hence a favored method is domestic and international food aid. This is a win-win so lution in that it solves the problem of large government stocks and contributes to a worthy human­itarian objective. When government SlOcks become so large as to create a problem, the government has been quite creative in fmding ways to reduce stOCks.

The classic example is the now venerable Food for Peace Program or P.L. 480. This program, passed in 1954 as the Agricultural Trade Development and Assistance Act, authorized the sa les of farm surpluses for local currencies in countries that need food but lack dollars to buy it. (Thus, P.L. 480 applies to all supported agricultural commodities and was not inspired by milk supplies, although it has surely been used for dairy producL'.)

In a discussion of P .L. 480 during the 1958 annual meeting of the American Farm Economic Association ,

4N.A. Kerr, "The Evolution of USDA Surplus Disposal," National Food Review, Vol. II , no. 3, U.S. Department of Agriculture, 1988.

Professor John Davis of Harvard states: "The objective most emphasized by the proponents of Public Law 480 in 1954 was the disposal of United States farm surpluses, which at the time were accumulating at the rate of $3 billion per year. Also slressed (lS objectives of the act were assistance to economic development in receiving counlries and the stimu­lation of permanent export marketes for farm products" (p.1484).5 (These CCC costs would equate to about $15 billion in current, inflation-adjusted dollars. At their peak in the 1980s, farm program costs reached around $25 billion.) The original legislation authorized expenditures of $700 million over a three year period. Actual sales during that period totaled slighrJy over $3 billion, as measured by CCC cost. Moreover, through the mid-1960s, P.L. 480 accounted for nearly 26% of all U.S. farm exports.

In 1958, Professor Davis reiterated the common belief that P.L. 480 would likely last a few more years but would eventually be phased out, perhaps by 1962. Thirty-six years later, P.L. 480 shows no sign of phasing out.

Over its long life, P.L. 480 has been criticized for dis­couraging the development of agriculture in receiving coun­tries, and it has not demonslrably created farm export oppor­tunities that could be sustained without a combination of price supports and foreign donations. Nevertheless, this program has provided food to nations where hunger is a problem, and it has relieved pressure on government stocks at times when surpluses have been a serious problem.

TEFAP, a more recent invention that focuses on domes­Lic donations, has interesting parallels to P.L. 480. TEF AP was created in 1983 and, despite the word "temporary" in its name, it shows promise of becoming as much a fixture as P.L. 480. USDA proved very successful in getting rid of government stocks through TEFAP. When stocks dried up and new purchases decreased to a lrickle, USDA suspended TEFAP diSlributions. It was not within USDA's authority to buy products just for the purpose of giving them away; because the legislation which set up TEFAP calls for dona­tions only if uncommitted inventories exist. There has been much support for continuing TEFAP donations by organized farm groups. Many producers take it for granted that these donations are necessary for food assistance and welfare purposes. States that set up an infraslructure to deliver the federal surplus would like the program to continue. Of course, those who received the food would like to continue doing so. Nevertheless, it is clear that TEFAP dislributions were not products USDA would buy unless the price support program was generating an otherwise unmanageable surplus.

Policy Issues In designing or modifying food assistance programs, it

is not always clear where social welfare goals stop and farm support goals begin. Kerr also states: "Surplus-disposal operations began originally as emergency measures. But, along with the support programs, they exist today, albeit with a change in emphasis as feeding the hungry at home and abroad took precedence over disposing of surpluses" (p.25). "In the 1960s, Americans awoke to the worldwide

5J.H. Davis, "Surplus Disposal as a Tool for World Development." Journal of Farm Economics, Vol. 40, no. 5, December 1958, pp.l484-1493.

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plight of the hungry and malnourished. As a consequence, both domestic and food distribution programs were justified more on humanitarian grounds and less on the need to dispose of surplus" (p.27). With the development of agricul­tural surpluses in the 1980s, old and new donation programs were used heavily to reduce government stocks. Kerr concludes: "Clearly, surplus disposal has continued as a major objective of commodity dona Lion programs despite the growing importance of humanitarian assistance as a policy goal over the past quarter-century" (p.28). Nonetheless, the continuation of programs like P.L. 480 or TEFAP depends on support outside the farm community, i.e., from those having broader humanitaIian objecLives.

At times there can be an uneasy alliance between surplus disposal and food aid motives. Some food assistance experts have suggested that just giving away whatever surplus commodities are available is not necessarily consis­tent with the dietary requirements of the needy. If food aid agencies could buy whatever products they wanted, chances are they wouldn't purchase as much dairy product as has been dislributcd.

Experience with TEFAP also suggests that a long term domestic donation program probably should pay more atten­tion to targeting lruly needy people and reduce the displace­ment of commercial counterpart or subsLitute products. Just as critics of P.L. 480 have argued that cheap U.S. food underm ines the development of foreign agricultures, proces­sors have been concerned thm overly generous TEFAP donations have undermined domestic commercial sales of corresponding or substitute products.

To the extent that dairy products are used in domestic and international food aid programs, one policy option might be to appropriate funding to food aid agencies and let them acquire dairy products outside of the DPSP. If it seemed efficient to do so, CCC could still handle the purchasing mechanics. In fact, this is similar to what occurred prior to the early 1980s. At one time, CCC sold its dairy stocks to other agencies responsible for various feed ing programs. The quantities were still counted as net removals under the DPSP, but the net expenditures allributed to the DPSP were reduced accordingly. When dairy stocks reached crisis proportions, CCC began giving its stocks to these food program agencies because the imperative was to reduce stocks, not to fuss over who picked up the tab.

If agencies who run feeding programs were given an appropriate budget and had to pay CCC for its dairy prod­ucts, one could easily make the case that CCC dispositions in such channels are not made for purely price supporting objectives. Purchased donations could be lreated the way unrestricted sales are lreatcd for the purpose of product quan­tity accounting thus reducing CCC cost and net removals. This doesn't make the program cost go away but it lransfers some of the burden more dirccrJy to food assistance and away from commodity support. While this has obvious merits for the dairy industry in this period of lriggered price cuts and budgetary pressures, it should also be recognized that shift­ing some of the budgetary conlrol to people who administer feeding programs probably means that emphasis would shift somewhat from supporting farm prices and incomes to food program objectives.