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RCED-95-199R 1 (1995-06-14)

handle is hein.gao/gaobackvt0001 and id is 1 raw text is: GAO United States GAO General Accounting Office Washington, D.C. 20548 Resources, Community, and Economic Development Division B-261648 June 14, 1995 The Honorable Richard G. Lugar Chairman, Committee on Agriculture, Nutrition, and Forestry United States Senate Dear Mr. Chairman: As part of your Committee's efforts to examine the nation's farm programs, you asked us for information on the U.S. Department of Agriculture's (USDA) Options Pilot Program (OPP). OPP, authorized under the 1990 Food, Agriculture, Conservation and Trade (FACT) Act, was designed to test the extent to which farmers could manage the risks of declines in crop prices by trading options on regulated commodity exchanges. These options, whose purchase costs are reimbursed by USDA, give their holders the option to sell futures contracts for specified amounts of commodities at specified prices. The Congress viewed OPP as a possible alternative to USDA's price and income support programs. This report provides information on (1) the status of OPP's implementation and (2) views on its performance. In summary, we found the following: USDA implemented OPP in 1993, subsidizing options purchases by 956 farmers in nine counties in three states. In 1994, USDA increased the number of locations where OPP was offered, adding four counties in two additional states. During that year, nearly 1,300 farmers participated in the program. In 1995, USDA further expanded the program, offering it to a total of 21 counties located in seven states. Information on the number of farmers participating in the program for 1995 is not yet available. Views on OPP's performance vary. A 1994 report by the Chicago Board of Trade, the Kansas City Board of Trade, and the Minneapolis Grain Exchange was optimistic about OPP's initial performance, noting that producers showed a relatively high level of interest in the program. GAOIRCED-95-199R, Options Pilot Program

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