Group Says USDA Idea Distorts Markets

January 31, 2000

The National Grain and Feed Association says USDA's proposal to subsidize the installation of grain-cleaning systems at wheat export facilities would create market distortions that would hurt farmers and reduce export market potential.

USDA's proposal is based on a faulty premise that U.S. exporters will not invest in grain-cleaning equipment where it is economically justified, said NGFA at a hearing conducted last week by USDA.

"As competitive as U.S. export markets are today, it is inconceivable to us that U.S. exporters would not aggressively pursue any reasonable, economically justified means to expand the volume of their business," said NGFA President Kendell W.Keith. "Subsidies, such as those proposed by USDA, will only create distortions in the market that will make it less likely that exports will respond in an economically efficient way in the future."

USDA has sought comments on whether the Commodity Credit Corporation should finance, "in some manner," the installation or upgrading of grain-cleaning systems at U.S. wheat export elevators.

NGFA noted that several wheat export facilities in the Pacific Northwest already have installed or are in the process of installing wheat cleaning equipment using private-sector funds in direct response to market demand from Asian countries, particularly Japan.

This was "convincing evidence" that U.S. wheat exporters, without government intrusion, have installed systems at facilities where market demand exists and there is a willingness by the importer to pay for such wheat, said NGFA.