Market Development: An Objective for Policies Affecting Commodity Prices?

Most government programs that affect commodity prices and provide food assistance do not attempt to boost sales. The chief objectives of producer price support and supply programs are to stabilize, support and protect farm income and prices; assist in the maintenance of balanced and adequate supplies of food, feed and fiber; and aid in the orderly marketing of farm commodities. Domestic food assistance programs are designed to improve the nutrition of low-income people and other target groups and to provide an outlet for surplus agricultural commodities. Export price reduction and assistance programs counter the effects of competitors' export subsidies, help sell U.S. commodities at world marketprices, facilitate the financing of food imports from the United States, and provide humanitarian donations. Market development, a widely-used term, is defined in this paper as the pursuit of sales through price and non-price strategies. Non-price marketing programs such as the Market Promotion Program (MPP) will be discussed in other conference papers. Pricing strategies to develop markets result in short-term sale and revenue increases because price discounts are linked directly to sales. However, the longer-term pursuit of new markets may require combinations of price and non-price strategies. For example, as the Uruguay Round Agreement of the General Agreement on Tariffs and Trade 85 (GATT) reduces export subsidies, policymakers will consider how to design export policies to address longer-term price competitiveness. In this paper, we will present the major government policies affecting commodity prices, discuss their performance in developing markets for U.S. agricultural products, and discuss options for modifying programs to emphasize market development. Our paper will focus primarily on major grains, the chief commodities assisted by domestic price support and export subsidy programs.