Feasibility of Providing the Armed Services With Additional Surplus Dairy Commodities Owned by USDA

In response to a congressional request, GAO gathered information on the feasibility of providing Department of Agriculture (USDA) surplus dairy commodities to the armed services and obtained information on the prices which the Commodity Credit Corporation (CCC) and the armed services pay for dairy products.

GAO found that, under the Agricultural Act of 1949, the armed services can order dairy products from CCC only in quantities which exceed their normal needs. The armed services must meet their normal needs by purchasing such products on the open market. If the law were revised to eliminate this restriction, providing the armed services' normal needs with CCC-owned dairy products would displace their commercial purchases. This would result in increasing the market surplus which CCC would have to purchase under its dairy price-support program and add to CCC dairy surplus inventories. CCC now pays less for butter and cheese than the armed services pay; however, it purchases products in bulk form, whereas the armed services purchase products in ready-to-use form. When CCC provides free cheese and butter to the armed services, it incurs additional costs to have these products processed into ready-to-use units for military use and the armed services reimburse CCC for the processing costs.