Rising Food Prices and Global Food Needs: The U.S. Response

Rising Food Prices and Global Food Needs:
The U.S. Response
May 8, 2008
Charles E. Hanrahan
Senior Specialist in Agricultural Policy
Resources, Science, and Industry Division

Rising Food Prices and Global Food Needs:
The U.S. Response
Summary
Rising food prices are having impacts across the world, but especially among
poor people in low-income developing countries. Since 2000, a year of low food
prices, wheat prices in international markets have more than tripled, corn prices have
doubled, and rice prices rose to unprecedented levels in March 2008. Such increases
in food prices have raised concerns about the ability of poor people to meet their food
and nutrition needs and in a number of countries have lead to civil unrest. More than
33 countries, most of which are in Sub-Saharan Africa are particularly affected by
food prices increases. The World Bank has estimated that more than 100 million
people are being pushed into poverty as a result of food-price escalation.
A number of interrelated factors have been identified as causes of the rising food
prices. Droughts in Australia and Eastern Europe and poor weather in Canada,
Western Europe and Ukraine in 2007 have reduced available supplies. Reduced
stocks have prompted many countries to restrict exports. Rising oil and energy prices
have affected all levels of the food production and marketing chain from fertilizer
costs to harvesting, transporting and processing food. Higher incomes in emerging
markets like China and India have resulted in strong demand for food commodities,
meat and processed foods and higher prices in world markets. Increased demand for
biofuels has reduced the availability of agricultural products for food or feed use.
Export restrictions in many countries have exacerbated the short supply situation.
One immediate consequence of the rise in global food prices is the emergence
of a shortfall in funding for international food aid. The World Food Program has
launched an urgent appeal for $755 million to address a funding gap brought on by
high food and fuel prices. WFP indicates that without additional funding it would
have to curtail feeding programs that meet the needs of more than 70 million people
in 80 countries.
The United States has responded to the WFP appeal for food aid and its own
food aid funding shortfall by announcing a release of $200 million from the Bill
Emerson Humanitarian Trust (BEHT), a reserve of commodities and cash that can
be used to meet unanticipated emergency food aid needs. Congress is considering an
FY2008 emergency supplemental appropriation for emergency food aid requested by
the Administration. The President announced on May 1, 2009 a request for Congress
to appropriate an additional $770 million in FY2009 to deal with the international
food situation.
In addition to near-term measures to meet food needs in low-income countries,
aid agencies are focusing on medium- and long-term efforts to enhance food security
and agricultural productivity. There have been calls for increasing the priority and
allocation of resources to agricultural development in poor countries, particularly in
Sub-Saharan Africa. The World Bank and USAID are two aid agencies that are
promoting agricultural development and growth in low-income countries. Both
indicate that African agricultural development should be a priority.

Contents
In troduction ......................................................1
Why Are Food Prices Increasing?.....................................2
How Countries Have Responded......................................4
Asia ........................................................4
Africa .......................................................4
Latin America and the Caribbean.................................5
Food Aid Funding Shortfalls.........................................5
The World Food Program (WFP).................................5
U.S. Agency for International Development .........................6
The U.S. Response to Food Aid Funding Shortfalls.......................7
Release from the Emerson Trust..................................7
FY2008 Emergency Supplemental Appropriations....................8
The President’s FY2009 Food Aid Request.........................9
Additional U.S. Food Aid Policy Options..............................10
Allocating Some Title II Funds to Local or Regional Purchase..........10
Earmarking Food Aid for Non-Emergency Projects..................12
Other Near-Term International Donor Responses........................12
Responses to the WFP Appeal...................................12
FAO’s Proposal..............................................13
World Bank and IMF Responses.................................13
Long-Term Considerations: Giving Priority to Agricultural Development.....14
U.S. Assistance to Agriculture: Focus on Africa.....................15
Competing Priorities and Congressional Earmarks...............16
Institutional Factors.......................................16
Other U.S. Assistance Initiatives.................................17
President’s Initiative to End Hunger in Africa (IEHA)............17
Millennium Challenge Account..............................17
Development Food Aid....................................18
World Bank.................................................18
List of Tables
Table 1. P.L. 480 Title II Supplemental Appropriations, 1999-2007..........8

Rising Food Prices and Global Food Needs:
The U.S. Response
Introduction
Rising food prices are having impacts across the world, but especially among
poor people in the low-income developing countries.¹ According to the United
Nations Food and Agriculture Organization (FAO), its index of food prices in March
2008 was 80 points higher than in March 2007, a rise of 57%.² In 2007, the index
rose by 36% over its 2006 level. The International Food Policy Research Institute
(IFPRI) reports that since 2000, a year of low food prices, the wheat price in
international markets has more than tripled, corn prices have doubled, and the price
of rice rose to unprecedented levels in March 2008.³
Such unprecedented increases in food prices have raised concerns about the
ability of poor people to meet their food and nutrition needs and in a number of
countries have lead to civil unrest. Food price escalation affects the cost of living for
everyone, but the poor are most severely impacted because the share of spending for
food in their total expenditure is higher than for better off populations. According to
FAO, food represents about 10%-20% of consumer spending in industrialized
nations, but from 60%-80% in poor developing countries.⁴ Low-income consumers
in both rural and urban areas in poor countries have been adversely affected by the
rise in food prices.
High food prices have resulted in social unrest and food riots in Egypt,
Cameroon, Cote d’Ivoire, Senegal, Burkina Faso, Ethiopia, Indonesia, Madagascar,
the Philippines, and elsewhere. In Haiti, several deaths resulted from violent protests
of price increases for staple foods. Popular discontent about food price inflation lead
to the fall of the Haitian government. Most recently, violence marked protests of high

¹ See CRS Report RL34474, High Agricultural Commodity Prices: What are the Issues?,
by Randy Schnepf, for an extensive discussion of the situation and outlook for commodity
prices. Food prices and their effects on U.S. food and nutrition programs are discussed in
CRS Report RS22859, Food Price Inflation: Causes and Impacts, by Tom Capehart. CRS
Report RS22824, High Wheat Prices: What are the Issues?, by Randy Schnepf, discusses
the factors responsible for rising wheat prices.
² FAO’s food price index is reported in Crop Prospects and Food Situation - No. 2, April

2008 viewed at [http://www.fao.org/docrep/010/ai465e06.htm].

³ International Food Policy Research Institute, The World Food Situation: New Driving
Forces and Required Actions, Food Policy Report #18, viewed at [http://www.ifpri.org/
pubs/fpr/pr18.pdf].
⁴ FAO, op. cit.

food prices in Somalia. In Pakistan and Thailand, governments have deployed troops
to prevent the seizure of food from farmers’ fields and from warehouses.
More than 33 countries, most of which are in Sub-Saharan Africa, are adversely
affected by food prices increases.⁵ The World Bank has estimated that more than 100
million people are being pushed into poverty as a result of the escalation of food
pri ces.⁶
Market analysts predict that global grain and oilseed supplies will rebound in
2008 because of current high market prices. However, most analysts, including the
United Nations Food and Agriculture Organization (FAO), also anticipate that food
prices will remain at significantly higher levels than previously.⁷
An immediate consequence of soaring food prices is a shortfall in funding for
international emergency food aid. The escalation in food prices, and its long term
effects, has also lead to suggestions that a higher priority and more resources be
devoted to enhancing food security and agricultural productivity in developing
countries.
Why Are Food Prices Increasing?
A number of interrelated factors have been identified as causes of escalating
prices for food.
^!Droughts in Australia and Eastern Europe and poor weather in
Canada, Western Europe, and Ukraine have reduced available
supplies. As a result of adverse weather conditions, global stocks of
corn, wheat, and soybeans are at historically low levels. Some
suggest that the apparent increases in harsh and frequent climatic
shocks are due to climate change.⁸ It is, however, an open question
as to whether the abnormal growing conditions of 2007 were a one-
time event or part of a more systemic change in climate.

⁵ See World Bank President Robert Zoellick speech at the Center for Global Development,
April 2, 2008, viewed at [http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,
contentMDK :21711307~me nuPK : 34472~page PK : 34370~piPK :34424~theSitePK :4607,

00.html].

⁶ Bilingual Transcript of Statements by Secretary-General, Heads of Concerned Agencies,
and Response to Questions at Press Conference on Global Food Crisis, April 29, 2008,
viewed at [http://www.unog.ch/80256EDD006B9C2E/(httpNewsByYear_en)/DC9886
DEEFC314B3C125743A005A9B09?OpenDocume nt].
⁷ See CRS Report RL34474, High Agricultural Commodity Prices: What are the Issues?,
by Randy Schnepf.
⁸ Josette Sheeran, Executive Director of the World Food Program, Testimony to the
European Parliament Development Committee, Brussels, Belgium, March 6, 2008.

^!Countries around the world, but especially Asian rice-producing
countries, have introduced export restrictions. In response to high
prices for food grains, some countries have introduced grain export
restrictions to augment domestic supplies and hopefully contain the
effects of high prices on their own consumers. Such export
restrictions are intended to augment domestic supplies and hopefully
contain the effects of high prices on consumers. However, such
measures exacerbate the food supply situation in importing
countries.
^!Rising oil and energy prices have affected all levels of the food
production and marketing chain, from fertilizer costs to
harvesting, transporting, and processing food. These rising fuel
costs are reflected in higher food prices. The costs for transporting
food aid from the United States to beneficiaries in developing
countries are already high. In FY2007, for example, of every dollar
provided for U.S. food aid, about 56 cents represented the cost of
transporting commodities.⁹ Rising fuel rices could make shipping
food even more expensive in 2008.
^!Higher incomes in emerging markets like China and India have
resulted in strong demand for food commodities, meat, and
processed foods and higher prices in world markets. The
increased demand for food and energy in emerging markets is
considered by many to be a structural change that will affect the
supply and demand for food and feed well into the future.
^!Increased demand for biofuels has reduced the availability of
agricultural products for food or feed use. Some think that the
competition between crops for food and crops for fuel will affect
food supply and prices for years into the future. The food price
impact of biofuels demand has caused some policy makers to
suggest that biofuel subsidies and mandates be reconsidered. Others
have suggested that there is not a conflict between meeting food and
fuel demands for agricultural products.¹⁰

⁹ Calculated from USDA Food Aid Tables, available at [http://www.fas.usda.gov/excredits/
FoodAid/Reports/reports.html ].
¹⁰ Remarks by Mr. Bob Stallman, American Farm Bureau President, viewed at
[ h t t p : / / www. f b.org/index.php?fuseaction=news room.news focus&year=2008&file=
nr0430.html]

How Countries Have Responded
Countries affected by the rising prices have responded in various ways. As noted
above, some food exporting countries have restricted exports. While such moves can
increase the availability of domestic supplies in the short run, it can lower domestic
farmers’ incentives to produce, and reduce the availability of supplies to importing
countries. A number of food importing countries have reduced or eliminated import
duties so as to reduce the cost of food. Some have introduced price controls, while
at the same time augmenting input subsidies for farmers to induce them to increase
production. A few other countries have addressed mounting food prices by expanding
existing social safety net programs that provide food or cash to poor people;
however, most low-income countries lack the administrative capacity and financial
resources to implement such programs.
The UN Food and Agriculture Organization (FAO) is monitoring the steps that
governments of developing countries are taking to mitigate the effects of global price
i n creases.¹¹
Asia
In Asia, home to some of the world’s largest rice producing and exporting
countries, governments have announced ceilings and in some cases bans on rice
exports. For example, India has banned the export of non-basmati rice and set a
minimum export price for basmati rice at $1200 /metric ton (MT). Viet Nam has
banned rice exports until June of 2008. Cambodia has announced a short-term ban
on rice exports and has released rice stocks to curb rising domestic prices. China has
banned some grain exports and, to increase domestic supply, has raised minimum
purchase prices of wheat and rice and increased agricultural subsidies. The
Philippines, Bangladesh and Thailand are selling rice stocks at subsidized prices;
Thailand plans to release 650,000 metric tons of rice to be sold at subsidized prices.
Africa
In North Africa, Egypt, has banned rice exports and the government there has
ordered the army to bake bread to increase the supply of subsidized bread. In West
Africa, Senegal, which imports about half of its grain consumption, is subsidizing the
purchase of wheat flour by 40%. In addition, it has waived tariffs and imposed price
controls. Liberia has suspended import duties on imported rice. Cote d’Ivoire has
suspended import duties on essential foodstuffs, following protests of price increases
for cooking oil and milk. In East Africa, Zambia, despite available export surpluses
of corn, has continued an export ban in place for much of the previous marketing
year. Zambia also is implementing a large input subsidy program to foster grain
production this year. In Malawi, the government is continuing its program of
subsidies for fertilizers and quality seeds. Zimbabwe continues import controls for
corn, wheat and sorghum, which are sold at subsidized prices. The government of

¹¹ Developing country responses to rising food prices are surveyed in FAO Crop Prospects
and Food Situation - No. 2, April 2008, viewed at [http://www.fao.org/docrep/010/ai465e/
ai465e007.htm].

South Africa, which has an extensive social safety net program, has announced an
increase in disability and old age payments, and increased social grants (cash grants)
to poor families. Ethiopia, which also has a social safety net program, has announced
wheat subsidies of $38 million, and fuel subsidies of $366 million. Ethiopia is
increasing the wheat ration it distributes to 800,000 low-income urban residents.
Ethiopia also has increased the cash wage rate of a large cash-for-work program by

33%. Ethiopia’s government has also announced it will increase imports of sugar,

wheat, and cooking oil. Tanzania has authorized duty-free imports of 300,00 metric
tons of corn, and banned exports of agricultural commodities.
Latin America and the Caribbean
Mexico has removed quotas and tariffs for food imports, and has negotiated
agreements with traders to increase corn imports and reduce retail food prices.
Mexico has announced a number of food production support measures and
announced that it will reduce fertilizer prices by a third. El Salvador, Guatemala,
Nicaragua, and Honduras have jointly agreed to cancel the import duty on wheat
flour for all of 2008. Argentina has imposed taxes on grain and oilseed exports in
order to increase domestic supplies and, to partially offset the negative effect of these
taxes on farmers incomes, is considering a 20% reduction in the price of fertilizers.
Brazil has removed import tariffs on 1 million MTs of non-Mercosur wheat until
June 30.¹² Peru has revoked its tariff on grain imports and has announced a program
to distribute food to the poorest members of its population. Ecuador has increased the
subsidy on wheat flour. Bolivia has authorized tariff-free imports of rice, wheat, and
wheat products, corn soybean oil and meat until the end of May. At the same time,
Bolivia has banned exports of grains and meat products.
Food Aid Funding Shortfalls
One immediate consequence of the rise in global food prices is the emergence
of a shortfall in funding for international food aid. Both the United Nations’ World
Food Program (WFP) and the U.S. Agency for International Development (USAID)
are experiencing food aid funding shortfalls as a result of high food and fuel prices.
The World Food Program (WFP)
On March 20, 2008, the United Nations World Food Program made an urgent
appeal to the United States and other food aid donors for an additional $500 million
to address a funding gap for food aid caused by rising food and fuel prices.¹³ The
WFP, the United Nations agency that is charged with meeting hunger needs of
vulnerable people throughout the world, subsequently announced that its funding

¹² MERCOSUR, the Common market of the South, is a regional free trade agreement,
between Brazil, Argentina, Uruguay, and Paraguay. Chile is an associate member country.
¹³ Letter to President Bush from WFP Executive Director, Josette Sheeran, March 20, 2008,
viewed at [http://documents.wfp.org/stellent/groups/public/documents/newsroom/wfp

174162.pdf].

shortfall had increased to $755 million for 2008. Without the additional funds WFP
would have to scale back on feeding operations in 2008 that would provide assistance
to 73 million people in 80 countries.
WFP is the world’s largest food aid provider. In 2007, the WFP provided $2.7
billion of food aid to an estimated 70 million people in 80 countries. The United
States contributed 44% of this amount or $1.2 billion in 2007. This percentage has
been the United States’ average annual contribution to the WFP since 1999. Other
major donors to the WFP in 2007 included the European Union (the EU Commission
and individual EU member countries), $586 million; Canada, $161 million; and
Japan, $118 million.¹⁴
The United States provides almost all of its food aid to the WFP in the form of
commodities; other donors provide primarily cash which WFP uses to purchase and
ship food commodities. In order to maximize the commodity value of its cash
resources and to mitigate the increased commodity and transports costs it faces, the
WFP says it is making 80% of its food purchases — an estimated $612 million —
in local and regional markets in developing countries. In 2007, the WFP Executive
Director Josette Sheeran reported that WFP increased its local purchases by 30%,
resulting, she indicated, in savings on food and transport costs and in helping local
farmers from whom the food was purchased break the “cycle of hunger at its root.”
U.S. Agency for International Development
USAID also has indicated that rising food and fuel prices could result in a
significant scaling back of emergency international food aid in FY2008. According
to press reports in March 2008, USAID expects that in FY2008 it would need as
much as $200 million in additional funding to meet emergency food aid needs.
USAID provides U.S. agricultural commodities for both emergency relief and for use
in development programs under the authority of P.L. 480 Title II.¹⁵ In FY2007, the
P.L. 480 Title II emergency program provided 1.5 million metric tons of emergency
food aid at a cost of $1.4 billion (80% of total Title II) to meet emergency needs in
30 countries. Approximately 594,840 metric tons of food aid valued at $348 million
(20% of total Title II) was used to support non-emergency development projects in
FY2007. Non-emergency or development food aid has been declining in recent years
as the need for emergency food aid has increased. The congressional appropriation
for Title II food aid was $1.2 billion in FY2007. In addition, Congress provided
emergency supplemental funding in FY2007 for Title II of $460 million.
For FY2008, the President requested and Congress appropriated $1.2 billion for
P.L. 480 Title II food aid for both emergency and non-emergency food aid. For
FY2009, the President’s budget also requested $1.2 billion for P.L. 480 Title II
commodity donations. The Administration also again requested $350 million for
FY2008 supplemental appropriations for Title II.

¹⁴ Data on WFP donors is available at [http://www.wfp.org/appeals/wfp_donors/index.asp?
section=3&sub_section=4].
¹⁵ USAID, U.S. International Food Assistance Report 2007, January 2008, viewed at
[http://www.usaid.gov/our_work/humanitarian_assistance/ffp/fy07_usifar_final.2008.pdf].

The U.S. Response to Food Aid Funding Shortfalls
The United States responded initially to the WFP’s appeal for food aid and its
own food aid funding shortfall by announcing a release of $200 million from the Bill
Emerson Humanitarian Trust (BEHT), a reserve of commodities and cash that can
be used to meet unanticipated emergency food aid needs. Congress also is
considering an FY2008 emergency supplemental appropriation for food aid requested
by the Administration. Some portion of the Emerson Trust release and some of an
emergency supplemental would be allocated to meeting WFP and USAID food aid
funding shortfalls. The President announced on May 1, 2009 a request for Congress
to appropriate an additional $770 million in FY2009 to deal with the international
food situation. Both FY2008 and FY2009 supplemental requests are part of war
funding supplementals.
Release from the Emerson Trust
On April 14, 2008, the White House announced that the President had directed
the Secretary of Agriculture to draw down on the Bill Emerson Humanitarian Trust
(BEHT) to meet emergency food needs abroad.¹⁶ This action would make an
estimated $200 million (commodity value and transport costs) in emergency food aid
available through the U.S. Agency for International Development, to the World Food
program and private voluntary organizations. The additional food aid, according to
the White House press briefing, would be used to address the impact of rising
commodity prices on U.S. emergency food aid programs, and be used to meet
unanticipated food aid needs in Africa and elsewhere.
The Emerson Trust is a reserve of commodities and cash that can be used to
meet unanticipated humanitarian food needs in developing countries or when
domestic supplies are short. It is authorized under the Bill Emerson Humanitarian
Trust Act of 1998 (P.L. 105-385). Up to four million metric tons of grains can be
held in the Trust in any combination of wheat, rice, corn, or sorghum, but wheat is
the only commodity ever held. With record prices for corn, rice, and sorghum, it
seems unlikely that, in the near term, other commodities would be purchased to bring
the Trust anywhere near its authorized maximum volume of grains. Funds regularly
appropriated for P.L. 480 can be used to replenish the Trust, but the P.L. 480 funds
that can be used for this purpose are limited to $20 million per fiscal year, about
70,000 MT at today’s prices. Emergency supplemental appropriations on occasion
have been devoted to replenishing the BEHT. The authorizing statute, however, does
not require the replenishment of the Trust.
Before the recent release, the Trust held 915,000 metric tons of wheat and $117
million. Following the announcement of the release, U.S. Department of Agriculture
Kansas City Commodity Operations Office sold 260,371 MT of wheat stocks. The
proceeds of the sale — $80 million — will be placed in the Trust and made available
to purchase commodities under P.L. 480 Title II.

¹⁶ White House, Statement of the Press Secretary, April 14, 2008, available at
[ ht t p: / / www.whi t e house.gov/ news/ r el eases/ 2008/ 04/ pr i nt / 20080414-4.ht ml ] .

Both House and Senate versions of a new farm bill address the reauthorization
of the Emerson Trust. The House version of the farm bill extends the authorization
for the Trust until 2012. The Senate version of the farm bill reauthorizes the Trust to
2012, but also makes changes in the Trust that would enable it to accumulate and use
cash reserves. The Administration made no suggestions for replenishing the Trust or
enhancing its ability to respond to emergencies in its farm bill proposals.
FY2008 Emergency Supplemental Appropriations
Congress is considering the President’s request for a $350 million supplemental
appropriation for P.L. 480 Title II food aid. In six out of ten years since 1999, the
Administration has requested and Congress has passed emergency supplemental
appropriations for P.L. 480 Title II food aid. For the most part these funds have been
allocated to emergency food needs. However, supplemental funds also have been
allocated to non-emergency development food aid and to replenishing the Emerson
Trust (see below).
Table 1. P.L. 480 Title II Supplemental Appropriations, 1999-2007
⁽^$ⁱⁿ^m^illioⁿ^s⁾
P.L. 480 Title II
Fiscal yearSupplementalComments
Appropriation
1999$149Emergency food aid for Balkan countries
2001$95Emergency food aid for Afghanistan to
mitigate the effects of conflict and
drought
2003$369Title II funds allocated to emergency
needs, previously approved non-
emergency projects, and replenishing the
Emerson Trust

2005$240Emergency food relief in Sudan (Darfur)

and elsewhere in Africa
2006$350“... to the maximum extent possible” to
be used to support previously approved
non-emergency projects
2007$460Appropriated generally for Title II
programs; also included $10 million for
the Emerson Trust.
^Source:^C^R^S^R^e^port^R^L^31095,^Em^er^{gency Fundi}^{ng f}^o^r^Agrⁱ^cul^t^u^r^e^{: A Br}ⁱ^e^f^Hⁱ^s^t^or^{y of}^Suppl^em^ent^a^l
^Appr^oprⁱ^a^tⁱ^ons^,^FY^1989-FY²⁰⁰⁸^.
The major issues with respect to an FY2008 emergency supplemental for P.L.
480 Title II food aid would be its size and the ways in which it could be allocated
between emergency and non-emergency programs, and the Emerson Trust. The
allocation of a supplemental appropriation between the WFP and U.S. non-

governmental organizations who implement food aid programs would also be a
consideration. Some private voluntary organizations (PVOs) that implement food aid
programs have called for a larger supplemental than proposed by the Administration.
Catholic Relief Services, for example, has indicated that it believes a supplemental
of at least $600 million is needed.¹⁷ Senators Casey and Durbin have proposed adding
$200 million to the FY2008 supplemental for emergency food aid. The
Congressional Black Caucus has urged that Haiti get priority consideration in U.S.
food aid programming. An amendment to the FY2008 supplemental appropriations
bill in the House would add $500 million to the President’s request for additional
funding for P.L. 480 Title II.¹⁸ The Senate Appropriations Committee Chairman’s
mark also calls for an additional $ 500 million in P.L. 480 food aid.
The President’s FY2009 Food Aid Request
On May 1, 2008, the President requested that Congress appropriate $770 million
to meet food needs due to rising food prices in developing countries. This funding
would be part of a FY2009 bridge supplemental appropriation to fund wars in Iraq
and Afghanistan. The requested amount would be allocated to
^!emergency food aid, $395 million;
^!international disaster and famine assistance, $225 million; and
^!agricultural development assistance, $150 million.
The additional emergency food aid would be allocated to P.L. 480 Title II donations.
The additional funds for disaster assistance would be allocated to the International
Disaster and Famine Assistance (IDFA) account and used to purchase food locally
in developing countries, to provide vouchers, and to purchase seeds and other
supplies. No detail was suggested with respect to how the additional $150 million for
agricultural development assistance would be allocated.
Some Members of Congress have been critical of the President’s proposal. They
have suggested that additional funds for food aid and disaster assistance may be
needed prior to FY2009. The effort by the House and Senate Appropriations
Committees to increase the amount of FY2008 supplemental funding for P.L. 480 by
$500 million — instead of waiting for a FY2009 supplemental — may be a reflection
of this concern.

¹⁷ Statement of Douglas Norell, Catholic Relief Services, at the Briefing for the
Congressional Hunger Caucus, April 10, 2008.
¹⁸ See Fact Sheet: Emergency Supplemental: Iraq, Afghanistan, Veterans, and Workers,
viewed at [http://appropriations.house.gov/pdf/FactSheet-Supplemental5-07-08.pdf].

Additional U.S. Food Aid Policy Options
Some policy options under consideration in the debate over the reauthorization
of food aid programs in the farm bill, now under consideration in Congress, could
affect the way in which the United States provides emergency food aid. These
include providing legislative authority to purchase non-U.S. commodities for
emergency food aid in countries or regions close to where food emergencies are
occurring and earmarking a portion of food aid for development rather than
emergency uses.
Allocating Some Title II Funds to Local or Regional Purchase
High transportation costs and lengthy delays before U.S. commodities arrive at
their destinations in emergency situations prompted the Administration, in its 2007
farm bill proposals, to recommend that the Administrator of USAID be given the
authority to use up to 25% of the funds available for P.L. 480 Title II to purchase
commodities in locations closer to where they are needed.¹⁹ The rationale for this
proposed new authority is that it would increase the timeliness and effectiveness of
the U.S. response to food aid emergencies by eliminating the need to transport
commodities by ocean carriers.²⁰ According to the Administration’s proposal, savings
achieved in transportation and distribution costs would be available for additional
commodity purchases, thus increasing the overall level of the U.S. response to
emergencies. In addition, local or regional purchases would also shorten the time it
takes to get food supplies to where they are needed, provide for flexibility in the
choice of commodity, and contribute to local economic development. Proponents of
local or regional purchase argue that it also would be less likely to disrupt receiving
country markets.²¹ The Administration indicated that most of U.S. emergency food
aid would continue to be provided by U.S. commodities.
The House-passed farm bill (H.R. 2419) did not endorse the Administration’s
proposal, but the bill did stipulate that $40 million of the funds appropriated for
USAID’s International Disaster and Famine Assistance (IDFA) program be allocated
to famine prevention and relief. IDFA funds can be used to purchase commodities
locally or regionally, but most IDFA funds are used to purchase non-food relief
supplies, e.g., medicines, tents, blankets, cooking utensils, sanitary facilities, and the
like. In contrast to the House version of the farm bill, the Senate version establishes
a pilot program, authorized at $25 million annually, to explore how local or regional
procurement of food in emergency situations might be used.

¹⁹ The Administration farm bill food aid proposals are available at [http://www.usda.gov/
documents/07finalfbp.pdf]. Legislative language for food aid programs proposed by the
Administration is at [http://www.usda.gov/documents/fbtrade_071.pdf].
²⁰ Cargo preference legislation requires that 75% of U.S. food aid be shipped on U.S.-
flagged vessels, which often costs more than shipping on foreign-flagged vessels.
²¹ See for example, “U.S. International Food Assistance Programs: Issues and Options for
the 2007 Farm Bill,” by Christopher B. Barrett, in American Enterprise Institute, The 2007
Farm Bill and Beyond, Summary for Policymakers, Washington, DC, 2007, p. 97 ff.

Its 2007 farm bill food aid recommendation was not the first time that the
Administration proposed allocating funds for local or regional purchase. The
President’s FY2003 budget request contained a proposal to shift $300 million from
P.L. 480 Title II to IDFA to purchase food for emergency relief in markets closer to
their final destinations rather than in the United States as required under P.L. 480.
The proposal, however, proved controversial with farm groups, agribusinesses, and
the maritime industry that supply and ship commodities for Title II, and with many
private voluntary organizations (PVOs) that rely on food aid to carry out
development projects in poor countries. A major concern of the PVOs is that
allocating Title II funds to local/regional purchase would undercut political support
for the food aid program and reduce the volume of commodities available for both
emergencies and development projects.
The conference report (H.Rept. 109-255) accompanying the FY2006 agriculture
appropriations act (P.L. 109-97) addressed the issue of converting a portion of P.L.
480 commodity food aid into cash by stating: “The conferees ... admonish the
Executive Branch to refrain from proposals which place at risk a carefully balanced
coalition of interests which have served the interests of international food assistance
programs well for more than fifty years.”
The President’s FY2007 and FY2008 budget requests also contained proposed
appropriations language to allow the Administrator of USAID to use up to 25% of
P.L. 480 Title II funds for local or regional purchases of commodities in food crises.
The Senate report (S.Rept. 109-266) accompanying the FY2007 agriculture
appropriations bill explicitly rejected this proposal, stating that “the Committee does
not agree with the Administration’s proposal to shift up to 25% of the Public Law
480 Title II program level to USAID to be used for direct cash purchases of
commodities and other purposes.”
Proponents admit that there would be some risks if local markets are unable to
absorb large increases in food demand that local purchases could represent. The
quality of local food products and ability to transport food locally are also potential
problems. One study of the World Food Program’s experience with local and
regional purchases found that such risks are manageable, however, and could be
avoided.²² Another study of global food aid transactions found that local food aid
procurement was 66% less expensive than shipments directly from donor countries.²³
An estimated 60% of all food aid from all donors is locally or regionally procured.²⁴

²² See “Local and Regional Food Aid Procurement: An Assessment of Experience in Africa
and Elements of Good Donor Practice,” by David Tschirley, MSU International Working
Paper no. 91, 2007, available at [http://www.aec.msu.edu/fs2/papers/idwp91.pdf].
²³ Edward Clay et al. The Development Effectiveness of Food Aid: Does Tying Matter?
Report prepared for OECD, Paris, 2005.
²⁴ Barrett, op. cit.

Earmarking Food Aid for Non-Emergency Projects
The volume of Title II commodities allocated to emergencies as opposed to
development projects has grown in recent years. Current law provides a mandate for
a minimum volume of commodities to be used for P.L. 480 Title II development
projects; however that mandate has not been met as the demand for emergency food
aid has increased substantially. House and Senate versions of the farm bill provide
for hard earmarks, expressed in dollar terms, for development food aid. The purpose
of these hard earmarks is to ensure that a minium amount of food aid would be
devoted to development projects.
Both versions of a new farm bill contain earmarks of P.L. 480 Title II funds that
would be allocated to non-emergency projects. The House-passed bill stipulates that
of the funds made available for Title II, not less than $450 million annually be made
available for non-emergency (development) food aid. This minimum level of
non-emergency assistance could not be waived unless requested by the Administrator
of USAID, followed by enactment of a law approving the Administrator’s request.
The Senate bill establishes a minimum of $600 million for development food aid that
also would not be subject to waivers. The Administration has indicated that it prefers
a continuation of the status quo which provides for waivers of the current minimum
volume of commodities that is devoted to development activity. Following passage
of the House-passed bill, the Office of Management and Budget, in its Statement of
Administrative Policy, said that it strongly opposed this provision because it would
deprive the Administration of the ability to quickly waive it in an emergency. OMB
estimated that this House bill provision would result in a $100 million decrease in
emergency food aid.
Other Near-Term International Donor Responses
Responses to the WFP Appeal
As of early May 2008, food aid donors had pledged to provide $613.4 million
to the WFP appeal or about 81% of the appeal.²⁵ Of that total, the confirmed amount
is $40.4 million. Public announcements by donor countries amount to $221.6 million.
Committed emergency food aid of which WFP’s share is to be determined is $340
million. (The U.S. contribution to WFP’s urgent appeal is in this category.) Another
$11.4 million is under discussion. Among the contributions announced are $181
million from the European Commission. Individual countries announcing
contributions to the WFP appeal include Japan, France, Germany, the United
Kingdom, Canada, and Norway.

²⁵ Personal communication from the Washington Office of the World Food Program, May

6, 2008.

FAO’s Proposal
The United Nations Food and Agriculture Organization (FAO) has called for
donors to contribute funds to increasing local food production in the near term.²⁶
FAO launched an Initiative on Soaring Food Prices on December 17, 2007. FAO has
allocated $17 million to this activity and is helping with the provision of inputs to
four African countries. FAO has convened a meeting in Rome from June 3-5, 2008
that will focus not only on mobilizing short and near term resources to provide inputs
and increase production, but also on longer-term approaches to enhancing world food
security.
World Bank and IMF Responses
Both the World Bank and the International Monetary Fund (IMF) are engaged
in activities to alleviate the effects of rising food prices on vulnerable countries in the²⁷
near term.
The World Bank is providing policy advice to countries affected by rising food
prices and discussing possibilities of helping countries meet short-run financial
needs. The Bank reports that a few countries, among them Burkina Faso, are
considering increasing the size of their Development Policy Loans.²⁸ The Bank is
also reviewing the possibility of scaling up financing of existing programs and
investment projects for safety net and agricultural programs. To respond to an urgent
food price situation in Haiti, the World Bank is making available a grant of $10
million. These grant funds are expected to cover the provision of food for poor
children and other vulnerable groups, partly through an expansion of the Bank’s
existing school feeding program, and job creation through labor intensive public
works.
The IMF reports that it is exploring augmenting existing financing arrangements
under its Poverty Reduction and Growth Facility (PRGF).²⁹ About 10 countries,

²⁶ FAO discusses its Initiative on Soaring Food Prices at [http://www.fao.org/newsroom/
common/ ecg/ 1000826/ en/ ISFP.pdf].
²⁷ The World Bank approach to rising food prices is detailed in “Rising food prices: Policy
options and World Bank response: Background note for the Development Committee,”
viewed at [http://siteresources.worldbank.org/NEWS/Resources/risingfoodprices_back
groundnote_apr08.pdf]. The IMF approach is spelled out in a recent article from the IMF
Survey, viewed at [http://www.imf.org/external/pubs/ft/survey/so/2008/NEW042808A.htm].
²⁸ Development Policy Loans provide quick-disbursing assistance to countries with external
financing needs, to support structural reforms in a sector or the economy as a whole.
According to the Bank, they support the policy and institutional changes needed to create
an environment conducive to sustained and equitable growth. Over the past two decades,
development policy lending — previously called adjustment lending — has accounted, on
average, for 20 to 25 percent of total Bank lending. See [http://web.worldbank.org/
WBSITE/EXTERNAL/PROJECTS/0,,contentMDK :20120732~menuPK: 268725~page
PK :41367~piPK :51533~theSitePK :40941,00.html ].
²⁹ The Poverty Reduction and Growth Facility (PRGF) is the IMF’s low-interest lending
(continued...)

mostly in Africa, have raised the possibility of augmenting existing arrangements so
as to acquire additional financing to cover the import costs of higher food prices. The
IMF is also working with PRGF-eligible countries and with other economies on
appropriate responses to higher food prices. The IMF thinks that targeted social
assistance is the best initial policy, but that other temporary measures such as tax or
tariff cuts on food products, are available supporting measures. Other financing
instruments of the IMF also are available to help countries overcome food-related
balance of payments strains. IMF also is exploring the use of stand-by arrangements³⁰
which are intended to help all member countries of the IMF address short-term
balance of payments problems.
Long-Term Considerations:
Giving Priority to Agricultural Development
In addition to near-term measures to meet food needs in low-income countries,
aid agencies are focusing on medium- and long-term efforts to enhance food security
and agricultural productivity. Many suggest that changes in the world market for food
and fuel are long-term and structural, and, consequently, that more attention should
be given to efforts to reduce poverty, increase food production, and enhance food
security, especially in the poor developing countries.³¹ There have been calls
especially for increasing the priority and allocation of resources to agricultural
development in Sub-Saharan Africa.
Official development assistance for agriculture, however, has been declining
since the 1980’s. World Bank data show, for example, that in 1980, the Bank
provided 30% of its annual lending to agricultural projects, but by 2007, that had
declined to 12%.
Data from the Development Assistance Committee (DAC) of the Organization
for Economic Cooperation and Development (OECD) show that the share of
agricultural development assistance in total Official Development Assistance (ODA)
has declined substantially from the 1980s, when it was 13% of total ODA. By 2006,
the overall percentage of ODA from all donors bilateral and multilateral going to

²⁹ (...continued)
facility for low-income countries. PRGF-supported programs are underpinned by
comprehensive country-owned poverty reduction strategies. A more detailed explanation of
the PRGF is available at [http://www.imf.org/external/np/exr/facts/prgf.htm].
³⁰ Stand-by arrangements enable countries to rebuild their international reserves; stabilize
their currencies; continue paying for imports; and restore conditions for strong economic
growth. Unlike development banks, the IMF does not lend for specific projects.
³¹ See International Food Policy Research Institute, The World Food Situation: New Driving
Forces and Required Actions, Food Policy Report #18, viewed at [http://www.ifpri.org/
pubs/fpr/pr18.pdf]. WFP Executive Director Sheeran also has called for givng a higher
priority to food safety nets and enhancing agricultural productivity in poor countries,
especially in Africa. World Bank President Zoellick and others also have called for
increased priority to food security and agricultural development, especially in Africa. See
footnote 11, above.

agriculture was 4%.³² U.S. aid for agriculture also has declined in relative terms since
the early 1980s. In 1983-84, U.S. assistance for agriculture represented 11.4% of
total development assistance from DAC member countries, while by 2006, the
percentage of bilateral development assistance accounted for by U.S. agricultural
development assistance had fallen to 2.3% of the total provided. In terms of U.S.
assistance for agriculture in comparison with total U.S. assistance, aid for agriculture
declined from 20% in 1980 to 3% in 2006.
Other OECD data show that although the total amount of aid for agriculture has
decreased, there has been a relative increase in the proportion of agricultural
development assistance going to Africa in recent years, but this has been an
increasing share of a decreasing total. However, the Partnership to Cut Hunger and
Poverty in Africa, an organization that advocates for increased support for African
agricultural development, found that U.S. assistance to African agriculture had
increased in real terms between 2000 and 2004.
The World Bank and USAID are two aid agencies that are promoting
agricultural development and growth in low-income countries.³³ Both indicate that
African agricultural development should be a priority. But competing aid priorities,
congressional earmarks, and institutional factors could make it difficult to re-order
U.S. development assistance priorities.
U.S. Assistance to Agriculture: Focus on Africa
The U.S. Agency for International Development (USAID) provided almost $600
million of development assistance to Africa in FY2006. Of that amount, $353.8
million was allocated to a wide range of agricultural activities, such as research and
development of new agricultural technologies (including biotechnology), assistance
with managing natural resources, including water resources, and support for
agro-forestry development. A report, prepared by the Partnership to Cut Hunger and
Poverty in Africa, chaired by Peter McPherson, examined U.S. agricultural
development assistance to Africa during the period 2000-2004.³⁴ It identified two
main factors that affect USAID’s allocation of resources to agricultural development.
These are
^!competing priorities and congressional earmarks that influence
funding for agricultural development assistance, and

³² Data in this section of the report on official development assistance is available from the
Development Assistance Committee (DAC) of the Organization for Economic Cooperation
and Development (OECD), which can be accessed at [http://www.oecd.org/document/

0/0,2340,en_2649_34447_37679488_1_1_1_1,00.html ].

³³ For a discussion of other international efforts aimed at addressing high food prices and
their impacts on developing countries, see CRS Report RL34474, High Agricultural
Commodity Prices: What are the Issues?, by Randy Schnepf.
³⁴ Partnership to Cut Hunger and Poverty in Africa, “Investing in Africa’s Future: U.S.
Agricultural Development Assistance for Sub-Saharan Africa,” Final Report-September

2005.

^!institutional factors that affect the scale and potential effectiveness
of development resources.
Competing Priorities and Congressional Earmarks. Priorities
established by USAID officials, such as giving higher priority to assisting
development of African agriculture, are difficult to translate into budgetary
allocations because decisions are shaped by so many other executive branch
institutions and by Congress, according to the Partnership. USAID funds devoted to
agricultural development compete with allocations to other important priorities for
U.S. foreign assistance, notably health (including HIV/AIDS), education, and
humanitarian assistance (mainly P.L. 480 food aid). Funding for health-related
assistance in Africa has grown dramatically through USAID and special presidential
initiatives to fight HIV/AIDS, TB, and malaria.
Congressional earmarks, the Partnership says, limit the flexibility of agricultural
development assistance at the country level. The Partnership estimates that 90% of
USAID’s development assistance devoted to agriculture is pre-allocated to specific
areas, such as trade capacity building, micro enterprise development, biodiversity,
and plant biotechnology. Congressional earmarks, in the view of the authors of that
study, limit the flexibility of development assistance programs to respond to the most
important needs at the field level and thus reduce the effectiveness of assistance.
Institutional Factors. The Partnership found that spending on
agriculture-related objectives in Africa from 2000 to 2004 was spread across 24
countries and four regional programs, resulting in average annual funding of about
$6 million per year per country. These funds were further dispersed among multiple
contractors and grantees. This approach, the Partnership concludes, raises questions
over whether agricultural projects are large enough to have a lasting effect and
whether their combined effects collectively generate a sustainable development
impact. The Partnership asserts that USAID agriculture program managers must
compete for development resources with other sectors on the basis of quantifiable
and near-term results reported through USAID’s internal management system. This
process, the Partnership suggests, may put projects that have longer-term impacts
such as investment in infrastructure or in human capacity at a disadvantage vis-à-vis
projects that have a shorter term impact.
The Partnership questioned the effectiveness of coordination of agricultural
development assistance within USAID, among other U.S. agencies that provide
agriculture-related assistance, and with other bilateral donor countries and
international institutions. It highlighted the absence of a mechanism for USAID to
closely coordinate agricultural development strategy, resource allocation, and field
program activities with these other U.S. agencies (especially the U.S. Department of
Agriculture), other donors, and multilateral development institutions. Improved
coordination, according to the Partnership, would help to decrease costs and increase
the effectiveness of assistance by integrating priority setting and resource allocation
and by boosting the scale of such efforts. A final institutional consideration raised by
the Partnership is that costs of U.S. development assistance are higher because of the
costs incurred by tying aid to procurement from U.S. sources (including the
requirement that US. food aid must be procured in the United States and shipped on

U.S.-flagged vessels), and by the requirement to use predominately U.S. contractors
to implement development projects.
Other U.S. Assistance Initiatives
Two other U.S. assistance initiatives provide resources for agricultural
development assistance. One is the Initiative to End Hunger in Africa (IEHA) and the
other is the Millennium Challenge Corporation (MCC).³⁵
President’s Initiative to End Hunger in Africa (IEHA). The IEHA,
launched in 2002, is a multi-year effort to increase agricultural productivity and rural
incomes. USAID specifically links the IEHA with the U.N. Millennium Development
Goal (MDG1) of cutting the number of hungry people in Africa and the world in half
by 2015. IEHA focuses funding on investments with the greatest potential for raising
smallholder producers’ productivity and incomes. In FY2006, USAID estimates
IEHA funding at $47 million. The Initiative has projects in Ghana, Kenya, Mali,
Mozambique, Uganda, and Zambia, and regional activities in East, West, and
Southern Africa. In Ghana, for example, USAID reports that IEHA activities focus
primarily on improving the productivity of the agricultural sector. In FY2006,
USAID allocated $14.2 million to agricultural development assistance in Ghana,
which is about 20% of all U.S. foreign Assistance to Ghana that year. In Mali,
another IEHA focus country, the Initiative emphasizes removing obstacles to
agribusiness development and actively promoting agribusiness. About a quarter of
total U.S. foreign assistance to Mali ($10.4 million) was allocated to agricultural
development in FY2006. No new countries have been added to the IEHA since 2006.
Millennium Challenge Account. The Millennium Challenge Account
(MCA), administered by the Millennium Challenge Corporation (MCC), was
established in January 2004 as a new vehicle for providing U.S. foreign assistance.
Establishment of the MCA was announced at the March 2002 International
Conference on Financing for Development in Monterrey, Mexico. The MCA aims
to help fulfill the U.S. commitment to the U.N. Millennium Development Goals
aimed primarily at reducing poverty and, eliminating hunger, and fostering
sustainable development. The president pledged to allot $5 billion annually by
FY2006 to the MCC. Countries that have created the necessary enabling environment
for economic growth through market-oriented, pro-growth policies, good governance
and investment of their own resources in health and education can qualify for
assistance under the MCC. The Partnership says that the MCC has potential
importance for agricultural development in Africa for two reasons:
^!The MCC represents a large, and potentially larger, pool of
resources for development assistance. Congress appropriated
almost $1 billion in FY2004, $1.5 billion in FY2005, and $1.752
billion in each of FY2006 and FY2007. These funds are available
until expended. Spreading such a large volume of funds over a
relatively few countries could dwarf the small programs of
development assistance that USAID generally operates in its

³⁵ See CRS Report RL32427, Millennium Challenge Account, by Curt Tarnoff.

recipient countries. Half of the 20 low income countries that were
deemed eligible for MCC grants in 2007 are in Africa. Compacts
under the MCC have been entered into with 8 African countries:
Madagascar, Cape Verde, Benin, Ghana, Mali, Mozambique,
Lesotho, and Tanzania.
^!Agriculture is a key sector for MCC funding. The MCC looks to
the eligible developing country to develop its own MCA proposal,
but informs countries that increasing economic growth and reducing
poverty requires them to emphasize investments that raise the
productive potential of a county’s citizens and firms and help
integrate its economy into the global product and capital markets.
One of six key areas of focus for MCAs is agricultural development.
Other key areas are education, enterprise and private sector
development, governance, health, and trade capacity building. The
MCC website reports that almost all of the MCA country proposals
submitted include an agriculture component.
Development Food Aid. Although as noted above, most U.S. food aid to
Africa goes to address emergency food needs, a smaller portion of such aid is used
in development projects, many of which aim to enhance food security. In FY2007,
of $1.2 billion of U.S. commodity food aid provided to Africa, just over $1 billion
was provided as emergency food aid, while $167 million was allocated to
development projects, many of which focus on agriculture.
Non-emergency food aid financed projects are the largest amount of funding
devoted to promoting food security in the USAID portfolio of projects in Africa.
Observers have noted problems of scale of activity funded with food aid and also
lack of coordination with other development assistance. However, USAID’s food
security strategy emphasizes that it will reduce the number of countries in which it
carries out food aid development projects and that it will integrate P.L. 480
development projects into a country’s overall agricultural development assistance
program.
World Bank
To address problems of food security in poor countries resulting from high food
prices, the President of the World Bank, Robert Zoellick, recently called for a “New
Deal for Global Food Policy.”³⁶ In his view, not only would such a New Deal require
a higher priority to food security especially in poor countries, but also attention to the
interrelated challenges of energy, yields, and climate change. Zoellick said that
immediate food needs such as those identified by the WFP should be met, but
attention also should be paid to meeting the Millennium Development Goal (MDG)
which calls for reducing by half global hunger and malnutrition by 2015. Zoellick
called for “a shift from traditional food aid to a broader concept of food and nutrition

³⁶ See Zoellick’s April 2, 2008, speech to the Center for Global Development at
[http://web.worldbank.org/ WBSIT E/EX T ERNAL/NEWS/ 0,,contentMDK :21711307~
page PK :34370~piPK :42770~ theSitePK :4607,00.html ].

assistance....” Cash or vouchers, he suggested, as opposed to commodity support,
would be appropriate and enable the assistance to build local food markets and farm
production. If commodities were needed, he said, they should be purchased from
local farmers. The World Bank could support emergency measures to help the poor
meet their food needs while encouraging incentives to produce and market food as
part of sustainable development.
The World Bank identified four key elements for a comprehensive medium- to
long-term approach to fostering growth in developing country agriculture in its 2008
World Development Report.³⁷ They include (1) improving producer incentives
(including the removal of subsidies which benefit richer farmers more); (2) providing
quality core public goods, e.g., science (research), infrastructure and human capital;
(3) strengthening institutions to provide more access to rural finance and risk
management, improve property rights, and ensure greater opportunities for collective
action by farmers; and (4) ensuring sustainable use of natural resources.
According to World Bank President Zoellick, Africa should be a particular
priority. Echoing Ms. Sheeran’s call for a Green Revolution to boost productivity in
Africa, he announced that the World Bank will double its lending to agriculture in
Africa from $400 million currently to $800 million by 2010.

³⁷ World Development Report 2008, World Bank: Agriculture for Development, 2008.