Wheat Commodity Program

For more than 40 years, the federal government's wheat commodity program has tried to reduce wheat price fluctuations while ensuring ample supplies for consumers. Because total returns for wheat were often above expected market returns, producers grew wheat to receive these benefits in addition to return from the commercial market. Congress passed legislation in 1985 and again in 1990 to gradually increase the influence of the commercial market on farmers' production decisions and to reduce the level of government support for wheat production. Despite these reforms, the government's involvement in managing surplus wheat remains substantial. Deficiency payments under the wheat program are above the 1982-85 levels, and the Conservation Reserve Program and the Export Enhancement Program have added costs averaging more than $800 million per year from 1986 to 1991. Because the government's costs connected with wheat production are affected by external factors such as droughts and international wheat production and prices, it could be misleading to compare trends in the government's overall costs from year to year. Over the long run, however, GAO would expect costs to be lower than they would have been under the 1981 farm bill.

GAO found that: (1) the 1985 and 1990 wheat program reforms reoriented farmers' production decisions toward market forces and reduced the federal government's involvement and costs in managing surplus wheat; (2) the reforms lowered farm supports and target prices, changed the way the government calculated deficiency payments to farmers, and linked acreage levels to wheat stock levels; (3) although the government's role in wheat farmers' production decisions has been reduced, the government continued to provide producers $2.3 billion in deficiency payments between 1990 and 1991; (4) 1985 reforms that reduced the government's costs for managing wheat stocks also reduced price supports, established mechanisms to reduce accumulated stocks, and expanded U.S. export markets; (5) the cost of the Conservation Reserve Program and the Export Enhancement Program totalled about $800 million annually, but program costs were offset by reduced deficiency payments resulting from lower domestic supplies and associated higher market prices; and (6) although governmental costs varied depending on weather conditions and international wheat prices, future government costs are expected to decline.