Commodity Credit Corporation (CCC) - American businessThe Commodity Credit Corporation (CCC), a federally owned and operated entity, was created to stabilize, support, and protect American farmers’ income and prices. The Commodity Credit Corporation aids agricultural producers through loans, purchases, payments, and other operations to support production and marketing of agricultural commodities. Initially a modest and popular government-support program, it has recently become part of a controversial agricultural subsidy issue.
When established in 1933, the Commodity Credit Corporation helped farmers attempt to attain and maintain parity. During the Great Depression, prices for farm products dropped to near zero. While farmers’ costs declined, farm incomes were severely depressed. As portrayed in John Steinbeck’s classic novel The Grapes of Wrath, many farmers left agriculture in search of opportunities elsewhere. Initially incorporated as part of President Franklin Roosevelt’s New Deal program to combat the depression, in 1939 the Commodity Credit Corporation was transferred to the U.S. Department of Agriculture (USDA). In 1948 it was reincorporated as a federal corporation within the USDA.
The Commodity Credit Corporation’s programs and policies have changed many times as U.S. policy toward agriculture and other economic support programs has changed. When it was established in 1933, a majority of U.S. congressional districts had large agricultural constituencies. As the United States has become more urbanized, agricultural political interests have declined as consumer and taxation political clout has expanded, and farm lobby power has also diminished.
Major Commodity Credit Corporation programs include
• Support activities. These include loan, purchase, and payment programs for wheat, corn, oilseeds, cotton, rice, tobacco, milk and milk products, barley, oats, grain sorghum, mohair, honey, peanuts, and sugar. Farmers may receive nonrecourse commodity loans on most of these commodities at a designated rate per unit (price) by pledging and storing a quantity of a commodity as collateral. When the commodities are harvested, farmers can choose to either pay back the loan and sell on the open market or deliver the commodity to the government at the support price. In years when market prices are higher than the support price, farmers naturally sell on the open market. When support prices are higher than market prices, the government winds up owning large quantities of agricultural commodities.
Two of the more controversial support programs are sugar and tobacco. Support prices for sugar are frequently significantly higher than world market prices, creating subsidies for sugar producers and higher costs for consumers. Tobacco support programs are both expensive and ethically questionable. Paying U.S. farmers to produce a harmful product is a dubious role for government.
• Inventory, disposal, and domestic food assistance programs. When the Commodity Credit Corporation acquires commodities through either collateral acquisition or nonrecourse loans, it stores and processes commodities through contracts with commercial warehouses. Sometimes the Commodity Credit Corporation will make loandeficiency payments to farmers, based on the difference between the support price and the market price, rather than having farmers deliver products to the agency. The Commodity Credit Corporation sells commodities through its Farm Service Agency office in Kansas City, Missouri. To reduce inventories, it donates food commodities acquired through its price support programs to the Bureau of Indian Affairs and federal, state, and private agencies. The commodities are used in school-lunch programs, summer camps, and assistance of needy persons. Some commodities are provided to the U.S. military and federal and state prisons.
• Export programs. Through a variety of sales, payments, export credits, and other activities, the Commodity Credit Corporation, along with the Foreign Agricultural Services, promotes and sells U.S. agricultural commodities abroad. Through the Export Enhancement Program, the Commodity Credit Corporation pays cash to U.S. exporters as a bonus, allowing them to sell in targeted countries at prices matching those of subsidizing competitors.
In 1996 the Freedom to Farm Bill, amending the Commodity Credit Corporation, intended to reduce government subsidies of commodity producers. Instead, when commodity prices declined to near-record lows, the Commodity Credit Corporation was authorized to increase support for farmers to prevent further foreclosures and bankruptcies among farmers. By 2001 farm subsidies, distributed primarily through the Commodity Credit Corporation, amounted to over $27 billion, but almost two-thirds of those funds went to wealthy farm individuals and farm corporations.
Supporting agricultural producers is a common practice in both industrialized and developing countries. Many international trade disputes center on “unfair” subsidies of domestic producers. Support for agricultural producers traditionally has been a politically “sacred cow,” but as the cost of subsidies and the balance of political power shifts, programs like the Commodity Credit Corporation have come under greater scrutiny.