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foreign agricultural economic REPORT NO. 5 1 ECONOMIC RESEARCH SERVICE U.S. DEPARTMENT OF AGRICULTURE

CONTENTS Page Introduction 1 Summary 5 Production Trends, 1955-64 5 Price Effects of Food Aid 7 Turkey 9 Agricultural Trade and Marketing Policies 9 Agricultural Price and Production Policies 14 Agricultural Development Policies 19 Conclusions - Turkey 21 Colombia 23 Agricultural Trade and Marketing Policies 24 Agricultural Prices 25 Trends in Farm Production 25 Agricultural Development 30 Conclusions - Colombia 31 Greece 33 Agricultural Price and Trade Policies 33 Trends in Farm Production 37 Feed Grain Imports and Development of Livestock Industries 42 Conclusions - Greece 42 Spain 43 Agricultural Price and Trade Policies 43 Trends in Agricultural Production 47 Agricultural Development 54 Conclusions - Spain 54 Israel 56 Agricultural Price Policies 56 Agricultural Prices and Production Policies 58 Agricultural Development 63 Conclusions - Israel 63 India 65 Government Price Policies 65 Agricultural Price Trends 67 Agricultural Production and Factors Affecting Expansion 70 Agricultural Development and Government Policies 77 Conclusions - India 78 Bibliography 80 For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C., 20402 ii

FOOD AID AND AGRICULTURAL DEVELOPMENT by Frank D. Barlow, Jr. and Susan A. Libbin 1/ INTRODUCTION The less developed countries received $17.5 billion worth of agricultural commodities from the United States under aid programs during 1955-66, nearly all of it under P.L. 480. 2/ Agricultural production in these countries has increased considerably over the past decade, but in many cases not enough to meet the demands resulting from rising populations and increased per capita incomes (fig- !)• Much of the same situation is in prospect for the next decade or so in many of the developing countries (70, pp. 75-9; L8; 19_, pp. 3-4). 3/ Population is expected to increase 2 to 3 percent or more per year and increasing incomes will boost demand further. In some countries, supplies will have to rise 4 to 5 percent a year to meet economic requirements. Some developing countries will continue to need food aid in the foreseeable future to help meet deficits and to support national economic growth. It will take time to develop their agricultural resources and their ability to import on a commercial basis will continue to be limited by a shortage of foreign exchange and by competing demands for capital imports. However, food needs will be so large that the bulk of them must come from increased production by the countries themselves. 4/ Another important element in the future situation is the change in the U.S. policy under the Food for Peace Act of 1966. The Act states that the United States will use food aid: . . . to encourage economic development in the developing countries, with particular emphasis on assistance to those countries that are determined to improve their own agricultural production . . . _5/ 1/ Assistant to the Director, and International Economist, respectively. Foreign Development and Trade Division, Economic Research Service. 2/ Includes $15 billion under P.L. 480, almost $2 billion under the U.S. Mutual Security Program, about $200 million under bilateral food aid programs from donors other than the United States, and $100 million under the United Nations World Food Program. 3/ Underscored numbers in parentheses refer to items in the Bibliography, pp . 80-85. 4/ Bachman, Kenneth L., "Can we produce enough food," speech delivered at the American Society of Agronomy, Kansas City, Mo., Nov. 17, 1964. 5/ Public Law 89-808, p. 1.

SELECTED COUNTRIES: INDICES OF TOTAL AND PER CAPITA AGRICULTURAL PRODUCTION COLOMBIA L — 11111,11 iim* ^ i "'•••ffS'STTTfll 1 1 i i i i i i 1954 1957 1960 1963 1954 1957 1960 1963 U.S. DEPARTMENT OF AGRICULTURE NEG. ERS 5957 -69 ( 4) ECONOMIC RESEARCH SERVICE Figure 1 2

The new law requires that before entering into P.L. 480 agreements, the United States consider the extent to which recipient countries are undertaking selfhelp measures, including (1) development of marketing, storage, and distribution facilities; (2) development of farm supply industries; (3) expansion of educational and research activities; (4) implementation of Government policies favorable to the expansion of agricultural production; and (5) allocation of land resources to the production of needed food crops rather than nonfood crops especially nonfood crops in world surplus. India was the first country to sign an agreement under the new program. This agreement, reached in February 1967, emphasizes India1 s proposed self-help efforts as required under the new Act. By December 1967, some 10 countries had signed agreements in which specific self-help objectives had been spelled out in considerable detail. In general, the emphasis has been placed upon national policy objectives to give high priority to agricultural development by encouraging the following: providing adequate credit, including private foreign investment; establishing price support levels to encourage greater production; developing national food distribution policies, including improvement of marketing and distribution infrastructure; and accelerating domestic production, procurement, and distribution of fertilizer, insecticides, improved seeds, and other agricultural inputs. On the whole, the response of recipient governments has been favorable to the clarification of policies designed to help them increase food production Because of the change in U.S. policy and the prospects for continuing need for food aid, the experience of 1955-66 concerning the effect of P.L. 480 programs on agricultural production in recipient countries offers valuable lessons for the future. Equally relevant are the steps taken to protect prices of domestic farm products, and the manner in which past food aid programs have operated to avoid conflict with national food policy objectives and to encourage economic development. The U.S. Department of Agriculture has been active in conducting research on the effects of the P.L. 480 program, and special contract studies have been completed for six recipient countries (Israel, India, Turkey, Greece, Colombia, and Spain). These studies analyzed the effects of P.L. 480 on economic growth, consumption, prices, and trade, and gave major attention to the program* s impact on agricultural production. In addition, the Economic Commission for Asia and the Far East (ECAFE) , Food and Agriculture Organization of the United Nations (FAO) , and a number of private institutions have supported research to analyze the impact of agricultural commodity aid programs. The economic effects of food aid in developing nations--Turkey , Greece, Spain, Colombia, Israel, and India--have been studied in considerable detail and the results are summarized in this report. These six countries received approximately 43 percent of the commodities shipped under the P.L. 480 Title I program during this period. The principal Title I commodities shipped to these countries in relation to total imports of the same commodities also are summarized in table 1. 3

Table 1. --Total imports and imports under Title I of P.L. 480, all agricultural commodities and selected commodities, six recipient countries, calendar years, 1955-64 1/ All agricultural commodities Wheat Feed grains 2/ Country Total j Title I ; Total Title I ; Total ; Title I [ imports \ imports * imports [ imports * imports * imports ■Million dollars India 3/ Spain • • Turkey • Israel • Greece • Colombia Total India 3/ Spain • • Turkey • Israel . Greece • Colombia Total 5,432.5 2,477.3 2,408.0 1,888.2 46.7 40.4 3,039.0 467.0 185.0 18.3 122.0 40.3 715.8 448.2 259.1 252.1 21.4 19.1 1,131.8 279.4 219.5 96.2 174.3 99.9 1,158.8 118.8 100.3 35.8 58.0 52.0 625.2 60.1 92.8 33.6 8.2 2.6 12,103.1 3,850.8 3,264.7 2,324.2 430.6 254.3 Rice ] Vegetable oils 4/ ] Cotton Total \ Title I ; Total Title I Total ; Title I imports ] imports ] imports ] imports \ imports j imports H rv 1 1 o v n _ _ _ UOlidio--421.0 217.2 23.9 19.8 1,076.0 269.3 — — 505.0 240.5 412.0 118.6 4.1 3.5 134.9 129.3 — — 13.7 — 26.3 34.8 47.1 5.5 11.5 — 34.5 26.2 14.3 — — — 35.4 9.5 37.6 11.9 450.3 220.7 760.0 460.1 1,587.0 405.3 1/ Title I data are on an export shipment basis and are not available on an import basis. 2/ Includes barley, corn, and for Israel, also grain sorghum. 3/ 1956 data from (55). 4/ Soybean and cottonseed oils. Sources: Except as indicated, (24 ; 69) . 4

SUMMARY Food aid imports under Public Law 480, as well as those under Sections 402 and 550 of the Mutual Security Program, have been aggregated to arrive at total concessional imports. Under both of these programs, commodities have been imported, priced, and distributed through the regular marketing channels within the respective countries. However, since the bulk of the commodities made available under special government programs moved under P.L. 480 Title I, major emphasis has been given to this program in the individual country studies. During the 1955-64 period, P.L. 480 Title I commodities accounted for nearly one-third of the total agricultural commodities imported by the six countries covered in this study (table 1) . Most of the Title I commodities consisted of grains, which accounted for nearly two- thirds of the total grains imported. It is significant to note that commercial imports were quite sizable in each of these countries. Production Trends, 1955-64 During the period of food aid imports, the six recipient countries included in this report made considerable progress in increasing agricultural output, averaging about 3.4 percent annually. The rate of progress in expanding output over the period 1955-63 in these major recipients of P.L. 480 imports is greater than in many other underdeveloped countries. The fairly sizable increases in production for countries such as India, Colombia, and Turkey were largely offset by high population growth (table 2) . Despite the rapid population growth in Israel, partly due to immigration, the country experienced one of the highest per capita gains in agricultural output of 2.1 percent annually, the same as in Spain, the country with the lowest rate of population growth. Table 2. --Annual percentage rates of change in crop output, six countries, 1955-63 Country Annual compound change in total crop output Current population growth rate Annual compound change in crop output per capita India 3.0 2.4 0.6 Spain 2.9 0.8 2.1 Turkey 3.1 2.9 0.2 Israel 5.7 3.5 2 . 1 Greece 1.7 0.9 0.8 Colombia . . . 4.3 2.9 i:4 Average 3.4 2.2 1.2 Source: (19) , p. 6. 5

Israel, the highest per capita recipient of food aid also had the highest rate of growth in agricultural output. Food aid to this country played a vital role in the country* s economic growth, benefiting practically all sectors. Although India was by far the largest recipient of food aid, per capita value was among the lowest of food aid recipients. In the case of India, however, food aid flows, which were substantial during the famine of 1957-58 and rose to higher levels after 1962, played a major role in permitting the government to continue its overall planned development objectives. The availability of food aid during the years of scarcity made it possible for the country to import the capital items necessary to meet overall development objectives set forth in the second, third and fourth 5-year plans. Food aid to Greece, Spain, and Turkey came at a crucial period, when each country had reached a stage in development where the availability of food aid served as a powerful stimulant to further growth. Soon after the termination of the Title I program in Greece and Spain, these countries shifted to important commercial purchases of U.S. agricultural products--f eed grains in Greece; and feed grains, vegetable oils, and later oilseeds in Spain. Although Turkey has not become a major commercial purchaser of U.S. agricultural products, the country has greatly strengthened its economic position. Israel, with development, also became an important commercial purchaser of oilseeds, grains, and many other agricultural products. To illustrate the importance of food aid during a period of transition and development, the U.S. stands to recoup a very large share of the value of the commodities shipped to Greece, Spain, and Israel under P.L. 480 as local currency loans are liquidated. It is possible that the United States will utilize up to 75 percent of the value of the Title I shipments to Greece, Spain, and Turkey to cover current and future U.S. expenditures in these countries. Current expenditures there are considerable. Title I imports generally were programmed to meet food import needs after shortfalls in production occurred. Major recipient countries encouraged expansion of agricultural production through increasing use of improved seeds and fertilizers, expanding agricultural research, extending irrigated areas, and increasing the supply of farm credit. In Turkey and India, a larger share of public investment was allocated to the agricultural sector in the 5-year plans for the 1960*s than during the early and middle 1950* s. Failure of some countries to meet the increasing demands for foodstuffs and feeds through greater increases in acreage and yields has been due primarily to physical, economic, institutional, and structural factors in farm organization that existed long before the Title I program. In Turkey, Spain, Greece, Israel, and Colombia, the availability of Title I commodities provided opportunity for greater flexibility in planning for more efficient use of agricultural resources. In Turkey, for instance, the availability of wheat under P.L. 480 avoided the pressure to resort to short term self-sufficiency measures to increase wheat output at the expense of more profitable crops such as cotton, tobacco, and olive oil in the coastal areas. 6

In Greece, the procurement of feed grains under P.L. 480 stimulated the development of livestock and poultry enterprises. The growth of these industries helped develop markets for local feed grain production. It also contributed to better utilization of domestic fodder and roughage availabilities. In Spain, the importation of cotton under aid programs contributed to the recovery and expansion of the textile industry, which later became the primary outlet for domestic cotton production as it expanded. Feed grain imports contributed to development and expansion of livestock and poultry industries. In turn, this growth, encouraged by the stability made possible through P.L. 480 imports, has provided more viable markets for domestic feed and roughage production. Vegetable oils and later vegetable oilseeds provided the basis for more efficient utilization of vegetable oils which permits the higher valued olive oil to move into market outlets that maximize the returns from this industry. Of particular importance in Colombia was the use of P.L. 480 local currency loans and grants to facilitate investments in agricultural development and related service industries. Investment to support water and land development in the Cauca Valley, fertilizer production, and various commodity development programs were especially helpful in stimulating overall development activities in agriculture as well as other sectors of the economy. The availability of wheat and feed grains under the aid programs permitted the Israeli Government to push full scale in the development and use of its meager land resources in the production of intensive high value crops such as fruits, vegetables, and cotton in the irrigated valleys. Also, the importation of feed grains and oilseeds provided the basis for developing commercial poultry and livestock enterprises that have now become a viable part of the country* s agriculture . In India, there appears to be less flexibility in shifting resources among the major crops--rice, wheat, cotton, and peanuts--because of physical, economic, and population factors. However, there probably is opportunity for greater specialization of crop production in subsistence agriculture, but as yet the conditions under which such shifts can be constructively made have not been adequately defined. Price Effects of Food Aid Most of the governments of the six countries adopted various measures to reduce the impact of food aid imports on prices of domestically produced farm products. For example, Turkey, Colombia, Greece, and Spain sold imports of food grains and vegetable oils at the higher level of domestic market prices. Profits from these markups were used to cover marketing costs and to help finance domestic agricultural programs. In contrast. Title I imports in a few cases were sold below domestic prices. For example, Greece, Israel, and Spain sold Title I imports of feed grains at prices below domestic farm prices in some years to encourage livestock production and stabilize prices for domestic feeds. The Indian Government sold Title I imports of wheat to consumers through "fair price" shops at prices below domestic wholesale levels to combat inflation and stabilize food prices. 7

It was the policy of most of the six governments to stabilize food prices within the overall national policy objectives. Without the Title I imports, they would have relied more on consumer rationing and price controls to prevent prices of agricultural products from rising to exorbitant levels. However, prices of grains and vegetables in the recipient countries would have been higher and more unstable without food aid because of the inflationary pressures of increasing demand, recurring shortages of domestic supplies, and the lack of funds to purchase commercial imports. Wide fluctuations in prices from year to year tend to impede expansion of commercial agricultural production. The use of food aid imports to promote price stability and reduce inflationary pressures was a major contribution to more effective use of agricultural resources. This was particularly true in Turkey, Colombia, Israel, and India. Changes in production and acreage in response to price movements depend to a large extent on the degree to which the commodity is produced for the market. Consequently, use of Title I imports to affect prices had the most impact on commercial producers of cash crops such as cotton, tobacco, and grain. Changes in prices affect the production decisions of such producers, but price per se is only one of many factors affecting agricultural development. Producers also respond to changes in price-cost relationships in the use of yield-increasing inputs, such as improved seeds, fertilizer, and insecticides. A majority of the producers in the developing countries are subsistence farmers who grow primarily grains. They generally sell only small quantities in the market to meet cash obligations. Their production decisions tend to be influenced much less by price changes than by such factors as climate, marketing, transportation and credit facilities, amount of land irrigated, the availability of fertilizer and improved seeds, and the extent to which the producer is trained in modern farming methods. 8

TURKEY During 1955-64, Turkey was the fifth largest recipient of Title I commodities, importing $448 million. Grains (mostly wheat) accounted for two-thirds and vegetable oils almost one-third of these imports. Aid imports were small, compared with domestic production, except for oilseeds, which averaged 21 percent of output over a 6-year period (table 3). Wheat imports averaged 6 percent, while the percentages for imports of feed grains and rice were even smaller. The Turkish Government maintained strict control over imports, both concessional and commercial, to protect producers* prices. Farm prices of commodities produced in Turkey were far above the prices of the imported commodities in most years. If there had been no restrictions on imports or their internal distribution, prices received by domestic producers probably would have declined. Agricultural Trade and Marketing Policies Import controls have been administered by two semiofficial agencies which regulate the production, marketing, and pricing of farm products. 6/ These agencies also have a monopoly on the procurement and distribution of imports. The Soil Products Office, (TMO) , began operations in 1938. Its main functions are the following: (1) setting guaranteed floor prices for wheat, feed grains, and rice; (2) purchasing these grains at support prices whenever they are offered by farmers; (3) selling its stocks of grain to municipalities, millers, bakers, hospitals, schools, and other institutions; (4) setting extraction and mixing rates for flour; (5) selling wheat at consumption centers to prevent excessive increases in consumer prices; and (6) subsidizing consumer prices by selling bread grains below the purchase price in deficit or disaster areas. Turkey* s Meat and Fish Corporation (EBK) was organized in 1952 to regulate the production, trade, and manufacturing of meat and fish. Unlike TMO, it does not guarantee support prices of its commodities, nor does it engage in as extensive nationwide operations. Its main domestic activities include improving animal husbandry, purchasing and selling slaughter animals and fish, and establishing and operating slaughterhouses. The import policies of these agencies are designed to promote the interests of producers in Turkey. These agencies have a monopoly on the procurement and distribution of all imports, both concessional and commercial. TMO handles all grain imports and small quantities of oils, and EBK imports most of the oils, dairy products, poultry, and meat. TMO and EBK sell imports to wholesalers at prices corresponding to current wholesale market prices of indigenous products. The private trade handles the bulk of the products produced domestically and has an actual role in both pricing and marketing. However, the semiofficial agencies TMO and EBK are effective in stabilization operations in accordance with their mandate in carrying out national food and pricing policies. This is done by entering the market aggressively when producer prices decline to support 6 j This section is based on Chapter 4 of (5). 9

Table 3. --Turkey: Principal P.L. 480 imports compared with domestic production, 1954-64 Commodity and year 1/ Domestic production P.L. 480 imports 2/ : P.L. 480 imports : as percentage : of production o 0 o i— 1 1 i i i i i i i i i i metric tons Wheat: 1954 4,900 171 3 1955 •••••••••••• 6,260 248 4 1956 •••••••••••• 5,851 615 10 1957 •••••••••••• 6,800 292 4 1953 •••••••••••• 6,300 17 3/ 1959 •••••••••••• 5,800 315 5 I960 •••••••••••• 7,076 448 6 1961 •••••••••••• 6,123 1,404 23 1962 •••••••••••• 6,750 392 6 1963 •••••••••••• 7,950 176 2 1964 •••••••••••• 7,000 328 5 Average 6,437 401 6 Corn: 1955 •••••••••••• 855 2 3/ 1956 •••••••••••• 857 49 6 1957 •••••••••••• 750 41 6 1959 •••••••••••• 800 26 3 1961 •••••••••••• 1,001 10 1 1962 •••••••••••• 650 15 2 1963 •••••••••••• 826 21 2 Average 820 23 3 Barley: 1954 •••••••••••• 2,400 83 3 1955 •••••••••••• 2,939 63 2 1956 •••••••••••• 2*, 830 28 1 1957 •••••••••••• 3,484 10 3/ 1964 •••••••••••• 2,780 11 3/ Average 2,887 39 1 Rice: 1955 •••••••••••• 92 3/ 0 1956 •••••••••••• 138 10 7 1953 •••••••••••• 138 5 4 1959 •••••••••••• 136 1 1 1960 •••••••••••• 138 11 8 Average 128 5 4 Oilseeds 4/ : 1955 ••••••••••*• 198 12 6 1957 •••••••••••• 186 18 10 1953 •••••••••••• 226 70 30 1959 •••••••••••• 244 84 34 1960 •••••••••••• 252 20 8 1962 •••••••••••• 150 50 33 193 90 47 1964 •••••••••••• 304 34 11 Average 219 47 21 1/ Each year shown is beginning of crop year for production figures and of fiscal year for trade figures. 2/ 4-80 data are on an export shipment basis and are not available on an import basis. Mostly Title I imports, except for small amounts imported in various years under Title II and Title III (donations). Wheat imports include the following amounts in 1,000 metric tons under the Mutual Security Program: 1954, 69; and 1955, 95. 3/ Less than 0.5 percent. 4/ Production includes sunflower seed, sesame seed, soybeans, and olive oil; imports include cottonseed and soybean oil equivalent. Source: U.S. Department of Agriculture, Foreign Agricultural Service. 10

levels and by releasing stocks through the normal channels of trade to prevent consumer food prices from rising to exorbitant levels during periods of scarcity. In a way, these agencies operate similarly to the U.S. Commodity Credit Corporation, but with possibly broader authority to actually influence the market and the marketing system. In most years, the agencies1 wholesale prices of Title I imports were far above import purchase prices (table 4) . Commercial imports were priced and distributed in a manner similar to Title I imports. During 1955-62, the gross markup--the difference between import prices of Title I commodities and the semiofficial agencies' internal sale prices of these commodities--was 464 million Turkish lira ($52 million) (table 5) . 7/ The only year when there was no markup on the aggregate of Title I imports was 1960. Most of the total markup was made on Title I imports of food grains and edible oils. Markups were small on imports of feed grains and dairy products. There was no markup on meat and poultry imports. During 1955-62, the percentage of gross markups or losses on individual Title I commodities was as follows: Percentage of Title I commodity markup or loss Rice 454 Barley 36 Corn 9 Wheat 7 All grains 14 Soybeans 34 Cottonseed 15 All oilseeds 29 Other (includes dairy products, meat, and poultry _1 / - 9 All Title I imports (average) 17 1/ Sold at prices below import cost. TMO received about 56 percent of the total gross markup of 464 million lira and EBK the remainder. Actual profits to these agencies were somewhat less, due to handling, transportation, and other distribution costs. A large part of the net profits made on imports were used to cover part of the costs of financing domestic pricing and investment programs. During 1955-62, TMO incurred net operating losses of 162 million lira, while EBK sustained even higher losses. Such losses, which are made up from government appropriations, would have been much larger had there been no profits from P.L. 480 imports. It is reasonable to conclude the gross product from handling Title I, as well as commercial, imports contributed significantly to the financial ability of these agencies to promote consumer and producer interests. 7/ Converted at 9 lira = $1. 11

Table 4. --Turkey: Title I import prices compared with average domestic prices, 1955-62 Commodity and crop year Title I import price Sales price of Title I imports Price of domestic crop 1/ Wheat: 1955 22 33 30 1956 24 30 30 1957 30 37 40 1958 38 43 44 I960 66 55 56 1961 62 62 68 1962 66 73 74 Corn: 1956 25 21 39 1957 22 30 48 1958 30 33 40 I960 57 48 51 1961 54 66 58 Barley: 1955 20 26 26 1957 18 28 30 Oats: 1955 22 26 ^/n.a. 187 Rice : 1956 46 160 1959 141 190 198 1961 136 275 254 Cottonseed oil: 1955 95 188 226 1957 212 240 307 1958 244 297 317 1959 353 391 390 1962 350 370 n.a. Soybean oil: 1958 216 322 317 1959 294 391 390 I960 275 380 n.a. 1962 299 353 n.a. Tallow: 1957 87 240 n.a. 1962 187 275 n.a. Beef: 1957 247 215 345 Poultry: 1959 762 613 n.a. Butter: 1959 865 1,100 1,198 .Cheese : 1959 573 508 n.a. Milk: Milk fat 1959 n.a. 1,085 n.a. Powdered milk 1959 239 358 n.a. 1/ Average wholesale price of several exchanges used for wheat and corn; farm price used for the other grains; wholesale price of margarine in Istanbul used for the oilseeds; average retail price of mutton used for meat; average retail price of butter used for that product. 2/ n.a. = not available. Source: (_5) . 12

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Table 5. --Turkey: Gross markups or losses on Title I imports, 1955-62 CM i i i i VO i 1 1 00 r-« CM 'ClCM vO CM v • • • • • • 4-1 • • • H U p ll 4-1 CO • • • • • • CJ • • • 3 •H • . X3 • • • • • • P • • • CD 4-1 5-i cO XI CO CD • • XI • i — 1 CD CO 5-i o c CO N CO U 3 a CO u 3 H co CO CO o U 4-1 P •H •u P 4-J P r* u 4-J P 4-J p 4-1 CO CO ON o w CO 4-4 u O CO 4-J u • . CO 4-J U 4-1 CO 4-1 U > CO 4-1 u i—i CO o o O CD cO o CD co ■u O (D Cd i—l O CD u O CD CO o 5-1 5-i 1—1 O Pd S i — l o Pd £ cO o Pd s P U Pd E •H o Pd s 4-1 u O O rH | 1—1 i—l CD o CO o c <3 S P-I Q EH 13 2/ Sold below cost

Agricultural Price and Production Policies Prices of most farm commodities rose during most of 1950-62 due to increasing inflation and to devaluation of the lira in 1958 (table 6). However, farm prices deflated by the general price level showed no or only moderate increases each year. With the exception of cotton, they did not reach or surpass 1950-54 relationships until the early 1960*s. Throughout most of the 12-year period prices of all major commodities, except oilseeds, declined relative to the general price level. Wheat prices fell more than those of other grains. Cotton prices lagged behind most other commodity prices, while oilseed prices rose relative to other farm prices and the general wholesale level. Title I imports helped moderate the inflationary pressures on farm prices, particularly wheat, resulting from the rising cost of living, increasing food and fiber needs, inadequate domestic supplies, and insufficient foreign exchange reserves to purchase commercially the essential agricultural imports (5», pp. 184, 215, 482, 497). To this extent, it appears that the availability of Title I wheat prevented the prices of wheat from rising to higher levels. However, since it was the policy of the government to check inflation, the government probably would have resorted to more rigorous consumer marketing and price controls in the absence of the program rather than permit rapid price increases (5, pp. 10, 176, 178-9, 212, 406, 492). Total agricultural production rose 46 percent between 1954 and 1965 but population rose at about the same rate (table 7). Thus, output per capita changed little. Most of the increase in aggregate output was accounted for by substantial increases in cotton and fresh fruit. Production of oilseeds also rose, while output and acreage of food and feed grains increased until about 1957 and then leveled off (table 8, fig. 2). Since Title I wheat played an important role in the government's effort to stabilize prices, the important question arises as to whether such imports depressed prices to domestic producers and adversely affected agricultural output. Price changes have more effect on acreage and production response of commercial producers than on subsistence producers. In less developed countries, such as Turkey, there is a large proportion of the farmers who have small, fragmented holdings and produce staple foods primarily for home use. Three-fourths of the farmers in Turkey have holdings averaging about 7 acres. The proportion of total grain production in Turkey that is consumed on the farms where it is produced is 55 to 65 percent for wheat, 60 to 80 percent for barley, 65 to 75 percent for corn, 40 to 50 percent for oats, and 5 to 10 percent for rice (5., p. 128). To obtain cash to pay their debts, subsistence producers may sell small quantities of their crop. In most cases, these sales are made soon after harvest when farm prices tend to be the lowest. A relatively large part of the grain that enters the commercial market is purchased by TMO. The effect of price incentives on production of subsistence and cash crops in Turkey was studied by analyzing prices and area planted to grains and cotton-14

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Table 8. --Turkey: Production, acreage, and yield of selected agricultural commodities, 1950-65 Crop : Grains Cotton Tobacco Oilseeds 1/ ^ear ; Wheat ; Corn ’ Barley : Oats : Rice * PRODUCTION i nnn m ^ 4- -v- 1 *-> f p J- LU1IO 1950 : 4,082 628 2,047 316 77 122 85 144 1951 : 5,600 850 2,700 350 97 136 89 174 1952 : 6,500 837 3,189 405 143 156 91 186 1953 8, 000 760 3,640 416 162 145 113 184 1954 : 4,900 914 2,400 325 165 142 98 267 1955 : 6,260 855 2,939 356 92 131 114 198 1956 : 5,851 857 2,830 363 138 146 115 230 1957 : 6,800 750 3,484 435 173 120 120 186 1958 : 6,300 635 2,830 290 138 180 104 226 1959 : 5, 800 800 3,048 399 136 185 122 244 1960 : 7 , 076 749 3,092 501 138 169 135 252 1961 : 6 , 123 1,001 3,103 401 135 207 102 219 1962 : 6,750 650 3,200 450 173 229 90 150 1963 : 7 , 950 826 3,899 475 180 250 132 193 1964 : 7,000 1,000 2,780 425 135 326 175 304 1965 : 7,430 800 3,100 450 165 326 124 251 ACREAGE acre s 1950 : 10,500 1,466 4,700 750 60 1,100 317 1951 : 12,000 1,540 5,089 762 74 1,586 300 1952 : 13,400 1,586 5,713 880 121 1,669 320 1953 : 15,840 1,534 6,002 790 123 1,445 340 1954 : 15,830 1,779 6,175 860 115 1,440 386 1955 : 17,445 1,745 6,523 912 71 1,547 382 1956 : 18,125 1,782 6,454 919 104 1,575 432 1957 : 17,878 1,752 6,500 949 173 1,520 428 1958 : 16 , 000 1,678 5,500 650 146 1,559 396 1959 : 15,500 1,730 6,500 900 111 1,542 416 1960 : 15,600 1,717 6,400 976 105 1,534 465 1961 15,500 1,742 6,400 949 100 1,604 347 1962 : 16,000 1,648 6,350 1,013 170 1,631 369 1963 : 17,500 1,656 7,042 1,000 136 1,553 583 1964 : 17,600 1,680 6,795 1,013 86 1,680 672 1965 : 17,600 1,606 6,845 988 124 1,690 549 YIELD PER ACRE ■n 11 j _ ” du s ne — — 1950 : 14.3 16.9 20.0 29.0 62.9 237 591 1951 ; 17.1 21.7 24.4 31.6 64.2 182 651 1952 : 17.8 20.8 25.6 31.7 57.7 198 627 1953 : 15.1 19.5 27.8 36.3 64.7 205 733 1954 : H.4 20.2 17.9 26.0 70.3 217 556 1955 : 14.7 19.3 21.0 26.9 63.2 223 656 1956 : H.9 18.9 20.1 27.2 65.1 219 587 1957 : 14.0 16.9 24.6 31.6 48.9 187 618 1958 : 15.0 14.9 23.6 30.8 46.4 246 577 1959 : 13.7 18.2 21.5 30.6 60.1 265 649 1960 ....... * 16.7 17.2 22.2 35.3 64.5 243 641 1961 : 14.5 16.1 22.3 29.1 67.6 284 648 1962 : 15.7 15.5 23.1 30.6 49.8 309 498 1963 : 16.6 19.6 25.4 32.7 63.1 355 498 1964 : 14.6 23.4 18.9 28.9 76.8 429 574 1965 ........ 15.6 19.6 20.8 31.4 64.5 426 496 1/ Includes sunflower seed, sesameseed, soybeans. and olive oil. Source: U.S. Department of Agriculture, Foreign Agricultural Service. 17

18

a cash crop (_5, pp. 155-60). The relationships between deflated farm prices and area planted during 1950-62 were negative for all grains, except corn, and positive for cotton. In other words, except for corn and cotton, there was no significant correlation between changes in deflated prices and area planted. During the same period, "while farm prices of barley were increasing in relation to wheat prices (during the 1950-62 period), the area planted to barley was diminishing and there were no shifts of land from wheat to barley" (_5, p. 161). The study concluded that price incentives were relatively unimportant in encouraging increased production of grains produced mainly for home use, while price changes did influence the production of cash crops, such as cotton. The study also pointed out that: "Price stability often is more important than a higher level of unstable and uncertain prices" (_5, p. 488). The price stabilizing effect of aid imports helped provide a favorable climate for increasing grain production. The additional resources provided by P.L. 480 commodities helped sustain a faster rate of economic growth than would have been possible without those commodities. Over the longer run, this tended to increase the demand for food and strengthened grain and other food prices. Agricultural Development Policies The Government of Turkey undertook major efforts to promote agricultural development long before the initiation of a concessional food aid program. Soon after World War II ended, steps were taken to increase grain and cotton production. Significant progress was made in the early 1950* s in the mechanization of the main wheat growing areas (56) . Other measures to speed up agricultural progress during the last 15 years include: (1) Increasing aggregate domestic investment in agriculture between 1955 and 1963 by more than fourfold (table 9); (2) improving the quality of seeds; (3) increasing the land cultivated by tractors; (4) developing water resources and raising the percentage of irrigated land; (5) expanding the operations of the agricultural research and extension service; (6) increasing the credit provided to farmers; (7) improving transportation links between rural and urban areas; (8) increasing plant and animal pest controls; (9) distributing land to farmers; and (10) giving greater priority to agricultural development in the second 5-year plan (1968-72) than in the first 5-year plan (1963-67) (_5; 50) . The underlying environmental, structural, institutional, cultural, and economic conditions that have existed in Turkey for many decades has limited the effectiveness of policies to encourage increased production. In appraising these policies, the report states that for Turkey to have met its deficits through increased production; . . . the framework of real events from 1954 to 1962 would have required a reshaping of economic philosophy, political attitudes, and administrative operations and the economic and cultural environment in which farmers were making decisions affecting intensification, the use of new practices and expanding production (_5, p. 487). 19

Table 9. --Turkey: Government investments in agriculture compared with total government investments for economic development, average 1950-54 and annual 1955-60 and 1963 Agriculture Year Government investment Million lira Percent in total government investments Percent of total government budget invested in economic development Percent Av. 1950-54 : 76,822 1955 : 182,149 1956 : 241,360 1957 : 382,108 1958 : 427,947 1959 : 531,014 1960 : 578,684 1963 : 827,000 21.3 18.3 24.9 24.0 29.1 24.0 34.7 26.5 33.3 27.7 30.7 27.9 25,0 32.1 n.a. n.a. Sources: (_5, p. 171; _50 for 1963 data). Such adjustments take time to evolve. The report concludes: The major part of the actual changes and increases in output would begin only four or five years after the improvements in the institutional structure; and the total of the resource adjustments . . . would take a decade of effort (_5, p. 489). The Turkish study also pointed out that "crash" measures to achieve greater self-sufficiency in grain production would have increased inflationary pressures and production costs and have led to uneconomic use of the country1 s resources . Title I imports helped protect Turkey against periodic deficits in basic food items such as grains and vegetable oils. In 1954, for example, unfavorable weather, following 3 good years, led to poor harvests and grain stocks were exhausted. However, Title I imports prevented a serious food deficit. Title I imports during periods of short-term deficiencies enabled the government to achieve greater stability in food prices and more flexibility in working toward its long-range objective of economic development. The program 20

" . . . was of considerable benefit in alleviating the need for pushing uneconomic self-sufficiency objectives and permitting . . . greater flexibility in the development of farming systems and production patterns that would maximize the country1 s agricultural resource potential" (5_, p. 182). The Title I program also helped stimulate development in the margarine and soap industries (_5 , pp. 92-3, 270, 356, 400, 493). During 1955-62, the markets for margarine and cooking oils expanded by 10 to 20 percent annually, but domestic production of oilseeds failed to keep pace with increasing demands. Approximately half of the domestic production of vegetable oils comes from olive oil, which is priced too high to be an economic raw material for the margarine and soap industries, but is an important source of foreign exchange earnings. The availability of low-priced, good quality Title I imports eliminated the need for using the more costly oil for soap production, thus increasing the supply of edible olive oil available for export. Also, the soap and margarine industries were encouraged to develop faster and with less uncertainty by the availability of a continuous supply of raw materials under the Title I program. By making possible the rapid expansion of the soap and margarine industries and increased total consumption of vegetable oils, the Title I program "... directly contributed to a higher standard of living, changed the consumption pattern, and indirectly freed foreign exchange for other commercial imports" (5, P. 401). Conclusions - Turkey Imported agricultural commodities are distributed by two semigovernment agencies. Lower priced imports are sold within the framework of national food and pricing policies at the higher level of domestic prices. Consequently, domestic producers are insulated against competition of lower priced imports whether they are imported under P.L. 480 or commercially. The availability of food aid served to reduce fluctuations in domestic food prices by reducing inflationary price increases during periods of scarcity. Also, Title I imports alleviated the need for stricter price and rationing controls . Agricultural output has increased rapidly since 1954, but grain production, the principal food item, did not increase significantly after 1957. Environmental, structural, institutional, and economic factors have hindered the expansion of grain production to meet increasing food requirements. These factors appear to be more important than changes in price in affecting the response of producers. Regression analyses showed that the relationships between deflated farm prices and the area planted during 1950-62 were negative for all grains, except corn, where they were not significant; and positive for cotton. Since Title I commodities were imported only as a result of shortfalls in production, it appears that the P.L. 480 program contributed to greater flexibility in planning the efficient use of agricultural resources as short range uneconomic self-sufficiency measures that might have been instituted to meet shortfalls in production were avoided. 21

The large imports of vegetable oils contributed significantly to the development and expansion of the margarine and soap industries. In addition, the net profits made on the handling of P.L. 480 imports by the two semiofficial import agencies were available to help finance the improvement and expansion of storage and marketing facilities and to help cover the administrative costs of agricultural price stabilization programs. 22

COLOMBIA Colombia, the third largest recipient of Title I commodities in Latin America, imported $60 million during 1955-65. Wheat accounted for 57 percent; cotton, 20; vegetable oils, 17; and feed grains, tobacco, and milk, 6 percent. P.L. 480 imports of wheat, cotton, and vegetable oils were relatively large compared with domestic production of these commodities (table 10). These imports were equivalent to 40 percent of the wheat during 1955-64, 22 percent of the cotton in 1955-57, and one-third of the vegetable oils in 1955-60. Table 10 . --Colombia: Principal P.L. 480 imports compared with domestic production, 1955-64 Commodity and year 1/ Domestic production ; P.L. 480 imports 2 / P.L. 480 imports as percentage of production — 1,000 metric tons Percent Wheat 1955 147 6 4 1956 139 14 10 1957 110 59 49 1958 140 101 65 1959 145 63 45 I960 . . 142 55 38 1961 142 96 68 1962 162 42 26 1963 0 90 50 56 1964 85 40 47 Average 130 52 40 Cotton 1955 23 6 26 1956 24 3 12 1957 21 7 33 Average „ » . „ . . . 23 5 22 Oilseeds 3/ 1955 O . . . O . C O . O . . 11 3 27 1956 11 4 36 1957 12 2 17 1959 24 17 71 1960 30 4 13 Average 18 6 33 1/ Each year shown is beginning of crop year for production and of fiscal year for imports. 2 J P.L. 480 data are on an export shipment basis and are not available on an import basis. Mostly Title I imports; small amounts under Title III donations, and Title IV long-term dollar credit sales. 3/ Domestic production includes soybean, cottonseed, and sesame oils (2, p. 309). Imports include soybean and cottonseed oils. Source: Except as indicated, U.S. Dept. Agr., Foreign Agr. Serv. 23

Agricultural Trade and Marketing Policies As in Turkey, the Colombian Government controlled marketing and pricing of imports far above import costs to maintain producer prices at higher levels.. The distribution and pricing of imported commodities are done through the following semiofficial agencies: (1) Instituto de Fomento Algodonero (IFA) , which regulates the production, marketing, and pricing of cotton and oil crops; (2) Instituto Nacional de Fomento Tabacalero, which conducts a tobacco development program and engages in the marketing and pricing of domestic crop; (3) Instituto de Cereales (ICE), which operates development programs for wheat and barley; and (4) Instituto Nacional de Abastecimientos (INA) , which exercises a monopoly over all imports of grains and vegetable oils j5/ ; supports the prices of rice, wheat, corn, and beans through domestic purchase; handles storage and resale operations; and maintains ceiling prices on many food products. Farm prices of grains and oilseeds in Colombia were far above the cost of imported commodities, both concessional and commercial. For example, in 1962 domestic farm prices exceeded import prices or cost by the following percentages: wheat, 47; corn, 12; and soybeans, 11 (2, p. 40). To protect domestic producers INA sold imports at the much higher domestic prices. During 1955-60, the gross markup on Title I imports averaged 13 million pesos annually. Similar markups were made on concurrent commercial imports (table 11). Table 11 . --Colombia: Prices of selected Title I imports, domestic sales prices, and gross markup Commodity Import price INA sales price Gross markup Wheat (1955-60 av.) Wheat flour (1955-60 av.) Edible oils (1959) 0„.... 702 914 212 824 1,306 482 2,100 3,200 1,100 Source: (2^, p. 110). The net profit from these markups provided financing for INA*s domestic operations, such as price support, development projects of Caja Agraria (acting as an agent for INA), and construction of additional storage facilities. During 1957-60, one-half of INA's expenditures were financed by income made from the markup of Title I imports ( 2 , p. 111). 8/ Beginning in 1966, private traders were permitted to import wheat and vegetable oils, subject to licensing requirements and duties. INA collects the duties from the private importer and uses them to help finance domestic programs. In October 1967, wheat imports were again placed under government monopoly. 24

Agricultural Prices Prices of most farm commodities rose more rapidly during 1957-64 than in 1952-56 (table 12). This reflected serious inflationary pressures resulting from increasing domestic demand for foodstuffs, inadequate domestic supplies, and limited foreign exchange. On a deflated basis, prices of wheat, barley, and rice rose at the same or a faster rate than the cost of living until the late 1950's and then fell below the general price index. Prices of corn, sesame, and cotton increased faster than the general price level during most of 1952-64. Wheat prices lagged behind those of the other grains, primarily because of a Title I provision that limited the markup on Title I wheat and flour imports after 1957. These commodities were sold to wholesalers for less than the domestic sales prices of commercial imports. Trends in Farm Production During 1954-65, total agricultural production increased (table 13, fig. 3). Output and acreage of the major commodities, rose during most of the period of Title I imports except for wheat production which remained rather constant between 1952 and 1962, and then declined (table 14). Barley showed the most significant increase among the grains. Cotton production rose to the point where the country became self-sufficient in 1959. For many decades, Colombia has produced about half of its wheat requirements. Despite a vigorous effort to expand production over the last 15 years, the gap between demand and domestic supplies has increased. The failure of wheat production to expand was mainly due to (_3; 2^, pp. 169-75, 204; 4, 32-6): (1) The area available for wheat production is limited and the crop competes with other cool-climate products, such as barley and potatoes, which are usually more profitable. The most profitable alternatives to wheat are in the best wheat areas. (2) The climate is more favorable for barley. (3) Many wheat producers operate largely subsistence farms, averaging less than 10 acres. These farmers follow traditional patterns and therefore have not changed their production practices rapidly in response to price changes, technical changes, or other incentives. (4) Wheat is not an important source of income for most Colombian producers, since few of them depend exclusively upon this crop and there are close food substitutes in corn, rice, yuca, and potatoes. Due to these and other environmental, institutional, and social factors, Colombia prefers to rely on imported wheat and concentrate on producing more profitable crops. Some experts believe that the country will never be able to provide much more than half its wheat needs, and will have to depend increasingly upon imports (_3) . Between 1961 and 1965, Colombia imported more wheat than it produced. In 1964, the country produced only one- third of its domestic consumption . 25

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COLOMBIA: INDICES OF PRODUCTION, AREA, AND YIELD OF AGRICULTURAL COMMODITIES 200 150 100 50 200 150 100 50 200 150 100 50 1950-54 BARLEY A.. i A J/_ ^ jr ill i i i i Mil TOBACCO pzy' t~\ tf w II I I I I I I I I I I I WHEAT ■ft*** 1 1 1 1 1 1 1 1 i i nr 800 600 400 200 100 0 500 400 300 200 100 : 1950-54 1 OILSEEDS * i pr — A Yi oduction rea 1 eld Unn»»... : ? c / |UVV v / 1 1 1 1 1 1 1 1 1 i i i i COTTON /\ tiiil l I I I I I I I I I I I 1950 1955 1960 1965 1950 1955 1960 1965 * INCLUDES SESAME AND SOYBEANS. NEG. ERS 5959-69 (4) ECONOMIC RESEARCH SERVICE U.S. DEPARTMENT OF AGRICULTURE Figure 3 28

Table 14. --Colombia: Production, acreage, and yield of selected agricultural commodities, 1950-65 Crop year Grains Cotton | Tobacco Oilseeds 1/ Wheat [ Corn Barley ] Rice | PRODUCTION 1 j UUv Ulc Ll 1C tons — — — « 1950 101 620 50 241 8 20 8 1951 131 845 56 259 11 20 12 1952 142 927 61 266 18 22 10 1953 142 770 79 272 21 26 10 1954 147 750 65 294 27 22 11 1955 147 770 52 318 23 29 9 1956 139 790 70 340 24 37 18 1957 110 720 60 349 21 38 21 1958 140 851 75 390 33 38 31 1959 145 701 101 415 64 39 32 1960 142 864 106 450 67 25 39 1961 142 733 101 474 76 28 42 1962 162 754 108 585 82 38 44 1963 90 782 118 550 73 42 67 1964 85 899 110 600 65 41 95 1965 110 871 96 672 65 40 105 ACREAGE i nnn « 1950 356 1,610 109 350 103 52 1951 430 1,898 116 400 136 51 1952 464 1,730 126 408 150 49 1953 432 1,730 130 420 200 50 1954 482 2,060 131 450 230 52 1955 450 2,059 106 465 170 54 1956 420 1,673 133 490 155 54 1957 440 1,395 119 500 178 54 1958 395 1,742 104 486 235 56 1959 410 1,631 138 509 380 59 1960 393 1,767 138 562 359 34 1961 395 1,757 136 586 398 34 1962 420 1,720 138 691 450 47 1963 279 1,809 143 628 400 54 1964 262 2,026 143 747 389 54 1965 314 1,977 104 926 410 62 YIELD PER ACRE ■ l ouna s - — - — - — 1950 10.5 15.2 21.3 33.7 158 865 1951 11.1 17.5 22.2 31.9 166 882 1952 11.1 17.5 22.2 31.9 160 990 1953 12.2 17.5 23.0 31.8 221 1,124 1954 11.1 17.5 22.9 32.1 255 950 1955 12.0 18.0 22.6 33.5 299 1,174 1956 12.2 18.6 24.2 34.0 300 1,498 1957 9.2 21.4 23.2 34.2 353 1,535 1958 13.0 19.2 33.2 38.4 306 1,496 1959 13.4 15.7 33.6 39.9 388 1,450 1960 13.0 19.2 35.3 38.4 410 1,614 1961 13.5 17.1 34.1 39.6 431 1,816 1962 14.2 17.2 35.9 41.5 400 1,790 1963 11.9 17.0 37.9 38.9 402 1,698 1964 11.9 17.5 35.3 41.7 370 1,697 1965 12.9 17.3 42.4 35.2 351 1,422 T7 Sesame and soybeans. Source: U.S. Dept. Agr., Foreign Agr. Serv. 29

In the mid-fifties, government policy shifted from reliance upon cotton imports to promotion of cotton production to meet domestic requirements, despite the favorable sales terms of Title I agreements. In 1957, the government required textile mills to use specific quantities of domestic cotton, thus insuring a market for the higher priced domestic crop, even though it was often lower in quality. Also, depreciation of the peso made imported cotton more expensive. Favorable domestic prices, improved seeds, expansion of marketing facilities and technical aid, and increased responsiveness of commercial farmers to price changes led to an expansion of cotton production. In 1960, the country became an exporter of cotton (2, pp. 108, 121, 287). Although Title I feed grain imports were small, they apparently assisted the livestock industry in meeting temporary grain shortages. Agricultural Development The Colombian study outlined 3 main areas in which the Title I program contributed to development (j2, p. 363): (a) by the use of Title I pesos to support development of agricultural resources, of fertilizer production, of industries using farm products, and of such institutions as the CVC 9/ ; (b) by the commodity development programs conducted with the promotional revenues derived from INA*s operations; and (c) by the greater stability of prices, which may be assumed to be generally conducive to new private investment and development activities in agriculture . The Title I program provided the government with three important sources of income to finance agricultural development: (1) Revenue derived from the markup of Title I imports, (2) promotional taxes levied on P.L. 480 imports, and (3) local currency accumulated by the United States from the sale of Title I commodities and then loaned to the government. Promotional taxes levied on Title I imports of wheat and flour, cotton, and cigarettes were the most important sources of funds available to the respective semiofficial commodity agencies to finance their campaigns to encourage increased production. Between 1955 and 1960, these levies averaged nearly 6 million pesos annually, equivalent to three-fourths of the budget of the Ministry of Agriculture which averaged only 8 million pesos. In 1958, 65 percent of the income of the Instituto de Fomento Tabacalero came from promotional taxes. These taxes helped to finance research to improve seed varieties, to establish experimental farms, and to study domestic and foreign market conditions. The 20 million pesos derived from the tax on Title I flour imports was used in the seed improvement campaign, and thereby helped to promote the wheat industry. 9/ The Cauca Valley Corporation, an autonomous regional development agency similar to the Tennessee Valley Authority. 30

As of June 1964, almost 200 million pesos accruing from the sale of Title I commodities had been loaned by the United States to the Colombian Government and used in the agricultural sector. Since the P.L. 480 law forbids local currency loans for the specific development of agricultural enterprises which might be competitive with U.S. agriculture, these loans were used for the development of industries servicing agriculture and for the improvement of marketing facilities (2, pp. 130-6). The largest loan was made by the government bank to the CVC which used it to finance land reclamation, water control, and electrification. The latter was the first total area electrification scheme in Latin America. By making feasible the use of electrical irrigation equipment, the project aided agricultural development and reduced the impact of the dry season. The reclamation project, which included flood control and drainage, helped to increase the cropland area, as well as to raise agricultural productivity. The CVC development program was considered a part of Colombian agrarian reform. The reclamation projects and intensified land use provided increased employment for that part of the rural population which could not easily be assimilated into the industrial labor force. Other principal loans helped finance a large fertilizer plant, the development of storage facilities, livestock improvements, agricultural access roads, and reforestation. Title I sales proceeds also were loaned to private enterprises in Colombia. Approximately 8 million pesos--or about 14 percent of the total Title I loans to the private sector through June 1964--were to firms processing agricultural products. One of the main firms was a corn processing plant. The income derived from the Title I program facilitated investments in agriculture which probably would not have been made in the absence of the program. During 1955-60, the Ministry of Agriculture received only about 3 percent of the national budget (3, pp. 163, 350, 354). Recently, the Colombiari Government has given greater priority to agricultural development. In 1967, public investment in agriculture accounted for 25 percent of total government investments compared with less than 15 percent in earlier years. Conclusions - Colombia The government, by controlling the marketing, pricing, and distribution of imported agricultural commodities through semiofficial agencies, was successful in insulating domestic producers from external competition. This was done by pricing commodity imports for domestic distribution at prices much higher than import costs and in line with domestic price levels. Analysis of the Colombian situation indicates that wheat prices might have been higher than they were had there been no P.L. 480 program, but it appears that physical, structural, and other economic factors (particularly more profitable alternative crops) were probably more important than price per se in causing the production of wheat to decline. During the 1955-65 period, output and acreage of the major commodities, with the exception of wheat, rose about in line with increases in population. Oilseed and feed grain production rose substantially and in the case of cotton, 31

the country became an exporter in 1960 despite fairly large imports from the United States and Peru during the 1950fs. The Title I program provided the government with supplemental revenue which helped finance increased investments in agricultural development and related service industries. Of particular importance was the additional support through P.L. 480 Title I loans and grants to support land and water development through the Cauca Valley Corporation, increased fertilizer ous commodity development programs. Also, the stabilizing tural imports appear to have been conducive to new private all development activities in agriculture as well as other omy. production, and varieffects of agriculinvestment and oversectors of the econ32

GREECE Greece imported $119 million of Title I commodities during 1955-64, and was one of the largest recipients on a per capita basis. Feed grains accounted for 43 percent of these imports; wheat, almost one-third; vegetable oils, 22 percent; and dairy products, the remainder. In 1964, Greece shifted from a P.L. 480 Title I program to a Title IV program of long-term dollar credit sales. In recent years, Greece has increased its commercial imports of grain. Concessional imports of wheat were relatively high in relation to domestic production until 1957 when the country became self-sufficient in this grain. Thereafter, only small quantities were imported for special uses. Feed grain imports under P.L. 480 were a significant percentage of output throughout the period (table 15). Agricultural Price and Trade Policies Domestic prices in Greece exceeded the prices of most imported agricultural commodities, both commercial and concessional. And, as in Turkey and Colombia, the government regulated the distribution and internal pricing of imports. Internal pricing of wheat, feed grains, and oilseeds is done in such a way as to promote agricultural development and protect producer interests. Since the 1930's the government has encouraged wheat production through regulations affecting production, prices, and marketing of indigenous and imported wheat. Its policies include: (1) Procurement of wheat at guaranteed support prices, (2) requiring millers to use a specified percentage of wheat from government stocks and the commercial market, (3) regulating the wholesale market prices of wheat, (4) subsidizing the flour mills, (5) fixing ceiling prices for different types of bread, and (6) exerting monopoly control over all wheat imports and their internal distribution. The large role played by the government in the wheat market is illustrated by the fact that in 1962 producers made four-fifths of their total sales to the government. Domestic prices for wheat have exceeded the prices of imported wheat. During 1956-63, farm prices averaged $98 per ton, the support $87, while import prices averaged $77. The Greek Government sold lower priced wheat imports at the higher level of domestic prices. Sales prices for imported wheat were based on the domestic prices of bread, wheat on the wholesale market, and the support price, all of which were regulated by the government. Sales prices of imported wheat exceeded import prices each year from 1955 through 1961 but were a little lower in 1962 (table 16). The net profits (after deduction of handling and transportation costs) from concessional wheat imports helped finance the government's domestic grain programs. During the 1955-57 period of substantial concessional wheat imports, the revenue derived from high markups enabled the government to satisfy two conflicting aims without undue strain on the national budget: maintenance of high price supports to producers, and stable bread prices to consumers. During 1955-58, subsidization of bread prices cost the government about 100 million 33

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Table 16. --Greece: Domestic prices for wheat compared with import prices, 1954-63 Crop year Average price of imported wheat Government sales price of imports Farm price i/ Minimum support price 2/ 1954 77 3/n.a. 85 88 1955 83 100 90 n.a. 1956 78 90 103 90 1957 81 90 100 90 1958 72 80 100 90 1959 71 80 91 77 1960 75 87 90 77 1961 81 87 101 90 1962 85 83 99 90 1963 70 n.a. 105 90 1 J Weighted average of price sold to government and on the free market. 2 / Higher "privileged" prices are paid to small farmers and others growing a specified amount. 3/ n.a. = not available. Source: (14) . drachmas ($3.3 million) annually. 10/ Without the revenue from Title I wheat, "this deficit would have been at least double" (14, p. 88). It would have become extremely difficult for the government to continue to set high price supports and, at the same time maintain low bread prices. Because of a shortage of foreign exchange reserves and competing demand for capital imports, in the absence of an aid program the government probably would not have imported commercially as much as it did. The government's price policies for wheat changed after 1957 because of the achievement of self-sufficiency in wheat production, the buildup of surplus wheat stocks, a reduction of wheat imports, lower revenues from markups, and the beginning of policies to discourage further increases in wheat production. As the upward trend of support prices ended, bread prices increased continuously during 1958-60. Feed grain imports were handled by private traders, but the government controlled internal pricing in such a way as to promote livestock production and to stimulate demands for the relatively high yield fodder crops, corn, barley, and oats. The Agricultural Bank, a government agent, purchased P.L. 480 imports of feed from private traders and distributed them to farmers and feed mixing plants. 10/ One drachma equals $30.00. 35

After 1957, the Bank has distributed corn imports at prices higher than import costs. In most years from 1954 to 1964, however, corn imports were sold below the farm prices of indigenous corn (table 17). There were no support prices for feed grains until 1965. The Bank sold Title I barley imports at prices higher than import costs from 1958 to 1964. The Bank's prices were at about the same level as domestic farm prices until 1960 but lower since. The sales below domestic prices since 1960 were a means of subsidizing livestock producers. They also helped to stabilize the level of domestic grain prices which had fluctuated widely before the Title I program. The government also used Title I imports of soybean oil to help maintain high support prices to producers and stable prices to consumers. Support prices of olive oil in years of bumper crops were fixed at low levels. In years of poor crops, they were increased and exports of olive oil were prohibited. During poor crop years, soybean oil imported under Title I was mixed with domestic olive oil, increasing the supply of edible oils as a means of stabilizing retail prices at a lower level than would have been possible in the absence of the program. Table 17. --Greece: Import prices of corn and barley compared with domestic prices, 1954-64 Crop year Corn Barley Import price Farm : price : Sales price of P 0L . 480 imports Import : price : Farm : price : Sales price of P.L. 480 imports 1954 81.3 73.0 71.7 72.0 69.0 71.7 1955 ............ 76.7 70.0 71.7 — 75.0 — 1956 •••••••••••• 77.3 81.7 71.7 — 82.0 — 1957 80.3 81.3 71.7 — 81.7 — 1958 60.3 72.0 71.7 47.3 66.7 71.7 1959 67.0 68.7 71.7 59.3 69.0 71.7 1960 ............ 67.3 68.7 71.7 67.3 71.7 71.7 1961 61.0 68.7 71.7 56.7 72.0 71.7 1962 •••••••••••• 63.3 70.7 71.7 67.7 72.7 71.7 1963 ............ 1/63.2 73.7 2/71.7 1/70.0 77.0 2/71.7 1964 ............ 1/66.2 79.3 2/71.7 1/68.4 77.7 2/71.7 1/ Food and Agriculture Organization of the United Nations, Trade Yearbook. 2/ Estimated. Source : (14) . 36

During most of 1950-57, farm prices of Title I commodities (wheat, feed grains, and oils) as well as other farm prices rose at the same or a faster rate than general wholesale prices (table 18). Between 1958 and 1964, prices of most farm commodities were stabilized at a lower level and lagged behind the rise in the general price level. In summary, it appears that Title I imports of grains and oilseeds were distributed and priced within the framework of the governments domestic agricultural price and food policies. These policies included maintaining high prices to wheat producers and high support prices to olive oil growers during years of scarcity, reducing extreme fluctuations in feed grain prices, and maintaining stability in consumer prices. Trends in Farm Production Total agricultural output on a per capita basis increased significantly during 1954-65, with steady gains over most of the period (table 19). Growth was most rapid for cotton, wheat, tobacco, olive oil, and wheat (table 20, fig. 4). In the case of livestock production, there was an increase of 60 percent during 1954-63 (14, pp. 93, 97). The concessional wheat imports under P.L. 480 met the urgent need of consumers during the recovery period of the middle 1950* s until domestic production rose to the level of consumption (14, Chapter 4 and pp. 261-2). After selfsufficiency was achieved in 1957, Title I imports were limited to small quantities of hard wheat needed for special baking purposes. By enabling the government to maintain high support prices during 1955-57, without undue financial strain the program indirectly stimulated production for the commercial market. Production of feed grains has not increased enough since the early 1950* s to satisfy Greece* s increasing needs. Most of the country Bs output of corn, barley, and oats is consumed on the farms where it is produced. Marketable quantities have been limited and fluctuated considerably from year to year. Prior to P.L. 480 imports, prices of these grains were often too high and too unstable for the expansion of commercial livestock enterprises. Furthermore, technical, economic, and structural factors limited feed grain production and discouraged shifts of land resources to feed grain cultivation from other crops. The production subsidy on feeds that began in 1959 had only limited success. Consequently, the government concluded that the maintenance of a higher level of feed grain production was difficult, even under a system of subsidies (14, pp. 91, 94-5, 98, 262). P.L. 480 imports filled the gap between domestic demand for, and supply of, feed grains. By making an adequate quantity of high quality livestock feeds (corn, barley, and oats) available at reasonable and stable prices, the program also made improvement in the livestock and poultry industry possible. During the quality and the quantity period of the Title I imports, the bulk of indigenous feeds sold commercially was insufficient for the development of efficient livestock production. Therefore, it appears that the beneficial effects of the P.L. 480 program on the development of livestock industries and the long-run 37

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Table 20. --Greece: Production, acreage, and yield of selected agricultural commodities, 1950-65 Crop : Grains Cotton ) Tobacco Olive oil ^ear ; Wheat Corn \ Barley ! Oats ) PRODUCTION +- ^ i ) uuu me cr lc con s — 1950 : 850 195 200 120 26 58 38 1951 : 931 250 230 140 30 62 141 1952 : 1,050 230 213 117 25 39 70 1953 : 1,399 309 258 167 32 61 158 1954 : 1,219 255 233 150 41 68 113 1955 : 1,334 285 224 157 61 101 104 1956 : 1,245 239 229 147 51 82 144 1957 : 1,727 266 254 186 63 110 164 1958 : 1,785 224 267 168 62 84 93 1959 : 1,769 291 218 139 57 80 160 1960 : 1,692 281 235 150 63 65 79 1961 : 1,594 270 235 153 98 74 248 1962 : 1,770 266 252 155 89 94 56 1963 : 1,387 312 243 136 94 129 210 1964 : 2,170 290 278 155 68 136 130 1965 : 1,999 279 412 177 74 124 191 ACREAGE i nnn 1 j Ov V dvl C O 1950 : 2,142 614 510 363 191 236 1951 : 2,357 624 516 377 213 236 1952 : 2,382 625 531 377 203 189 1953 : 2,581 664 530 368 220 217 1954 : 2,581 631 528 345 270 262 1955 : 2,569 570 518 365 410 319 1956 2,622 574 509 364 395 391 1957 : 2,691 534 496 373 385 301 1958 : 2,750 511 483 356 402 278 1959 : 2,875 513 456 319 325 253 1960 : 2,820 522 448 315 409 226 1961 : 2,636 481 454 324 510 254 1962 2,697 440 459 326 508 306 1963 : 2,311 478 451 289 570 362 1964 : 2,984 389 464 299 350 357 1965 : 2, 766 362 572 310 335 319 YIELD PER ACRE Pounds 1950 ••••••••••* 14 • 6 12.5 18.0 22.8 294 542 1951 ••••••••••* 1A* • 5 15.8 20.5 25.6 293 581 1952 ••••••••••* 16 • 2 14.5 18.5 21.3 262 460 1953 ••••••••••* 19*9 18.3 22.4 31.3 303 620 1954 • •••••••••* 17 # 2 15.9 20.3 29.9 338 568 1955 : 19 • 1 19.7 19.9 29.6 327 699 1956 ••••••••••* 17.4 16.4 20.8 27.7 284 623 1957 : 23.4 19.7 23.5 34.3 362 804 1958 : 23.9 17.3 25.4 32.6 341 669 1959 22.6 21.5 21.9 30.1 387 695 1960 ... ........ 22.1 21.2 23.9 32.7 338 637 1961 ........... 22.2 22.1 23.8 32.6 422 640 1962 24 . 1 23.8 25.2 32.7 387 674 1963 22.0 25.7 24.7 32.2 362 782 1964 26.7 29.6 27.5 35.7 425 837 1965 26.5 30.3 33.0 39.3 487 860 Source: U.S. Dept. Agr., Foreign Agr. Serv. 40

GREECE: INDICES OF PRODUCTION, AREA, AND YIELD OF AGRICULTURAL COMMODITIES U. S. DEPARTMENT OF AGRICULTURE N EG. ERS 5960 - 69 ( 4 ) ECONOMIC RESEARCH SERVICE Figure 4 41

expansion of domestic demand for indigenous feed grains more than offset any unfavorable influences that imports might have had on domestic production in any particular year. Feed Grain Imports and Development of Livestock Industries The Greek study cited the following contributions of the Title I program to the development of commercial livestock and poultry industries: (1) Provided the government with considerable reserve stocks of high quality feed grains at reasonable prices. Livestock producers were freed of the need for maintaining stocks, and were thus enabled to economize on costs. (2) Satisfied the needs of commercial livestock producers near the principal commercial centers who could not easily procure the necessary quantities from domestic producers in the free market. (3) Maintained the prices of domestic corn and barley at reasonable levels for both feed grain and livestock producers. (4) Stimulated the long-run demand and market for corn, barley, and other feeds . Conclusions - Greece The government policy of selling the lower-cost concessional imports of wheat and vegetable oils at the higher levels of domestic prices resulted in significant revenues to the government. These revenues were available for use to help finance domestic price support programs and to help maintain stable consumer prices . During the 1954-65 period, aggregate agricultural output in Greece increased nearly 50 percent. P.L. 480 imports of grains and oils were used to supplement domestic production rather than displace it. Environmental, structural, and economic conditions were major factors limiting the shifting of resources to increased production of feed grains. The availability of Title I feed grains was credited with reducing fluctuations in feed grain prices and thus encouraging the development of poultry and livestock production adjacent to the major population centers. The general concensus is that the stabilizing effects of P.L. 480 feed grain exports in stimulating live stock industries contributed to increased potential demand for domestic and imported feed grains as well as other livestock feeds. 42

SPAIN Spain imported some $467 million of P.L. 480 Title I commodities during the 7 years before the program was terminated in 1962. Spain was one of the principal early recipients of U.S. agricultural commodity assistance. Edible vegetable oils accounted for 53 percent of these imports; cotton, 25 percent; feed grains, 8 percent; and wheat, tobacco, meat, and poultry the remaining 16 percent. In 1962, Spain shifted to an important commercial purchaser of U.S. agricultural commodities . P.L. 480 imports of wheat, feed grains, and tobacco averaged only 5 to 8 percent of Spain’s domestic production (table 21). In contrast, the Title I imports of soybean and cottonseed oils exceeded domestic production by an annual average of 123,000 metric tons during the period, but these imports were distributed in such a way as to avoid conflict with domestic olive oil producers. In fact, these lower priced vegetable oils were blended with olive oil to encourage consumer acceptability and made it possible for Spain to maintain exports of the higher valued olive oil. This contributed significantly to increased foreign exchange earnings and hastened the country’s economic recovery. Although cotton imports averaged two-thirds of domestic output over the 8-year period of concessional cotton imports, the country practically achieved self-sufficiency by the time the aid program was terminated in 1962. Import costs or prices of U.S. commodities imported under P.L. 480, the Mutual Security Program, or commercially, averaged about 30 percent below the domestic prices of similar agricultural commodities produced in Spain (6^, p. 305). As in Turkey, Colombia, and Greece, prices of domestically produced commodities were maintained above world prices through government protection and controls. Agricultural Price and Trade Policies Production, consumption, prices, and trading of principal agricultural commodities in Spain have been regulated or controlled by the government since 1940. These measures have been relaxed some since the mid-1950*s. In general, the objectives have been (1) to keep consumer prices reasonably stable; (2) to encourage maximum self-sufficiency in production, particularly in food grains and cotton; and (3) to stimulate production for export. Principal agricultural imports, including U.S. aid imports, were handled within the framework of national food and pricing policies in a way designed to promote those policy objectives. The principal controls, regulations and agencies affecting (wheat, feed grains, vegetable oils, cotton, and tobacco) during the last decade were as follows (56; 67; 6): (1) Grains - The National Wheat Service (NWS), fixes the minimum area that growers must devote to wheat production and the proportion of wheat land that is fallowed. Since 1958, the NWS has allowed wheat to be replaced by feed grains, other feed crops, or meadows in marginal wheat lands. Producers are required to sell to the NWS, at the support price, all wheat produced in excess of their needs for food, feed, and seed, NWS has monopoly control over all distribution of wheat to flour mills, regulates the mills’ activities, and controls bread prices. Since 1956, cultivation of feed grains has been compulsory on a specified acreage on farms over 250 acres in 30 of the country’s 50 provinces. 43

Table 21. --Spain: Aid imports compared with domestic production, 1954-61 Commodity and year 1/ Domestic production Aid imports 2/ Aid as a percentage of production P.L. 480 : 3/ | Mutual Security [ Total ?n s — — — — — — — — — — ■ Percent Wheat 1959 4,627 21 21 4 I960 3,538 13 400 413 12 1961 3 266 224 224 7 3^810 86 133 219 6 Corn 1955 686 47 7 54 8 1956 ••••••••• 714 32 3 35 5 1957 111 4 3 6 1 1958 916 97 — 97 10 1959 1,001 52 — 52 5 1960 1,016 100 58 158 16 1961 ••••••••• 1,067 83 — 83 8 Average .... 882 59 10 69 8 Barley 1956 1,551 50 35 85 5 1957 1,881 9 7 16 1 1958 1,777 112 — 112 6 1959 2,050 72 — 72 4 1960 1,566 100 83 183 12 1961 ......... 1,744 62 — 62 4 Average .... 1,761 68 20 88 5 Oilseeds 4/ 1955 . * 61 114 11 125 781 1956 19 126 29 155 816 1957 14 116 12 128 914 1958 17 183 — 183 107 1959 23 149 — 149 643 1960 25 116 — 116 464 Average .... 19 134 8 142 747 Cotton 1954 21 — 42 42 195 1955 34 9 22 31 91 1956 ......... 49 34 3 37 76 1957 38 22 16 38 100 1958 42 37 19 56 133 1959 65 2 7 9 14 1960 72 38 — 38 53 1961 ......... 106 34 — 34 32 Average .... 53 22 13 35 66 J J Each year shown is beginning of crop year for production and of fiscal year for imports. 2/ Data are on an export shipment basis and are not available on an import basis. 3/ Mostly Title’ I and small amounts under Title II. 4/ Production includes sunflower, hempseed, linseed, and cottonseed oils; imports include soybean and cottonseed oils. Source: U.S. Dept. Agr., Foreign Agr. Serv. 44

Feed grains can be sold on the open market, but NWS will purchase them at the support price if voluntarily offered for sale. An official agency, General Transport and Supply Commission, has a monopoly over all wheat imports, and until 1963, feed grain imports. Private trade now handles most feed grain imports which are subject to licensing regulations and levies. (2) Tobacco - A government agency fixes the minimum number of acres to be devoted to tobacco production, and requires growers to sell their entire crop to the agency at the support price. A semiofficial agency has monopoly over all imports and the manufacture and distribution of tobacco and tobacco products. (3) Cotton - The government requires cotton growers to produce the varieties authorized for their areas, sets support prices, and requires growers to sell their entire crop to ginning concessionaries at prices no lower than the support price. Before 1962, the government controlled imports. Since then, licensed private importers may import cotton, but the government authorizes imports only for the manufacture of textiles for export or to replace raw cotton previously used in the manufacture of export products. Cotton gins must deliver to the government the cotton needed to meet export requirements. The producer receives a subsidy on exports or a price which is between the high domestic and the low export or world price. (4) Oils - The government controls new plantings of olive trees and sets minimum support prices for oil. Olive oil can be sold on the open market, but a semi -government agency purchases at the support price all oil offered to the agency for sale. Although there are no longer ceiling prices set on olive oil at wholesale and retail levels, the official agency may sell its stocks of olive oil to prevent excessive price increases. All exports of olive oil require a license, and until 1962, export prices were controlled. The government had a monopoly over imports of vegetable oils and their internal distribution until the end of 1965. The government minimized price depressing effects of Title I commodities by controlling imports and by selling the lower priced commercial and concessional imports at levels approximating the prices of domestically produced commodities. Table 22 compares c.i.f. import prices of Title I and MSP commodities and their wholesale prices with support and farm prices of. indigenous crops. During the period of concessional imports, the average annual level of guaranteed support prices exceeded average annual c.i.f. import prices of the P.L. 480 and MSP commodities by the following percentages: wheat, 25 percent; barley, 11 percent; corn, 3 percent; and olive oil, 48 percent above soybean oil. Domestic farm prices usually were higher than import prices. The cost to the General Transport and Supply Commission of importing and distributing Title I corn imports during 1958-62 averaged 3.54 pesetas per kilogram, while the sales prices averaged 4.16 pesetas per kilogram--a net markup of 18 percent. Net markups on other aid imports: wheat, 18 percent; barley, 13 percent; and soybean oil, 19 percent. The Commission sold wheat imports in the domestic market at about the same level as producer support and farm prices of wheat. Imports of soybean oil were sold at prices near the support for olive oil, but below farm levels. Corn and barley imports were sold at prices higher than producer price supports, but 45

Table 22. --Spain: Import costs of selected commodities under P.L. 480 and the Mutual Security programs, compared with domestic prices, 1955-63 Commodity and year C.i.f. import price of aid 1/ Import cost of aid imports 2/ Domestic sales price of aid imports Margin between sales price of aid imports and cost of imports Support price Farm price Corn 1955 ••••••••••••• 2.89 3.03 — — 2.30 3.52 1956 ••••••••••••• 2.84 2.99 — — 2.40 4.43 1957 ••••••••••••• 2.89 3.03 — — 2.40 4.54 1953 ••••••••«•••• 2.61 2.84 4.10 1.36 2.40 5.64 1959 ••••••••••••• 2.94 3.20 4.10 1.02 3.50 4.92 1960 ••••••••••••• 3.71 4.04 4.20 .30 3.60 5.25 1961 ••••••••••••• 3.46 3.77 4.20 .49 3.60 4.83 1962 ••••••••••••• 3.53 3.85 4.20 .57 3.60 5.39 Av. 1958-62 .... 3.25 3.54 4 . 16 .75 3.34 5.21 Barley 1957 ••••••••••••• 2.73 2.88 — — 2.80 3.97 1953 ••••••••••••• 2.43 2.56 3.60 1.04 3.35 4.05 1959 ••••••••••••• 2.80 2.94 3.60 .66 3.40 4.41 1960 ••••••••••••• 3.60 3.78 3.60 -.18 3.45 4.16 1961 ••••••••••••• 3.49 3.66 3.80 .14 3.50 4.09 Av. 1958-61 .... 3.08 3.24 3.65 .41 3.42 4.18 Soybean and olive oil 3/ 1955 ............. 4/n.a. 5/16.2 12.7 -3.5 11.6 — 1956 ............. n.a. 6/18.5 n.a . n.a. 12.6 — 1957 ............. n.a. 7/18.3 n.a. n.a. 15.5 — 1958 ............. 8/11.1 8/13.1 n.a. n.a. 17.3 21.7 1959 ............. 9/10.2 9/12.1 16.0 3.9 19.5 21.6 1960 ............. 10/12.0 10/14.2 10/21.0 6.8 19.5 22.7 1961 ............. 18.6 22.0 20.2 -1.8 19.5 24.2 1962 ............. 15.3 18.0 20.2 2.2 19.9 31.7 1963 ............. 13.7 16.2 21.0 4.8 25.3 31.2 Av. 1959-63 14.0 16.5 19.7 3.2 20.7 26.3 Wheat 1961 4.46 4.70 5.56 .89 5.56 5.59 1/ Aid includes P.L. 480 and the Mutual Security Programs. 2/ Includes economic cost of transporting and distributing the imports within Spain. It was estimated that marketing costs amount to an additional 9 percent of the import prices for corn and barley, 5 percent for wheat, and 10 percent of the import prices of refined soybean oil. 3/ Soybean oil applies to the aid data. C.i.f. prices are for unrefined soybean oil; and import costs and sales prices are for refined soybean oil. The yield rate for unrefined soybean oil is estimated at 93 percent. Olive oil applies to support and farm prices. 4/ n.a. = not available. 5/ December. 6 / February. ]_/ January. 8/ August. 9_/ April. 10/ March only for years 1960-63 c.i.f. prices, import costs, and sales prices of imports. Source: (6>; 66) . 46

considerably below prices actually received by farmers as a means of subsidizing livestock producers. Since 1962, the government has required private traders to pay a compensatory duty on feed grain imports which brings them into alignment with the level of domestic farm prices. Prices of all commodities increased during 1951-64 (table 23) . On a deflated basis, prices for olive oil and the barley and corn supports rose more than the general wholesale level while the prices for the other commodities listed in table 22 lagged. This indicates that U.S. aid programs helped stabilize prices at a time when Spain was under serious inflationary pressures. The shortage of foreign exchange reserves during 1955-59 imposed severe limitations on the quantity of agricultural commodities that could be purchased commercially. During this period, domestic production was not sufficient to meet the increasing demand for agricultural commodities. Therefore, the P.L. 480 imports helped stabilize prices at a time when Spain was under serious inflationary pressures and thus it is believed contributed to economic development (6, pp. 106, 110-3, 121, 162-4, 175, 182, 189, 190, 200, 207, 212-3, 276, 286, 293, 254-9, 302-4). By 1960-61, Spain*s foreign exchange situation had improved considerably, but sizable imports under P.L. 480 continued. This contributed greatly to rapid improvement in the country* s financial condition and put Spain in the position to shift to an important commercial purchaser with the termination of the aid program in 1962. In the absence of a P.L. 480 program during 1955-59, however, it is unlikely that the government would have permitted domestic prices to rise to excessive levels. Restraining rapid price fluctuations of basic commodities was an essential element of government policy. For example, there were rationing regulations and strict controls over the marketing and pricing of olive oil during periods of shortages prior to the aid programs. Throughout the fifties, government regulation of the domestic olive trade was gradually reduced with the government reserving the right to intervene to prevent prices from exceeding reasonable levels. Since aid imports provided the country with a greater supply of edible oils and other commodities than would otherwise have been possible during 1955-59, it appears that the aid programs made it possible for the government to relax its control over domestic prices and marketing and hastened the country* s transition from an aid recipient to an important commercial market for agricultural products, particularly vegetable oils, oilseeds, and grains. Trends in Agricultural Production Total agricultural output increased 42 percent during 1952-65. Most of the increase occurred since 1958 when food production increased at a faster rate than population (table 24). The largest production gains were made in cotton, corn, and livestock products. Wheat, barley, oats, and olive oil showed no trends (table 25, fig. 5). The available evidence indicates that concessional imports under P.L. 480 and MSP were not allowed to interfere with the domestic production of olive oil, grains, cotton, or tobacco (6^, pp . 64, 66-7, 69, 78, 86-7, 106-14, 122, 308). Since 1950, production of olive oil and other vegetable oils has been insufficient to meet the increased demand. During 1955-61, aid imports of soybean and cottonseed oil supplied 27 percent of domestic consumption and accounted for 47

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Table 24. --Spain: Indices of production and yield of selected agricultural commodities, and of total agricultural 1950-65 i— 1 . cO cO CO CO rH o CM ON CM 1". NO CO ON o O in ■ — ^ 4-1 4J • • 00 00 ON 00 ON ON ON O o o i—i CM i—l 1—4 1 . — 1 •H O d d i—l 1 — 1 1—4 i—i i—l i—l i—l o a H i-l /-V CO a o o o • • r— i r— 1 S-I T3 CO cO r-'* I— 1 l"o 00 vO 00 o o00 I""00 CO II aj O • • ON ON ON ON ON ON ON o ON o o 1—4 ON o S-i On CU o d d 1—4 1—4 1—1 1—4 1—4 3 UO pH 4-1 1 i-i p3 in O O' 1 — 1 • •H rH cO CO cO NO NO 1^. ro NO I"' r^uo 1 — 1 <1ON NO CM 4-1 • 00 00 00 00 ON ON ON o o 1 — 1 i—4 CM 1—1 CM toO o d d i—4 1—4 i—4 r—4 r—4 1 — 4 i — 1 c0 d H o rH «H CO 4-1 •U O • O 3 T3 C0 CO ON in 1 — 1 o NO r'NO CM l'ON uo 1—4 00 H T) O • 00 oo ON 00 ON ON ON o o o o CM r—4 1 — 1 O d d 1—1 r—4 t—4 1—4 t—4 r—4 T— | Pm o o <1CM CO m m 00 00 CM m NO NO ON in 4-> >-i i cO 'Cf-0" 00 o NO 41) o 0) 00 I — 1 o 00 1—1 ON ON i—l o o 00 00 i—i i—l ON o CO m x: I — 1 T— 1 i—4 i—4 r—4 1—4 t—4 i — 1 r—4 ON • i — t S-4 toO < CO o >— 1 iH m 00 CM m CO NO m NO NO ON U0 t—4 00 0) Vi o •H -H m ON ON 00 i-" o ON ON CM CO ON ON NO uo 00 • p •H i— 4 O «— i i—4 i — 4 i—4 1—1 > 4-1 o CJ as CO 3 co • T3 p O >N . S-i Cl) 00 i — i m CM 1 m in in in m m m in m UO NO vO NO NO NO NO i-l|CN| CO ON On ON ON ON ON ON ON ON ON ON Ov ON On ON ON i— i i-4 t—4 i-H t—4 1 — 1 1-4 1-H rH l—l i—l l—l l—l 49

Table 25. --Spain: Production, acreage, and yield of selected agricultural commodities, 1950-65 Crop : Grains Cotton : Tobacco Olive oil year : Wheat Rice : Corn ’ Barley : Oats : PRODUCTION _ W UlCLi.1V, LU11D' 1950 : 3,402 299 599 1,502 506 6.4 15.5 181.4 1951 : 4,763 302 650 2,143 540 6.8 20.0 698.5 1952 : 4,627 324 686 2,230 547 14.8 26.0 278.0 1953 : 3,402 389 742 1,590 443 17.0 30.7 330.0 1954 : 4,899 361 749 2,205 526 20.7 34.0 303.9 1955 : 3,991 389 686 1,718 540 33.7 31.4 263.1 1956 : 4,196 384 714 1,551 452 48.6 25.3 381.0 1957 : 4,900 402 771 1,881 535 38.1 26.3 340.2 1958 : 4,545 375 916 1,777 519 41.6 21.5 345.0 1959 : 4,627 386 1,001 2,050 560 64.9 22.0 450.0 1960 : 3,538 361 1,016 1,566 300 71.8 29.9 499.0 1961 : 3,266 394 1,067 1,744 472 105.6 32.1 340.2 1962 : 4,431 392 920 2,162 513 111.0 23.7 327.6 1963 : 4,860 399 1,171 2,070 466 96.8 24.9 590.7 1964 : 3,966 398 1,203 1,600 381 77.2 25.1 200.0 1965 : 4,500 377 1,155 1,391 346 80.6 31.6 314.0 ACREAGE 1 ,uuu acres 1950 : 10,080 143 990 3,820 1,546 78 28 1951 : 10,413 151 990 3,815 1,550 110 37 1952 : 10,531 160 1,000 3,954 1,483 150 43 1953 : 10,517 169 1,025 3,964 1,527 175 50 1954 : 10,526 175 1,000 3,963 1,502 267 55 1955 : 10,593 166 925 3,990 1,505 406 49 1956 : 10,860 162 911 3,892 1,251 494 49 1957 : 10,818 165 925 3,781 1,448 433 49 1958 : 10,786 160 939 3,739 1,432 417 43 1959 : 10,791 165 964 3,706 1,396 557 44 1960 : 10,462 163 1,058 3,529 1,374 618 44 1961 : 10,587 153 1,038 2,866 1,236 805 47 1962 : 10,507 156 1,097 3,580 1,357 855 47 1963 : 10,474 155 1,203 3,576 1,300 650 41 1964 : 10,223 158 1,270 3,388 1,225 490 41 1965 : 10,447 143 1,191 3,511 1,206 490 48 YIELD PER ACRE ■p ^ i i ■ r OUilQ S 1950 : 12.4 102.4 23.8 18.1 22.6 103 1,220 1951 : 16.9 103.3 25.9 25.8 24.0 153 1,192 1952 16.0 99.2 27.6 25.9 25.4 213 1,332 1953 : 11.8 112.9 27.3 18.4 20.0 187 1,355 1954 : 17.1 100.9 29.5 25.6 24.1 176 1,363 1955 13.9 114.7 29.2 24.2 24.7 190 1,402 1956 : 14.2 119.9 30.8 18.3 24.9 225 1,130 1957 16.6 121.7 32.3 22.8 25.5 200 1,138 1958 15.4 114.9 38.4 21.8 25.0 220 1,185 1959 : 15.8 117.4 40.9 25.4 27.6 254 1,102 1960 : 12.7 118.8 37.8 20.4 21.6 256 1,504 1961 : 13.2 124.0 41.7 24.2 26.3 298 1,501 1962 16 . 8 123.2 33.0 27.7 26.0 290 1,404 1963 : 17.0 126.0 38.3 26.6 24.7 329 1,346 1964 : 14.5 123.3 37.3 21.7 21.4 348 1,351 1965 : 15 . 8 127.9 38.2 18.2 19.8 362 1,438 Source: U.S. Dept. Agr., Foreign Agr, . Serv. 50

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51

about one-third of domestic production of vegetable oils, primarily olive oil. The P.L. 480 study concluded that during 1955-61, almost two-thirds of aid imports of soybean and cottonseed oils supplemented domestic supplies or covered the deficit between national production and domestic requirements. The remaining one-third substituted for domestic olive oil and thereby enabled the country to export olive oil. It is unlikely that olive oil production would have been significantly greater had there been no P.L. 480 program. Although domestic olive oil prices might have been higher in the absence of a P.L. 480 program, higher prices probably would not have stimulated domestic production in the short run. It takes many years for newly planted olive trees to reach full production. Also, even in the long run, higher prices alone might not be much of a stimulant to the expansion of production. Since the early fifties, there has been a steady rise in domestic olive oil prices, both absolutely and relatively. Despite favorable prices, the area planted to young olive trees increased at a declining rate during the fifties. Thus, the P.L. 480 study on Spain concluded that the . . . influence of prices in the long run is growing weaker, at least with regard to the extension of land surface dedicated to olive-growing .... the development [increase] of mill olive prices is not a sufficient incentive to reverse the process of steadily diminishing expansion in mill olive growing (j>, pp. 59-60). Also, it is probable that the government would have instituted controls to restrain excessive rises in domestic oil prices in the absence of the P.L. 480 imports of soybean and cottonseed oil. An article published in December 1961 by the Banco Central in Madrid stated that a price increase by itself is not sufficient to bring about a substantial increase in production; • it must be accompanied by improvements in basic farm organization, in the distribution and marketing system, and in farm techniques. The author compared changes in agricultural production of principal food and industrial commodities in Spain (such as grains, olive oil, and livestock products) with farm prices. He found that there is no parallel between developments in prices and those of production; there is even a considerable disparity. For example, the lowest figure in the rate of increase of the price index--indus trial crops--shows the highest production figure, and the highest price index-~potatoes--has the lowest production figure (32, p. 6095). Production of the crops he examined increased, in general, less rapidly than prices. Even when there was an important increase in production of a commodity handled largely by free trade, such as poultry, the author found that organizational elements (compensating duties on grain fodder) explained the increase better than prices. The author concluded that price is an important factor, but not always a decisive one in stimulating production. Attention must also be given, he said, to all the structural and technical aspects of agriculture and the general economic framework. 52

The stimulus of high prices, especially under the free trade system (where there are extreme seasonal price variations), does not seem to be sufficient to achieve any substantial advance in production, and indeed it would be ridiculous to use it as a long-term measure (32, p. 6098). Wheat acreage and production remained rather constant during 1951-64, but yields fluctuated widely because of variations in the weather. Wheat was imported under aid programs in only 3 years over the period of the entire aid programs, 1954-61. Only in 1960 did wheat imports represent a significant amount--12 percent of domestic production. The government, through a semiofficial agency, has completely controlled the wheat industry. The P.L. 480 study concluded that since Spain had sufficient foreign exchange reserves in 1960 and 1961, the government would have imported approximately the same amount commercially as it did on concessional terms. The study also found that because of the periodic need for imports and the nature of the controlled wheat economy, wheat imports, whether they were on concessional or commercial terms, did not discourage domestic production (6^, pp . 148-53, 158-61, 309-10). The main effect of imports of feed grains under P.L. 480 was in contributing to the better use of the country fs agricultural resources (6^, pp . 188-9, 204, 309-10). During the period of concessional feed grain imports (1955-61), there was a decline in barley acreage of approximately 89,000 hectares on unirrigated land and an increase in corn production of about the same amount on irrigated land. There was also an increase in barley yields. Corn cultivation became more profitable relative to the barley, due to the following factors: (1) An increase in the price of corn relative to that of barley, as corn consumption grew at a rate five times faster than barley; (2) expansion of the irrigated area devoted to corn; (3) increase in the use of fertilizers; (4) increase in the use of agricultural machinery; and (5) more widespread use of U.S. hybrid corn under the aid program. In the absence of P.L. 480 feed grain imports, there probably would have been a shift in acreage from barley to corn, because corn is a more profitable crop, especially on irrigated land. However, it is likely that, due to the country* s deficit in barley production, the shift in acreage would have been restricted. Therefore, Title I barley imports facilitated and encouraged the shift from barley to corn. The P.L. 480 study in Spain concluded that the transfer of land from barley to corn was desirable, because it made possible a better use of resources. Although cotton imports under P.L. 480 and MSP accounted for almost one-third of Spain* s total cotton supply from domestic and imported sources and about 79 percent of domestic production between 1954 and 1962, these imports did not slow the development of national production (J5, pp . 257-9, 262, 269, 284-5, 291-3, 311-2). After the early 1950's, a significant expansion occurred in output, acreage, and yield. Production increased from 14,000 tons in 1952 to 77,000 tons in 1964. This expansion was accomplished through seed improvements, extension of irrigated land, greater use of fertilizers, better production practices, extremely high subsidized prices, and a strict system of government protection and controls. 53

Concessional imports provided the textile industries with a greater supply of good quality low-priced cotton than otherwise would have been available had there been no program. Therefore, P.L. 480 and MSP imports contributed to better utilization of the industry* s productive capacity and to the continuation, and later expansion, of textile exports. Tobacco is under strict government control and protection. During 1955-61, P.L. 480 imports averaged about 8 percent of domestic output, which remained stable after increasing in the mid-fifties. Spain*s inability to supply more than half of its needs from domestic sources has been due to indigenous factors. Imports of tobacco have been necessary to meet the domestic requirements. Agricultural Development By increasing supplies of corn and barley in 1952-62, the aid program contributed to a sharp expansion in production of poultry and livestock products, despite a decline in livestock numbers from 1952-62. Greater supplies of good quality feed grains made it possible to improve the quality of livestock diets and to increase the quantity of feed per animal. The increase in feed grain supplies came both from an expansion of domestic corn production and from supplemental imports under concessional import programs. The government sold aid imports at prices below domestic farm prices as a means of subsidizing livestock and poultry industries and preventing excessive increases in the price of domestic feed to livestock producers (j3, pp . 227-31, 310). Concessional imports also assisted the expansion of the mixed feeds industry. The growth in mixed feed production required larger quantities of barley, corn, and soybean meal than could have been obtained from domestic sources or commercial imports during this period. The increased feed output was an important factor in the increase in production of livestock and poultry products. Part of the local currencies collected by the United States from the sale of Title I commodities in Spain were used to promote agricultural development. From 1955 to June 1966, the peseta equivalent of $184 million of local currencies generated from Title I sales were loaned to the Spanish Government. Over two-thirds of this amount was used for projects aimed at raising agricultural productivity. The principal projects included irrigation, land consolidation, reforestation, watershed control, and soil conservation. These Title I loans provided supplementary funds for agricultural projects, which probably would have been delayed in the absence of the program. Conclusions - Spain Stringent government controls over agricultural production, prices, marketing, and foreign trade insulated domestic producers from the competition of lower cost or lower priced concessional or commercial imports. The profits accruing to the government through its resale of low-cost agricultural imports at the higher level of domestic prices were available to help finance domestic agricultural price and development programs. The availability of concessional imports under the aid programs made it possible for the government to import far larger quantities of agricultural commodities than it could have purchased on a commercial basis because of the severe 54

shortage of foreign exchange, particularly prior to 1960. By obtaining these agricultural imports on concessional terms, primarily under P.L. 480, greater stability in agricultural and food prices were achieved. Instead of the government resorting to more intensive marketing, price, and trade controls, the stage was set for gradual relaxation of controls, which began in the early 1960's. The Spanish study on the effects of P.L. 480 and other agricultural aid imports concluded that the imports of grains contributed to more efficient use of agricultural resources by enabling the country to concentrate on increasing the production of corn, the expansion of commercial livestock and poultry industries, and the development of the commercial feed mixing industry. The imports of cotton on concessional terms facilitated recovery and development of the textile industry and the imports of cottonseed and soybean oil made it possible to offset shortfalls in olive oil production. In both cases, the impact of these commodity imports were beneficial in raising domestic consumption levels and in terms of both short and long term improvement in the country's balance of payments position. Also in both cases, the commodity imports were managed in a way to avoid interference with domestic production. And in the case of vegetable oils, consumers became amenable to their use, particularly in blender with olive oil, which opened the way for Spain to become a major commercial importer of United States vegetable oilseeds, particularly soybeans. 55

ISRAEL Israel imported $279 million of P.L. 480 Title I commodities during 1955-64, and was the largest recipient on a per capita basis. Feed grains accounted for 36 percent; wheat, 34 percent; oilseeds, 12 percent; and the remainder (consisting mostly of dairy products and smaller amounts of rice, cotton, tobacco, and meat), 18 percent. Israel has increased its commercial purchases of agricultural commodities since 1960, but P.L. 480 imports continued to be important after 1960. Concessional imports during 1954-64 were larger compared to domestic production than in most other Title I recipient countries (table 26). Imports of wheat and feed grains under Title I and MSP exceeded domestic output by an annual average of 11,000 and 6,000 tons, respectively. Title I imports of oilseeds averaged approximately 37 percent of domestic production of refined vegetable oils, while cotton imports averaged 12 percent of domestic output. The government controlled the distribution of Title I imports to promote its policies for expanding production and developing agricultural processing enterprises. In contrast with Turkey, Colombia, Greece, and Spain, the Israeli Government used Title I imports to help stabilize domestic prices at levels low enough to make it possible for the government to relax price and marketing controls. Agricultural Price Policies The government has exercised rigorous controls over agricultural production, marketing, consumption, and prices since it was established in 1948. Because of extreme inflationary conditions, the government instituted wholesale and retail price control and rationing in the early 1950's for bread, vegetable oils, beef, rice, dairy products, and feed grains. Controls were gradually relaxed, and by 1962 rationing and retail price controls had been abolished for most commodities. The government also has regulated prices and marketing at the farm level since the early 1950's (28.). Three types of price guarantees to producers have been used: (1) minimum support prices for vegetables, poultry, meat, peanuts, and certain fruit, whereby the government agrees to purchase these commodities at set prices; (2) fixed prices for sugar, cotton, wheat, and feed grains, whereby the government requires processors to purchase a specified amount at fixed prices which usually are subsidized by the government; and (3) marketing and price agreements for dairy products, through which the government sets production quotas to restrict supplies and uses subsidies to establish "reasonable" prices . Price and production controls on agricultural commodities have been administered through some 12 production and marketing boards, which in 1964 covered 85 percent of the total value of agricultural commodities marketed. These boards are controlled mainly by producers, although each board includes government representatives who insure that the boards' activities conform to government policy. There are no boards for grains, producer sales of which are subject to direct government control. 56

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c o •iS 4-1 O 3 X O is fa U •rS 4J CO CD e o X CO 6 CO u 00 o u fa u pi o <0 c/3 st CO P Pi i P st pi m £ oj X C is O fa B •H -a Cl) 4J o CD I— I CD C/3 4-1 i—l O st cO c CO 1 CO CO CO CO u st m cO w CD CD X X CD CD a Ov C P 1 • X CD X X n i— i cO 4-1 1 00 Pi C CD pi c OV CD CD • C CD X T— 1 •H X T— 1 Pi m 1—1 P CO P •H 00 o O 14-1 cO O OM U • • >v CO CN is c ’ — 1 1 CO CO c CD is G CO 1 — i cO B O CD CO c is fa! M fa H M 4-1 PQ cO C/3 p CD CD •H CD c • n is i— i >s 00 St in P 00 ON o i — 1 CN CO St > *- - — - — . 3 CO 00 — ^ — P CD in m m in in m X vO P P vO < 1—1 1 | CN | co| st| |m| o c vO| o I — 1 CX3 1 CO P ON OM OM OM On OM OM OM OM OM B o u H i— 1 i— i !— 1 1— 1 1—1 i— 1 1 — 1 1 — 1 l — 1 i — 1 r— 1 cO 4-1 fa o o o uo CN 00 c *» •h r". £ >P O OM o •« MS CO c CD O p 4.) ■ X O is > c o CD is cO rv X . CD O G CO C/3 a G 4-4 CO i — i is • d CO o is . o r\ p • fa 00 CO •H P C CO B < •H P m 3 C •H CO CO ov o O C CO C i — i B P is 00 p O cO O •H X • A O MS CD 4S CO 00 o is is w d c o iS O O M o •H n cO fa fa H p £ o CD e o st >1 n •H CD o 1—1 . 1—1 o T— 1 A i—l is c 4J o o cO 00 CO •H A MS uo O <3 H 1 — 1 Ov CO C 1 — 1 CD i— 1 •H • o X 1—1 P MS 4-1 C P X fa CD cO A G MS CD i — i UO X CO O Q P W uo c cO M OM CO • A X . i— i i — 1 CO c CO •H CD M c CO • cO 1—1 . A o p > 4-J CO CD p C cO •H C 1—1 O B EH O 4J o *iS o 4S P •H o 4-1 is O is EH o O MS c CD O 3 X O O o • X CO (D d o 00 CN H o P is pi A st is I cO p A

The government is the sole importer of meats, wheat, and vegetable oils, and all Title I imports of dairy products. Commercial firms import feed grains, cotton, rice, and tobacco, but are subject to strict licensing and other government regulations. Agricultural Prices and Production Policies During 1949-59, most farm prices and retail prices of food rose continuously (table 27). On a deflated basis, retail prices of most foods, and farm prices of feed grains and livestock products, rose less rapidly than other prices in 1949-51. This period was marked by strong demand for food, extreme inflation, and limited food supplies. Strict rationing and price controls limited the rise in food prices. The next 3 years were marked by currency devaluation and the beginning of relaxation of controls. Agricultural prices rose to levels more consistent with actual supply and demand conditions and advanced faster than prices generally. During 1955-59, food supplies were increased by the availability of Title I imports and expanded domestic production of some commodities. Although most controls were abolished, food prices rose at a slower rate than other prices. The greater price stability resulting from Title I imports enabled the government to abolish price controls and rationing considerably sooner than would have otherwise been feasible. In fact, the transition away from price controls and rationing began in 1954, the first year of Title I imports (47, pp . 60, 64-6; 31, pp. 120-2, 131-3, 137, 179, 183, 195-6, 242-5). Title I wheat imports led to increased supplies of white bread, prices of which declined relative to standard bread, even though the demand showed a greater increase. Title I rice imports enabled the government to abolish rationing and price subsidies on rice in 1958-59. Since then, the government has sold rice to wholesalers at fixed prices which have been more consistent with actual conditions, while free market prices have declined. Title I imports of feed grains and oilseeds led to derationing of these products in 1953-54 and 1958-59, respectively, and a substantial decline in free prices relative to official prices (31, pp. 4, 16, 17, 51, 95, 128, 281-2). Total agricultural production almost tripled between 1954 and 1965, while per capita production rose substantially (table 28) . Production and yields of wheat and feed grains increased between 1950 and 1954, and then remained fairly constant until 1964, when there was a substantial expansion (tables 28 and 29). Oilseed production rose slightly over the period and cotton production, which began in 1953, expanded rapidly (fig. 6). Production of animal products and citrus fruits--which were not imported under Title I--increased considerably after 1950. The assurance of a continuous flow of Title I imports provided the government with greater flexibility in planning for more profitable use and desirable long-range development of the country* s agricultural resources. Before the Title I program, the lack of a continuous flow of imported raw materials, in certain cases, prevented the full and efficient use of productive resources. Title I imports enabled the government to maintain an adequate level of stocks, thus making it possible to more fully utilize the nation* s productive capacity and to develop profitable local processing industries. 58

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Table 28. --Israel: Indices of production and yield of selected agricultural commodities, and of total agricultural production, 1950-65 i — l CO c CO 4-1 o 4-1 < 3 •H •H H 4-1 Pu o CO d o TJ o \ 5-i T 3 5m col CD O a Pm O /-N pM T— 1 O cd o U 1-* d II 4-> ON i-M i—4 LO cO d 1 4-1 a r— O •h m H 5-i cr. 00 i — i cd ^ i-4 c0 4-J 03 O O H O Pm d O 4-1 4-1 CN | O O 03 CD T— 1 r— 1 CD 54 •I— 1 CO >4 CO PQ C /^N •H o CO • • •• o 5-i I— 1 O 4-1 II CO > PM CD T— 1 5m cO CO PQ d •H cO • # .. U o 4-1 CO (D XI a 5 -4 O cO 5m CD O ! . . cO CO co cO 00 o T— 4 M± o CO o 00 ON • • • * i"00 00 00 o t-M CM CM CO CM CO CO d n n d 1 — 1 ! 1 t-H 1—4 i-M r—4 t-M t — 1 co CO CO co ON I — 1 m in 1-4 CO 00 00 m in <1CO • • • . r-. 00 00 00 o r-M r-M 1—4 CM CM CO CO d n n d 1 — 1 l — 1 l — 1 1 — 1 i-M i — i t — 1 1 — 1 co a a cO NO o nr—4 i—l 00 r— -dON CM o 00 • • • • NO r-» 00 o' 1 — 1 CM CO M± m p". pd u u d 1— 1 1 — 1 ■ — i t-M 1—4 r-M t—4 i-M co a a co r-. i—4 oo CM 1—4 r-* m o ON NO I—l • • • • NO nr-» 00 o i— i CM co NO p^ d n n d 1—1 t—4 r—4 1—4 i — 1 l — 1 1—4 i—l i i i in ON 00 00 o CM ON NO ON o CO CO NO i ! 1 cn CO CM ON r—4 o CO CO i—4 CO NO ■ 1 1 i — 1 l-M 1 — 1 1 — 1 i—l r-M t-M t-M i—l I — 1 1 — 1 <1x co in 1 — 1 ON CM r^. m in o ON ON NO 00 ON CO NO 00 i — i 00 <1- oo CM nr^. 00 o CO iv cn cm CO r^Mt m NO nCM i — | ON CM o •dCO • < cd On O o i-m CM m 00 i—4 m -dr-'. r^ON CO i — i CD o 1—4 1 — 1 t— i r—4 CM CM CM CM i — i i-m t—4 t—4 in CO o m 4M T— 1 4-1 o CO II a d CD NO CD d3 r-t m Q II iM r—4 CO • . a m co cd d ON . • M r— 1 X d o i—l CM cn -clm NO n00 ON o t—4 CM CO

Table 29. --Israel: Production, acreage, and yield of selected agricultural commodities, 1950-64 Crop year Grains : : Oilseeds 1/ : Wheat : Barley Cotton PRODUCTION AAA - j « uuu metric tons——— 1950 .. . . . : 27 37 2 1951 .. ...: 21 28 — 3 1952 .. ...: 31 91 — 2 1953 .. ...: 30 65 2/ 3 1954 .. . . . : 34 91 1 2 1955 .. . ..: 36 44 2 2 1956 .. . . . : 74 85 3 2 1957 . . . ..: 83 74 4 4 1958 .. ...: 63 54 5 2 1959 .. ...: 73 65 7 3 1960 .. ...: 41 26 11 4 1961 . . ...: 52 44 15 6 1962 .. . . . : 50 48 16 6 1963 .. . ..: 55 37 14 2 1964 . . ...: 126 117 16 3 ACREAGE 1950 .. . . . : 95 123 1951 .. . . . : 105 151 — 1952 .. . . . : 80 200 — 1953 .. . . . : 85 205 2 1954 .. . . . : 80 195 2 1955 .. ...: 125 155 6 1956 .. . . . : 145 145 14 1957 .. . . . : 150 114 12 1958 .. . . . : 130 128 15 1959 .. ...: 137 126 17 1960 . . . . . : 135 135 25 1961 .. .. . : 106 136 39 1962 .. ...: 119 150 40 1963 .. . . . : 129 163 31 1964 .. . . . : 138 181 31 YIELD PER ACRE --Bushels Pounds 1950 .. ...: 10.4 13.8 1951 .. ...: 7.5 7.6 — 1952 .. . . . : 14.1 23.4 — 1953 .. ...: 12.8 15.6 240 1954 .. ...: 15.6 21.5 960 1955 .. ...: 10.6 12.9 880 1956 .. ...: 18.8 26.9 680 1957 .. ...: 20.3 29.8 760 1958 . . ...: 17.7 19.2 704 1959 .. ...: 19.7 23.7 960 1960 .. ...: 11.1 8.9 941 1961 .. ...: 18.9 27.0 825 1962 .. ...: 16.0 14.7 900 1963 .. ...: 15.6 11.3 960 1964 .. ...: 33.7 29.6 1,115 1/ Includes sesame and sunf lowerseeds . 2/ Less than 500 metric tons. Source: U.S. Dept. Agr., Foreign Agr. Serv. 61

ISRAEL: INDICES OF PRODUCTION, AREA, AND YIELD OF AGRICULTURAL COMMODITIES % OF 1950-54 % OF 1950-54 WHEAT ■•■> Production — Area - Yield 50 “1 1 OILSEEDS £ ln,i I ! I 1 ! s «r m » I i 5% .f !> > 1 1 * / Is/ f. s/ s : 5 : m m s s 5 / f % \nu — I— I. 1 1 / Iiiii ? i i i i 200 BARLEY A M rAA *\ f V *» n J | f ! — — — fjr n^\ 1 1 1 1 L, 1 -LJf 1 1 1950 1955 1960 1965 1950 1955 1960 1965 * INCLUDES SESAME AND SUNFLOWER SEEDS. U. S. DEPARTMENT OF AGRICULTURE N EG. E R S 5962 - 69 ( 4 ) ECONOMIC RESEARCH SERVICE Figure 6 62

Agricultural Development Increased supplies of grains and oilseeds from Title I imports contributed to an expansion of the flour milling, edible oil, and feed mixing industries and to the construction of grain storage facilities. Before 1955, the lack of suitable storage facilities for grains and oilseeds, irregularity of supplies and the low level of stocks discouraged the building of additional facilities. The regular flow of supplies under the Title I program during 1955-60 resulted in increasing storage capacity for grains by one-half. Part of these facilities were financed by local currency loans from the sale of Title I commodities. Almost 30 percent of these loans were made to private firms. Most U.S. grain shipments now pass through grain elevators built with the aid of Title I loans. The Israel study concluded that Title I imports allowed for additional investments amounting to approximately two-thirds of the value of the imports from 1955 to 1960. This made possible an increase of about 2 percent in gross national product in 1961. Title I imports were particularly important to development of the livestock industry (31 , pp. 212, 232-66). In the 1949-54 period, all locally produced grains had to be sold to the government at fixed prices. Government stocks of indigenous grains, and all imported grains, were allocated at controlled prices to livestock producers, who also had to market their products at prescribed prices. Since feed prices on the free market were considerably higher than official prices, the majority of livestock producers could buy only a limited quantity of feeds. Beginning in 1955, Title I imports provided the country with an adequate and continuous supply of feeds. The government permitted decontrol of grain prices and allowed official prices to drop to a lower and more stable level. Free prices declined from as much as 50 percent above government levels to near official levels. It is estimated that livestock production increased 15 percent more during 1955-59 than it would have without Title I imports. Profitability of livestock production also increased. The assurance of concessional imports encouraged the government to conclude a poultry agreement with producers to supply necessary quantities of grains at stable prices. The agreement was a further stimulation to expansion of the industry. Conclusions - Israel The government controlled the distribution of Title I imports to promote its policies for expanding agricultural production and developing agricultural enterprises. The assurance of a continuous flow of Title I grains, oilseeds, cotton, tobacco, and meat provided flexibility in planning for more profitable use and desirable long range development of the country* s agricultural resources. The imports of wheat, feed grains, and oilseeds avoided the pressure of shortterm self-sufficiency measures to divert resources to expand the domestic production of these products. This facilitated progress in the development of more intensive enterprises such as fruits, vegetable crops, and cotton on 63

irrigated land which were more suited to the country's agricultural resources than grains and oilseeds. During the 1955-65 period, total agricultural production almost tripled while per capita production rose substantially. By facilitating the stabilization of food prices at levels lower than otherwise would have been possible, the food aid program enabled the government to relax its rationing and price controls. In addition to encouraging the more efficient use of agricultural resources, the food aid program contributed significantly to (a) the development of milling, feed mixing, edible oils, and livestock industries; and (b) the construction of increased storage facilities for grains and edible oils. These developments were not only timely but resulted in a permanent positive effect on gross national product, employment and income. 64

INDIA India received more Title I commodities than any other country during 1955-64, though the per capita value was relatively small. Of the $2.5 billion total, wheat accounted for three-fourths; cotton, 11 percent; rice, 9 percent, and corn, tobacco, dairy products, and soybean oil, the remaining 5 percent. Concessional wheat imports were over one-fourth of domestic output during 195464, and reached 60 percent in 1964 (table 30). Title I imports of rice, corn, cotton, and tobacco were only negligible shares of domestic production, thus their impact on the nation* s agriculture was small. Government Price Policies Since World War II, the Indian Government has used an extensive range of measures to regulate and control agricultural prices, consumption, and marketing (54, pp. 2, 50, 57-67, 135, 201-2; 37_ , pp. 163, 167, 170). Title I imports were distributed and priced within this framework of controls and to a large extent were used to promote its policy of stabilizing food prices. In general, the objective of agricultural price policy has been to maintain a "reasonable" level of consumer prices. Measures used by the central government to prevent exorbitant price rises during periods of shortages and general inflationary pressures included: (1) Rationing of food grains and sugar; (2) restrictions on the movement of food grains, sugar, and cotton between interstate zones; (3) distribution of government stocks of food grains to consumers at fixed prices through fair-price shops (about 150,000 in June 1967); (4) licensing of food grain and cotton wholesalers operating on the free market; (5) setting quotas for cotton textile and jute mills; (6) requiring that roller flour mills buy from government stocks and sell their products at set prices; and (7) regulating forward trading in oilseeds (37 , pp . 168, 171-2, 188, 191-2; 27 , pp. 23-9; 54, pp. 83, 90, 101; 3_5, pp. 5, 7-11, 18-20). State governments used similar measures to stabilize agricultural prices. Although domestic prices policies have been consumer-oriented, the government has given some price support to producers in the following ways: (1) Since 1943, setting floor and ceiling prices for main varieties of cotton; (2) since 1948, setting minimum prices for sugarcane purchased by mills; (3) in certain years since 1954, procuring grains from producers at fixed prices; and (4) since 1949, setting minimum prices for raw jute. Until 1964, price support policies generally were limited and designed more to meet emergency situations of declining farm prices than to stimulate production (37 , pp. 167, 178; j), p. 34; _33, p. 51). Price supports to producers for most commodities also were held at relatively low levels, primarily because of administrative difficulties, the costs of high price support programs, and a general lack of storage facilities. In 1965, the government announced a basic change in its grain price policies. Adequate incentives to producers were made a major policy objective and price supports were increased considerably (27) . 65

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Table 30. --India: Selected P.L. 480 imports related to domestic production, 1954-64 QJ i 00 i m vO 00 00 ON 00 o c0 \ 1 00 CJv CN 00 ON <1-1 m cn 5-i cn| i VO T— • O i-i 0) a A A > 1 On CNI r^< 1 » O 1 CNI vO CO N X A 1—1 Pi—l no ml i •H •elr» CN i r4 H in co ON o tn CO 1-4 r-4 •H C 44 *H CO E co 00 CN r-4 1-4 44 B co ON 1—1 1 CO 4-1 44 i CO 1 1 00 1 i CL O 54 i CN 1 1 -d- i i O 4-1 (0 i 00 1 1 CN 1 i 54 54 CO x) o o 54 G CL cO G 44 6 CD O *H >N CO 4-1 00 G 54 c i 00 1 1 CN 1 i G CO O G i m 1 1 r- i i •H 44 O i ON 1 1 CN 1 i C C B c o >1 CO •H T— 1 00 0) C 00 QJ 1-4 o c XI rO •H co CO 1-4 a> o •r4 "H 00 i-i > 5m cu CO co| CO CO CO 4-J 4-1 /■N 4-1 s ' — 1 1 54 4-1 54 4-1 54 4-1 o c o c o c to CL • 54 o CO CO QJ M-4 cn CO O G > 4-1 /■N 4-1 X 4-1 O CO QJ 54 4-1 54 4-1 CO O •H X O G o G G 4-1 G 4-1 CL QJ CL QJ 54 CO O g O g U CO aj c •H CO c •H 54 G •H 54 0) 54 o 4-1 QJ o QJ O QJ CO X O X •H O CL •r4 o CL G G 4-J 00 VM 4-1 00 X X M X X o

To stabilize domestic agricultural prices, the government also has established extensive controls and regulation of foreign trade of most commodities. Since 1943, the government has exercised monopoly control over all food grain imports and has controlled the internal prices of food grain imports at both the wholesale and retail levels. Other farm commodities, except soybean oil, can be imported by private traders subject to strict quantitative and financial controls (27 , pp. 2-14). Some commodities, such as cotton, are imported through both government and private channels. Since 1954, the government has subsidized the prices of imported food grains to permit lower income consumers to purchase them. Until recently, concessional and commercial imports of wheat and rice were issued to state governments, dealers of fair-price shops, and roller flour mills at prices below the costs of importing, distributing, and storing. The government also prescribes the retail prices at which the imported grains or their byproducts may be sold. The government subsidy on the sale of Title I imported wheat was 10 percent of the cost of importation and distribution in 1956-64, compared with 25 percent for imported rice in 1956-61 (table 31). In January 1965, the sale prices of imported wheat and rice were increased to levels which eliminated the subsidy on wheat and reduced the one on rice (29 , p. 14). In November 1965, the sale price of imported wheat was again increased to a level which, for the first time, slightly exceeded import costs. During most years, the wholesale and farm prices of wheat at major private markets far exceeded the cost of imported wheat or the sales price of Title I imports. For example, wholesale prices of indigenous wheat in Bombay during 1957-63 ranged from 10 percent to 78 percent above the import costs of Title I wheat. Nevertheless, the government subsidized imported wheat as a means of helping to implement its policy of stabilizing food prices in fair-price shops and of keeping general wheat prices from rising to higher levels. Agricultural Price Trends During most of the 1950-64 period, average wholesale prices of all grains and industrial raw materials, as a group, deflated by the cost-of-living index, were fairly stable (table 32). In general, grain and cotton prices lagged behind the rise in general prices, while prices of jute and oilseeds rose at a faster rate. Food grain prices passed through five stages, with corresponding changes in controls and regulations affecting marketing and distribution: (1) From 1948 to 1951, wholesale grain prices rose sharply as supplies declined, due to declining production and the loss of a major source of supply with the partition of India and Pakistan in 1947. Consequently, rigorous controls were instituted. (2) From 1952 to 1955, prices fell as production increased. Controls, such as rationing and restriction of interstate trade, were gradually reduced. 67

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Table 31. --India: Title I import costs of wheat and rice compared with domestic prices, 1955-65 1 1 on X 1 • • • 1 5-i c X M 1 O o p cu 4-» CO 1 1 O 1 O ri — 1 • • • . 4-1 X cd CO CU ?-i 1 1 • • 1 • • • cd cd cd CO a i-l O X X i T— 1 T— I 1 CO X • • • • CU • 4-J a w c CO CO CNJ CNj CNI G C g c X rH X X •X g O p c X cu 00 E-H -I-I o cd n| cd cd PL < Ei X cd CO c CO 00 PL cu. 00 CU c a CU •X 4-J CN| CU •H o PL cu 5-( 0o 1 1 1 1 1 1 o o in in 4-J o P X O Cl) P> . 1 1 1 1 | 1 . • • . P X o PL O P4 o 1 1 1 1 1 1 CO 00 00 X X lx PL -X 1 i — 1 1 — 1 \ — 1 r—l rH •H o r-'P 5-1 1 5-i c • CO PL 1 X 00 • 1 CO CO i — i X 1 •r4 •H 00 1 X) o N X •H X 1 CO 5-i X 00 X /-N CO PL 4-1 X| 1 1 rH i — i rH i — i (U CU < o o cd r\ PL CU 5-1 1 1 LO | i 1 i X X CO •X X X X O 4J 1 i — i rH r— 1 r— 1 tH i — 1 vO X X X X •H X X p X cu r\ 4-J PL CO 1 • . • . X PL cd o X p o 5-1 o cd o rH g o PL • • • a g PL PL X cd cu c o a p C • c o PL 5-i X o X CO cd e M X O cd p X CU m X 00 o o i— i CN CO n n in in in in X X X X X X H CN CO O in xl CO on on ON ON O ON O on on on ON •H t — i T— 1 i — 1 i — 1 i — 1 rH r-H rH I — 1 r— 1 i— i U 68

(1952-53=100) Grains : Industrial raw materials CO 4) H T3 \ < O CNI | | co co coo'd-r^fooomoo'oor^.r^oo co . • •HOO'HHHMPKtnn-O • C d C H H 1— I,— I,— 1^1— It— I,— I C co co covD— l'C>— T 1 T 1 T 1 . 1 T 1 T 1 . 1 I 1 ^-1 C inoocNmmini— i co co • • *0\00.— iCMOO co CO • • •OOCT'OOOO'— oo'00or^c^ooooo0i-idinmmcoN 0) r— I u G pa 0\On®NHHNHN^Hn(0N G ONCMOONr^vOONOt— l rl o O O' ^ « 1— ll— I 1 1 < 1 T 1 T 1 T 1 1 I C i— iO--iN Oi— icMcoJOiC00

(3) From 1956 to 1959, prices rose as a result of increasing demand due to population growth, a short grain crop, rising incomes, and greater urbanization. A number of early post-partition measures for checking price rises were revived. Since the government did not want to exercise as strict control over the food grain sector as it did immediately after partition, Title I imports were used to check price rises. (4) From 1960 to 1963, food grain prices were stabilized at a lower level, as supplies increased as a result of greater production and Title I imports. Price controls and market restrictions gradually were eased or abolished. (5) In 1964 and 1965, prices rose due to a severe drought and depleted stocks. Several price and marketing controls were applied. The government considered control of food grain prices vital to the success of its economic development plans (54, pp . 61, 64-9, 72, 74, 76-7, 120-1, 127-8, 135-6, 138, 199, 200; 3_5, pp. 18-9, 73). Government officials feared that development programs would generate inflationary pressures which might be most severe in food grains, as India was not able to produce enough for its increasing needs. The government relied on Title I imports to help stabilize wheat prices in the fair-price shops, but they were ineffective in holding wholesale prices of indigenous wheat down during periods of shortages. Zonal restrictions on the movement of wheat were eliminated with the signing of the 4-year Title I agreement in 1960, and were not revived until 1964 when acute food shortages occurred. Because Title I imports of rice were very small, the government tried to check rising prices primarily by reliance on zonal restrictions and other marketing controls (49; 37) . During 1950-63, wholesale prices of cotton declined relative to the prices of other industrial raw materials and the general price level. But cotton prices were high relative to cereals. As with food grains, the relative movement of cotton prices was not due to manipulation of Title I import sales prices but to various government price and marketing controls (37 , pp. 169, 191-4). The income-generating effects of P.L. 480 commodity imports tend to raise prices over the long run by contributing to economic growth, which in turn raises the demand for food. In the absence of P.L. 480, economic growth probably would have been discouraged by higher food costs and the necessity to use scarce foreign exchange to import essential commodities. Agricultural Production and Factors Affecting Expansion Food production and total agricultural production increased by almost one-third between 1954 and 1964, but dropped considerably in 1965 (table 33). Since population rose at about the same rate as production, there was little or no per capita gain. Grains account for almost two-thirds of total agricultural output and about three-fourths of the arable land. Among the grains, wheat and corn production nearly doubled from 1950 to 1965 while rice, the major grain crop, increased two-fifths (table 34). Production and yields of several principal cash crops-- jute, sugarcane, and oilseeds--also increased during 1950-65 (fig. 7). Production of wheat and rice increased less than domestic requirements as a result of population growth and rising incomes. 70

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1 1 . . * l cO cO CO cO cO CO oo o rH rrH CM uo 00 rH Mt UO CO c o 4-1 4-1 • • • ON o o ON o O O o o O o ON o 3 •H o g c c c rH rH H 1—4 rH 1-4 1-4 rH rH •H TO a H 44 O i — i cO o 54 o • • • 3 O- i'—n TO o 54 TO cO CO CO CO oo o H NO CN CM NO 00 1-4 CO of CM O .-4 o a; O • • ON o o ON o O o o o o o ON u Cfl iH PM O C c c c i-4 1-4 rH 1-4 rH rH i—4 t—4 t — i a 5-4 II 3 on »— • 4-i in g 1 — 1 1 u 3 r1— 1 • • • • 3 o m cO CO cO cO cO rH r» 'CICSJ i O r— 1 cO • •• 54 3 4-1 4-1 CO o 00 vt m CO 1—4 ON NO 00 I-o CM ON i — 1 I-'' t-4 O CD o as ON o o 1—4 o ON ON o o CM CM o o CM 3 o X T— 1 t— 1 i — 1 i-4 i-4 1—4 1—4 i—l t-4 r—l i-4 1—4 o i—4 12 •H II U a) m on & 54 4J on |H 0) O .-4 a 3 3 54 CD TO TO • •• CD Q O o CO 5-1 54 c o± ON ON n CM ON o o ON r~CO oU0 r-o a P4 54 r^00 o i — i t — 1 ON 1-4 CM CM CM CM co of x P3 4-1 o T3 14-4 4-1 •rH CD O cO m NO ON r^. < ctf 44 CO a •r4 . 4J (D TO 44 O o c a c X M 1 CD O II w a 54 . . co o cO C/3 CO CD CO 5-4 O) • • o o Oo X C 54 CD 3 1— 1 o rH CM CO

Table 34. --India: Production, acreage, and yield of selected agricultural commodities, 1950-65 Crop year Grains Cotton : Jute Sesame Wheat Corn Barley Rice PRODUCTION i j uuu uic l n c tons 1950 6,755 2,347 2,389 33,138 592 631 445 1951 6,829 2,817 2,523 33,967 677 899 452 1952 6,343 3,429 2,367 36,494 675 883 471 1953 7,613 3,621 2,928 44,712 846 594 563 1954 8,106 3,546 2,952 39,886 958 563 598 1955 9,146 3,123 2,980 43,054 823 806 464 1956 8,869 3,693 2,814 45,390 908 824 449 1957 9,504 3,780 2,863 39,848 963 742 360 1958 8,005 3,769 2,256 48,105 914 936 519 1959 9,957 4,069 2,651 47,232 718 836 365 1960 10,322 4,015 2,717 51,344 1,008 731 321 1961 10,992 4,312 2,866 52,263 882 1,152 372 1962 12,039 4,520 3,152 48,100 1,067 981 464 1963 10,830 4,553 2,423 55,388 1,132 1,072 439 1964 9,861 4,558 2,037 58,610 1,067 1,094 466 1965 12,268 4,632 2,523 46,500 1,001 814 465 ACREAGE 1950 23,082 7,613 7,654 74,252 14,556 1,376 1951 23,488 7,960 7,502 71,896 16,213 1,904 1952 22,825 8,688 7,613 72,225 15,693 1,769 1953 23,685 9,324 7,822 75,406 17,027 1,198 1954 25,741 9,035 8,505 74,144 18,684 1,212 1955 27,517 8,910 8,228 75,965 19,978 1,697 1956 »o»....». 29,804 9,057 8,237 77,788 19,893 1,860 1957 32,593 9,830 8,478 77,838 19,314 1,844 1958 28,269 10,457 7,396 79,848 19,926 1,766 1959 31,141 10,457 7,982 81,506 17,581 1,644 1960 ......... 32,542 10,774 8,140 82,947 18,871 1,516 1961 . ........ 31,154 10,862 7,724 83,669 19,226 2,209 1962 33,410 11,385 8,191 86,325 19,230 2,051 1963 33,748 11,238 7,468 88,026 19,600 2,092 1964 33,349 11,345 6,857 89,855 20,100 2,020 1965 ......... 32,800 11,572 6,592 89,000 19,800 1,928 YIELD T5 j . .1 It. 1 n 1950 10.8 12.1 14.3 21.8 90 101 1951 10.6 13.9 15.4 23.1 92 104 1952 10.2 15.5 14.3 24.7 92 110 1953 11.3 15.3 17.2 29.0 105 109 1954 11.2 15.4 15.9 26.3 114 102 1955 12.2 13.8 16.6 27.7 92 105 1956 ......... 10.9 16.0 15.7 28.5 101 107 1957 10.7 15.1 15.5 25.0 110 89 1958 10.4 14.2 14.0 29.5 101 117 1959 11.7 13.8 15.2 28.3 100 112 1960 11.6 14.7 15.3 30.3 117 106 13.0 15.6 17.0 30.0 101 115 1962 13.2 15.8 17.7 27.2 122 105 1963 11.8 15.8 14.9 30.8 127 113 1964 10.9 15.8 13.6 31.6 117 119 1965 ......... 13.7 15.8 17.6 25.8 112 93 Source: U.S . Dept. Agr., Foreign Agr. Serv. 72

73

In recent years, there has been considerable research on factors affecting agricultural production in India. Much of this research has been concerned with the level of agricultural prices and the response of producers to changes in product prices. In considering how food aid can be most effective in contributing to agricultural production, it is relevant to review some of the research conducted on the importance of agricultural price movements, the effects of food aid imports on product price levels, and the importance of commodity prices in relation to other major factors affecting the expansion of agricultural output in India. These findings should be valuable in the future programming of food aid to insure that these additional resources contribute as effectively as possible to the Indian Governments objectives of expanding food production. The changes in area planted to wheat and production of wheat in response to changes in the price of wheat were studied by the Gokhale Institute of Politics and Economics in India. Regression analyses were made for the five principal wheat producing areas, covering 1950-61. These five areas accounted for nearly 90 percent of the total area in wheat. In these areas, acreage increased over the 12-year period, while relative farm prices remained stable or declined (54, pp. 167-81). The conclusions from the regression analyses were: (1) . . . the statistical analysis . . . does not indicate any significant influence of relative price on the acreage under wheat (54 , p. 164). (2) . . . the price elasticity of acreage under different cereals in most parts of India is low . . . (54 , p. 201). (3) . . . internal production of wheat had a negative relation with price . . . (54 , p. 126). (4) . . . the statistical analysis did not reveal any significant relation of the supply of rice or other cereals with the price of wheat (54 , p. 127). (5) . . . agricultural production during the decade preceding 1961-62 was so dominated by extension of cultivation to new areas, particularly in the wheat growing States, that it is difficult to see any effect on it, of the large wheat imports under P.L. 480 through relatively lower wheat prices .... It does not appear that the relatively low wheat prices had particularly discouraged farmers from putting not merely a large part of the new land under wheat, but also from using the seasonal fallow land for the purpose (54, p. 165). Several other studies tend to support these conclusions. P. N. Mathur of the Gokhale Institute pointed out that from 1952 through 1961 "the percentage increase in area of wheat has been the largest for any important crop and no other major crop suffers that much price decline" (45, p. 69). S. P. Sinha of Bihar University found from his regression analysis that in the main grain growing areas: 74

. . . the relationships between the purchasing power of farmers* net yield per acre of rice, wheat, maize, and jowar and the acreages under these crops indicate a very small change in the acreage on account of the changes in the purchasing power of net returns (64, p. 97). He also found that . . . the correlation between price and production (of grains) is not significant (64, p. 98). Other studies comparing price and production changes from 1950-62 for crops in the Punjab area of India indicate somewhat more elasticity in the response of acreage to price (44, pp. 477-87). 11/ One study indicated that . . . though agricultural production in general is inelastic (in the Punjab), production of rice, wheat, and sugarcane was relatively more price elastic (41, p. 39). Sinha also recognized that the response of grain acreage to price changes was higher in Punjab and Madhya Pradesh than in other grain producing areas. However, he indicated the response was not a marked one and was probably due to the fact that these two areas are more commercialized than other regions. Land holdings are larger and more wheat is produced primarily for the market rather than for home consumption. However, even in the more commercialized areas, S. R. Sen of the Planning Commission, New Delhi, found that . . . there has not been any occasion since P.L. 480 supplies started in 1956 for prices to fall to such a low level as to discourage domestic production (60, p. 1034). As indicated earlier with respect to the other countries studied, the significance of price incentives is related in part to the degree to which production is for the market. In India, most farmers have small holdings and produce subsistence crops (food grains) mainly for home consumption. Commercial crops, like cotton, jute, and oilseeds, are grown primarily for the market. In 1961, the marketed surpluses (or the share of production sold from farm) of rice, wheat, and corn were estimated at 31, 33, and 24 percent, respectively, of the country* s total production, while the percentage for commercial crops was three fourths and upward of total output (8, p. 34). The ratio of marketed surplus of grains to production increases as the size of farm holdings increases, as indicated in table 35. Farmers who market only a small portion of their crop, as well as commercial farmers, are influenced in their production plans by economic, climatic, and institutional factors, such as the amount of irrigation and fertilizer, the 11/ The short-term price elasticities in this study were based on prepartition Punjab for the years 1914-45 and indicated a slight response of acreage planted to price. 75

quality of seeds, the degree of technology, the availability of credit, the adequacy of marketing and transportation facilities, and the amount of foreign exchange reserves to purchase agricultural inputs, such as fertilizer (64, pp. 96-100; 49, p. 1044; 48, pp. 287, 288, 293, 297, 298; 51, pp. 44, 88; 9, p. 35). Table 35. --India: Marketed surplus of grains as percentage of production according to size of landholdings, 1958 Marke t Crop \ Size of holdings Below ; 10-20 ; Above 10 acres acres 20 acres Percent Hapur (Uttar Pradesh) Wheat Chandausi (U.P.) : Wheat Moga (Punjab) : Wheat Bhatinda (Punjab) : Wheat Monghyr (Bihar) : Corn Andhra Pradesh : Rice 20 22 37 12 32 30 1/40 44 66 0 19 28 0 16 26 1/41 39 48 1/ Percentage is high because this is a commercial area. Source: (37, pp. 163, 167, 170). The Gokhale Institute study on P.L. 480 concluded that: In an economy like India* s no one expects the relative prices to play the major role in increasing food production to meet the rapidly growing demands. It would require major efforts at re-organization of the structure of agriculture, changing the technological base through extension of irrigation, improved seeds, increased supply of fertilizers, better credit and marketing facilities, and generally the know-how of superior farming techniques. To a very large extent, these efforts in India have to be initiated mainly by the State (54, p. 166). Smoothing out the fluctuations in grain prices reduces uncertainty for producers and provides the basis for income stability. Assuming that prices are sufficiently high to encourage yield-increasing methods, instability of prices, even at a higher level, is probably more of a deterrent to expansion of grain 76

production than somewhat lower prices with reasonable stability (15 , p. 380; 37, pp. 93-4, 158-62; 60, p. 1034; 62, pp. 91-2). Most of the emphasis in the studies cited in this report was on price and acreage response. Since the use of fertilizer and other yield-increasing technology is related to knowledge dissemination and availability of adapted varieties, the price effects are even more difficult to determine by statistical techniques. Consequently, effects, if any, of prices on the rate of increase in yields must be regarded as largely speculative. Analysis by Mellor, however, indicates that with the technology available during this period, yield increases from fertilizer were relatively low (34, pp . 150-60). Factors in addition to price are important in attaining rapid increase in agricultural production. The prices of grains, particularly rice, however, were relatively low in relation to the cost of fertilizer during most of this period (_19, pp . 55-6). Agricultural Development and Government Policies A main goal of Indian agricultural policy has been to achieve greater selfsufficiency in food grain production to reduce the nation* s dependence on imports (33, p. v) . However, it now appears that insufficient attention was given to agriculture in the first and second 5-year plans, 1951-61 (^, PP • 426-7). This was due primarily to the prestige associated with industrial enterprises and to the widely held view that emphasis on industry was in India's economic interest. However, Title I imports were not available when the first plan was drawn up. When the second 5-year plan was drawn up in 1956, the government did not visualize the need for large food aid imports during the early sixties. Agriculture received considerably more attention in the third plan (1961-66), which was formulated about the time of negotiation of the large 4-year Title I agreement in 1960. Government investments allocated to agriculture increased from 7.6 billion rupees in the first plan to 17.6 billion rupees in the third. Government investment planned for the fourth plan (1966-71) will be more than double that allocated in the third. The principal agricultural objective in the fourth plan is to achieve self-sufficiency in food grain production by 1970 (40). Budget expenditures for agriculture during 1966-67 are 43 percent above the 1965-66 level. Some of the programs to stimulate grain production during the last decade were: (1) More short- and medium-term credit to farmers, (2) increased use of improved seeds and fertilizers, (3) soil conservation and land reclamation, (4) flood control and irrigation, (5) establishment of marketing cooperatives, and (6) use of a package program (Intensive Agricultural District Program) in selected areas (27 , pp . 30-51; 2_9, pp . 21). Beginning in 1964-65, greater emphasis was placed on incentive support prices for food grain producers, and the Food Corporation of India was established to administer the government's price programs. In 1965, the government also established an Agricultural Prices Commission to advise the government on needed changes in agricultural policy and price structures to stimulate agricultural production. Price supports in 1965-67 were significantly higher than those in 1963-64. 77

Rising investment expenditures were facilitated by the use of Title I imports to stabilize prices of food. More of the scarce foreign exchange was available for development expenditures than would have been available otherwise. In the absence of food aid under P.L. 480, the government probably would have been forced to cut back on its development expenditures, adversely affecting the food production program (30 ; 37 , pp. 93-4; 54, pp . 102, 320; 49; 45, p. 70). S. R. Sen summarized his views on the effects of P.L. 480 on agriculture in India as follows: . . . large imports under P.L. 480 have been absorbed in India without adverse effect on either prices or production of domestic wheat. This . . . has been possible primarily because these additional supplies were injected not into a stagnant but into a developing economy in which an attempt was made to use P.L. 480 supplies in an integrated manner along with other complementary resources for stepping up the rate of investment and hence the productive capacity and the purchasing power of the people (60, p. 396). 12/ Conclusions - India Before 1965, the government sold Title I food grain imports at subsidized prices below the costs of importation and distribution. During this period, farm and wholesale market prices of indigenous food grains were far above the subsidized prices, and after 1961, producer prices for wheat were about the same or higher than Title I sales prices. The Indian Government used Title I imports in the late 1950* s to help carry out its policy of stabilizing food prices and relaxing rationing and price controls on food grains. In the absence of Title I imports, the government probably would have intensified price and marketing controls during the periods of extreme food shortages in 1957-58 and 1964-65 to alleviate famine conditions, particularly in the cities. The relative importance of price probably has been overemphasized as the cause of food shortages in India. The acute shortages of food in 1958 and 1965 were to a large extent the result of unfavorable weather. The analysis of factors affecting the expansion of food production in India indicates that the levels of commodity prices is particularly important in the commercial sectors of Indian agriculture in encouraging the application of yield increasing technologies, but that price per se is only one of the many factors that must be considered on the Indian scene. It should be recognized that the expansion of agricultural production over the last decade has been hindered by structural, economic, and physical factors that 12/ Similar views were expressed by another Indian economist who concluded that, "On the whole, taking the available evidence on acreage under cultivation, agricultural investments and farm inputs, it seems that import of P.L. 480 food grains has not adversely affected agricultural production" (53 , p. 43). 78

existed prior to P.L. 480. Thus, aid was more the result than the it appears the programming of P.L cause of India* s failure to expand more rapidly. 480 food production The flow of Title I imports into India during periods of food shortages led to greater stability in food availabilities, which assisted the government in maintaining its level of development expenditures, both in agriculture and the industrial sectors of the national economy.

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