Cotton Program

The Marketing Loan Has Not Worked Gao ID: RCED-90-170 July 31, 1990

Pursuant to a congressional request, GAO analyzed the Department of Agriculture's (USDA) cotton marketing loan program and identified options for improving its effectiveness.

GAO found that: (1) since 1985, the marketing loan program has not achieved its objective of keeping U.S. cotton prices competitive in world markets; (2) during the 14-month price divergence period, U.S. producers lacked incentive to redeem their loans and to market their cotton at prices near the world price; (3) import restrictions and 8-month nonrecourse loan extensions are two other factors that make it difficult for the program to be effective; (4) administrative changes to the program primarily affected the calculation of the adjusted world price and the payment of storage and interest costs; and (5) the Secretary of Agriculture has used the acreage reduction program in an attempt to maintain cotton carryover stocks at the 4-million-bale level.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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