Efforts by governments to control wheatsurpluses by cutting support prices have met with only partial
success, the International Wheat Council (IWC) says in its
latest monthly report.
    Faster results could be achieved by a policy of reducing
both price and areas, as employed in the United States, the IWC
says in a survey of support prices in the five main wheat
exporters - Argentina, Australia, Canada, the EC and the U.S.
    In some countries, for example Australia and Argentina,
which are highly dependent on wheat shipments for export
income, there may be problems in reducing production.
    A policy of cutting wheat production could lead to
unemployment, with job prospects outside agriculture limited.
Alternative crops may offer inferior returns which could then
lead to lost export revenue and balance of payments problems.
    The IWC outlines three courses of action open to
governments in wheat exporting countries.
    They could continue to support prices in the hope that when
the world economy improves demand for wheat will rise and
surpluses wil be reduced or eliminated.
    Alternatively, support could be limited to wheat which
could be easily sold, without needing to be stored for a long
period.
    This option may prove to be the most politically
unattractive and would result in many producers abandoning
wheat production, the report said.
    The third option would be for governments to distinguish
between the commercial and social aspects of agriculture,
possibly varying support prices according to farm size or
overall production.
    The IWC review covers support prices in the major exporting
countries since 1982. At some time during that period all the
producers cut support prices in response to growing surpluses.
    These changes did not always result in lower export
subsidies as on several occasions currency fluctuations more
than offset lower prices in the domestic currency.
    For example between 1985/86 and 1986/87 the EC intervention
price for bread wheat fell from 209.30 to 179.44 European
currency units (Ecus). It dollar terms, the currency in which
most export transactions are denominated, the intervention
price however rose to 193 dlrs from 168. The high cost of
supporting farm prices has put a strain on national exchequers
and some governments are now searching for ways to cut
expenditure, the report says.
    The proportion of world wheat output produced by the five
major exporters declined in the period covered by the survey
from 40 pct in 1982 to 35 pct in 1987. This was partly due to
increased production in China and India.
    The period saw an upward trend in yields, although this was
countered in the Argentina, the U.S. And Australia by lower
acreages.
    In Argentina a reduction in the sown area of about 20 per
cent was put down to low prices causing producers to switch to
other enterprises, particularly livestock while lower U.S.
Acreages are attributed to official incentives.
 REUTER
