A college professor once told my class that there are government-owned silos filled with billions and billions of dollars worth of corn and other foods that the government steals away, to keep the value of corn (and the other foods) artificially elevated.
Is this true?
Not as far as I know. What they do to artificially keep prices up is just subsidize it, so farmers can afford to grow less.
Storing it like that would cost more money than just paying off the farmers.
The EU has had butter mountains and the like, where they’ve bought up butter or milk in bulk in order to stop the market being flooded and keep prices high for farmers.
Maybe you’re thinking of that?
Otara
IANA expert, but I don’t think the government itself stores the excess corn. It does, however, incentivize farmers to overproduce corn with a system of agricultural subsidies.
The net effect is that sometimes there does end up being giant piles of corn (though not directly owned/stored by the government, I think), some of which goes into processed foods, some of which is exported, some of which goes into ethanol for fuel… and the rest, I’m not sure, maybe just spoils?
Corn subsidies are primarily in the form of per-bushel price supports. The government guarantees that farmers will receive a certain minimum price for what they bring to market. This doesn’t allow farmers to grow less; it encourages them to keep on growing as much as they can, without regard for what would otherwise be market forces. That’s why we have too much corn. That’s why it’s artificially cheap to fatten livestock in feedlots and sweeten everything with corn syrup.
silos is an expensive way to hide a whole lot of corn (billions’ worth.)
There was a system of guaranteed minimum price to keep farmers producing most foods. The government did buy the grains and such so that the harvest didn’t see all farmers ruined by the stock market traders. They also sold it back into the market after the harvest glut was over and prevented extreme high prices for the consumers. This was during the Cold War. They were getting a large surplus for a while, that resulted in the government working on deals to sell surplus grain to other countries. Notice the government was involved in these deals as most countries didn’t want international trade undermining their local producers and had import restrictions. The government also started a program paying farmers to leave some fields fallow to revert back to wilderness areas, which was conservation approach to lowering the grain reserves. During the Cold War the USA government wanted a larger reserve of important resources to a certain level encase something happened.
The grain shipments of our surplus were also a tool in the 70’s for negotiations with the USSR for reduction of nuclear weapons and other peace talk agreements as the USSR was having a wheat shortage. Surpluses of food and other resources were an advantage over the other side as it was a war. You can’t have increased reserves stockpiled away if the farmers go tits up because there is a large local supply during the Cold War.
To be clear, the programs I was speaking of began in the the mid '70s and continue to this day. Certain Cold War-era grain sales to the Soviet Union were related to establishing the present system, but we’ve kept it going ever since. Here is what we’ve spent subsidizing corn in recent years.
I think you got it backwards. They pay the farmers subsidies to grow more corn, thus keeping the price low.
The primary reason this policy is continued is because of the ethanol mandate, which requires that at least 10% of our gasoline contains ethanol, which is almost 100% made from corn in the U.S.
The US is still the largest agricultural exporter by far, and it’s one of the few sectors that’s still growing in this economy. It’s ludicrous to suggest that the government is buying billions of dollars worth of food and letting it rot just to prop up the market.
The US government has at times bought surplus food, but when they did they distributed it …either domestically, through what came to be known as the “government cheese program” or to other countries in the form of food aid. At it’s peak in the 80s, they may have held $100 or $200 million worth of food – far from the billions the OP’s professor suggests. This USAT article has a good historical overview.
As mentioned, the EU years ago used to subsidize agricultural output by buying up surplus - hence things like mountains of butter and wine and such. Predictably, make the price good and reliable and more and more farmers produce more and more product, which the EU could not unload. Given the expansion of the EU into more agricultural countriess, this policy was IIRC corrected years ago by finally reducing subsidies.
Canada similarly had “Marketing Boards” for milk, eggs, etc. that had monopolies on buying from the farmer. At one time, your milk quota (like taxi licenses) was the most valuable thing some farmers owned. Economic circumstances and the NAFTA (Free Trade) agreements conspired to end this stupidity where the board bought and stored much more than it could sell, until whole warehouses of eggs or butter were stale-dated and had to be destroyed. (one of those “fan strike” episodes)
The USA does have strategic reserves, but generally these are non-perishables like oil and special metals. Every few years when the price of oil jumps someone makes noises about selling oil from the strategic reserves to level the price.
Short answer: once upon a time this was true, but not in the USA and not any more.