oversight

Reviews of Ways To Increase the Export of United States Agricultural Commodities

Published by the Government Accountability Office on 1971-06-16.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                         UNITED   STATES GENERAL     ACCOUNTING            OFFICE
                                                                                                                           17
                                                     WASHINGTON,    D.C.    20548


INTERNATIONAL    DIVISION
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          E-114824



          Dear   Mr.        Secretary:

                    In our continuing           review     of ways to increase         the export      of United
          States       agricultural         commodities,       we learned     recently     of a program         where
          the Department             of Agriculture        (ITSDA) could in our opinion            beneficially
          increase        its export        sales    of surplus     nonfat    dry milk.
            .-,.,-^.-
                                                                      .A'
                    The Export        Marketing      Service    (EMS), in cooperation          with the Agri-
          cultural        Stabilization         and Conservation        Service     (ASCS), conducts           a program
          under which nonfat              dry milk of the Commodity             Credit    Corporation        (CCC) is
          sold for dollars              to American      plants   overseas.

                 The basic    procedures        for the program   are set forth in ASCS Announce-
          ment   IQ-23  (hereafter       referred     to as the ME'-23 program) which provides
          that   CCC dairy    products      be offered    for sale on the basis   of competitive
          bids   or announced      prices.

                   In addition         to the basic   procedures        and conditions       of sale contained
          in this      announcement,         EMS has administratively           determined       that     sales      of
          nonfat      dry milk under ME'-23 be restricted                to the highest        bidder      for each
          offering        regardless       of the size of the bid.            EMS officials        informed        US
          that     sales under this          program  are being       limited     because nonfat          dry milk
          is needed to meet the commitments                 of title       I sales    programs       (20.7     million
          pounds in fiscal             year 1971) and title       II donations        programs       (314.4      million
          pounds in fiscal             year 1971) under Public          Law 480.      As a result,          the bid
          invitation         quantities      under the Ml?-23 program          are made available             only
          after      Public     Law 480 commitments       are satisfied.

                  There is some question           as to whether        this    should   be so.        From a
          purely     economic      standpoint,     there     is   no doubt    that    amounts     sold    under the
          Mp-23 program         are more beneficial          than equivalent        amounts    donated       free to
          foreign     recipients       under Title      II of Public       Law 480.      Further,        every
          pound donated         abroad    incurs   transportation         costs which must be borne by
          the U.S. taxpayer.

                Public  Law 480 legislation        provides    that dollar  sales have priority
          over title   I sales and title     II donations.         Some may debate  whether     W-23
          could be considered   "dollar     sales"      in the strictest   sense since    these




                                                  SOTH ANNIVERSARY         1921-    197t
,


    sales are generally        made below prevailing        market     prices.       Also,    there
    may be instances      where title     I sales might       eventually       bring    a grea:er
    return    to the Department      than sales under m-23.              However.     when comllared
    with title     II donations,     MP-23 sales,     regardless       of the price        received,
    result    in greater    economic    benefits   than title       II donations.

         Our review       showed that a significant         increase      in sales of nonfat  dry
    milk under the MP-23 program          is possible     if the Department        were to modify
    its present    restrictive     procedures    slightly        in order   to be able to
    (a) accept   all reasonable       bids and (b) reduce prices            as necessary   to
    meet foreign    competition.

            Under the restrictive     bid procedure    instituted      in August                       197@ through
    early     April   1971, we found  that bids for more than 4.5 million                               pounds of
    milk powder with a value approximating           $550,000     were rejected.                         The
    quantities      covered  by the rejected    bids averaged      only 9/10 of                        one cent
    per pound below the award price.

            We obtained     information      from a dairy      company which presently          operates
    several    plants    overseas,       and which   buys most of its nonfat            dry milk require-
    ments from offshore          sources,    to see if they would be interested               in obtaining
    USDA milk powder under the MP-23 program.                   The company advised          us that    they
    would be pleased        to use the U.S. -source         milk powder if it could be purchased
    at prices     comparable       to those charged       by foreign      suppliers.       The company
    presently     purchases      about 21 million      pounds of nonfat          dry milk offshore
    that might      be made available        under the m-23         program.       This would provide
    USDA with approximately             $2.5 million    of additional        revenue    per year from
    this    one company alone.

           GAO suggests          that    a subsidiary          benefit    above and beyond the obvious
    economic       benefit     of giving       priority        to MP-23 sales     over foreign        donations
    is that      the donation         programs      might      be more properly      identified        and
    appreciated.           Heretofore,       many people           have believed   that      commodities
    donated      are in such long supply                that     the recipient   was doing       the United
    States     a favor      in providing        USDA an        outlet   for its mounting        surplus      problem.

            In view of the cost,            the     balance-of-payments      and other  benefits
    possible     in an increased           m-23      program,     we recommend  that your Department
    consider:

            . . . giving     a higher   relative        priority    to PIP-23       sales       in   relation
                 to Public       Law 480, Title         II donations,

            . . . adopting      a more flexible          bid policy       so that     greater        quantities
                 might       be sold under the         program,

            . . . offering  price   reductions     to           provide  American     plants          overseas
                 with U.S.-source      milk powder              on a basis   competitive             with
                 offshore   procurement,       and




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       . . . informing        American    firms    which operate  daisy  plants          abroad
           of the         availability       of American  nonfat  dry milk at           competitive
           prices         and encouraging       them to use American    milk.

        This report       contains     recommendations       for your consideration.              Your
attention       is invited      to section      236 of the Legislative          Reorganization         Act
of 1970 which        requires      that you submit written         statements       of the action
taken with respect           to the recommendations.            The statements        are to be sent
to the House and Senate Committees                   on Government     Operations      not later       than
60 days after        the date of this         report    and to the House and Senate
Committees        on Appropriations        in connection      with   the first      request      for
appropriations         submitted      by your agency more than 60 days after                  the date
of this      report.

        We would appreciate     it if           you would     send copies    of   the statements
furnished     to the congressional              committees     to the Office      of the Director,
International      Division,   General           Accounting     Office.

        Copies of this     report         are   being sent to the House and Senate
Committees     on Appropriations,            the House and Senate Committees    on Government
Operations     and the Director,            Office    of Management and Budget.

                                                                 Sincerely     yours,




                                                                  ' irector
                                                              i I’ 7

The Honorable
The Secretary            of Agriculture




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