Abstract
Alternative government stock policies are evaluated in terms of their effects on the US livestock sector and consumer food prices before and after the 1988 drought using a comprehensive model of the US agricultural sector. Stock levels associated with the Food Security Act of 1985 (FSA85) are compared with those of a reduced-stock policy. This option reduced government corn stocks to zero and lowered overall stocks by almost 2 million bushels prior to the drought, saving taxpayers about $15 billion compared to the observed level of spending associated with FSA85. However, consumers were projected to spend almost $40 billion more following the drought in higher food (particularly meat) costs because of the dramatic shock lower corn stocks would have on corn prices and the livestock sector.
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