Surplus Disposal in World Markets: An Application to Egyptian Cotton

Eric A. Monke, Dennis C. Cory and Donald G. Heckerman

American Journal of Agricultural Economics, 1987, vol. 69, issue 3, 570-579

Abstract: In many countries, agricultural exports are managed directly by governments. A frequent problem encountered by policy makers involves the accumulation of unwanted surpluses caused by domestic price support programs, unforeseen declines in world demand, or unexpected shifts in the domestic supply-demand balance. This paper examines the intertemporal use of the world markets as a means to eliminate these surpluses. The analytical results follow directly from the theory of storage. They are applied to an analysis of the Egyptian ELS cotton market, where stock levels in the early 1980s became about six times as large as normal carryout. Estimation results suggest that optimal disposal plans may frequently involve selling surplus stocks in a single year.

Date: 1987
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