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Surplus U.S. food supplies dry up

By Bryan Ray for
USA TODAY

Updated

5/2/2008 4:49 PM 

An official at a farmers' cooperative watches as corn is unloaded at
an Iowa distribution center last year. Surplus stores of such crops
are increasingly rare.

By Sue Kirchhoff, USA TODAY
WASHINGTON — As the farm economy collapsed in the 1980s, the U.S.
Department of Agriculture was saddled with mountains of surplus
cheese, corn and other foods that it socked away in warehouses and
even caves.
As recently as 2003, the USDA had to buy so much powdered milk to
support dairy prices that beleaguered officials shipped some to U.S.
ranchers for cattle feed.

STORY: U.S. could add $770 million in food aid

While the previous surpluses were costly and sharply criticized,
much of the food found its way to the poor, here and abroad. Today,
says USDA Undersecretary Mark Keenum, "Our cupboard is bare."

U.S. government food surpluses have evaporated because, with record
high prices, farmers are selling their crops on the open market, not
handing them over to the government through traditional price-
support programs that make up for deficiencies in market price.

FIND MORE STORIES IN: Congress | Texas | Bush | Democratic | United
Nations | World War II | President Reagan | mid-April | Agriculture
Organization | Missouri Republican | Agriculture Secretary Ed
Schafer | Bill Emerson | Bakers Association
Worldwide, food prices have risen 45% in the past nine months,
posing a crisis for millions, says the United Nations' Food and
Agriculture Organization.

Because of the current economics of food, and changes in federal
farm subsidy programs designed to make farmers rely more on the
markets, large U.S. reserves may be gone for a long time.

The upshot: USDA has almost no extra food to supplement the billions
in cash payments it spends to combat hunger at home and in
developing nations.

A coalition of religious and farm groups, in an open letter to
Congress this week, warned that low supplies increase the risk of
hunger and higher prices, calling for creation of a strategic grain
reserve.

"As a matter or national security, our government should recognize
and act on its responsibility to provide a stable market for food in
an era of unprecedented risk," says the letter from the National
Family Farm Coalition and various groups.

Others experts say large government stockpiles are not only
unnecessary, they are counterproductive. That includes John Block
who, as President Reagan's Agriculture secretary during the 1980s,
went to enormous lengths to get rid of extra food: giving
commodities to farmers as payment for idling land, offering surplus
grain as a subsidy to exporters and holding cheese giveaways for the
poor.

"We shouldn't have large reserves stacked up. It was very costly for
us," Block said, noting that for years he was accused by other
nations of depressing their farm sectors by dumping extra U.S. food
on world markets.

Still, even he terms the current world situation "shocking" in the
sense that prices for so many types of food have risen at once.

The USDA's sole remaining sizable stockpile contains about 24
million bushels of wheat in a special government trust dedicated to
international humanitarian aid. The special food program, which also
holds $117 million in cash, has dwindled from its original 147-
million-bushel level as Republican and Democratic administrations
have used it but not fully replenished it.

That leaves the Bush administration with less flexibility to respond
quickly to international food aid needs. President Bush in mid-April
drew $200 million from the Emerson Humanitarian Trust, named after
former congressman Bill Emerson, a Missouri Republican. Bush's
action followed a desperate plea from the United Nations for food
aid. Thursday, the president announced he would ask Congress for
$770 million in separate, additional funding to meet international
needs.

But Agriculture Secretary Ed Schafer, at a recent food aid
conference, says his agency faces tough decisions about managing the
rest of the reserve in times of widespread hunger. "How far do we
draw down?" he asked. "Do we take it down to zero because we need
it? Do we hold some in there, because who knows what's going to
happen, for emergency purposes later?"

Nutrition programs in need

Domestic nutrition programs, supported by once-bountiful commodity
supplies, also face increasing stress. In a sign of how tight the
situation has become, Keenum last summer dug into little-used legal
authority to barter the last remaining USDA raw cotton and other
surplus for about $120 million of canned meat and other processed
goods desperately needed by domestic food banks and international
programs.

"Now that we've created the program, it would be great if we had
more stocks we could convert," Keenum says. "We just don't."

The fact that USDA's larders are depleted doesn't mean the country
is out of food. The vast majority of U.S. grain is in the hands of
farmers and private firms. Overall, the USA is expected to have
carryover supplies of 241.9 million bushels of wheat this year, for
example. But the USDA situation is indicative of broader trends,
with domestic and international grain supplies in decline.

Total U.S. wheat stocks are down from 777 million bushels in 2001,
and are the lowest since World War II. The USDA says that's about a
35-day supply of wheat and notes that farmers in Texas are already
starting to harvest a new crop. The American Bakers Association
estimates the country has a 24-day supply of wheat compared with the
previous three-month level on hand.

International grain supplies are the tightest in three decades, and
prices of wheat, corn, rice and other food staples have doubled or
tripled.

"The whole world has gotten fairly sanguine about food supplies,"
says Bruce Babcock, director of the Center for Agricultural and
Rural Development at Iowa State University. "Advances in logistics
and just-in-time production have allowed the world to get by on very
low stock levels for a very long time. We kind of undershot it this
year."

But Babcock says a strategic food trust like that proposed by farm
and religious groups raises tough policy questions: How would it be
managed? When would it be tapped? Whom would it benefit? And how
would USDA keep it from acting as a disincentive to advances in
productivity?

There is some basis for comparison. The nation for years has
maintained a strategic petroleum reserve as a form of energy
security. The White House, which now wants to increase supplies in
the reserve, is in a struggle with members of Congress who say such
a move is unwise at a time when oil prices are above $100 a barrel.

Congress, so far, has responded to the growing food crisis by
proposing a major increase in nutrition funding in a five-year farm
bill now under debate. Lawmakers and the White House are also
prepared to spend more money for international programs. The U.S. in
the last year provided more than $2 billion in foreign food aid.

"The commitment is there to deal with the international and domestic
situation … in a formidable way," says Rep. Rosa DeLauro, D-Conn.,
chair of a House subcommittee that funds food aid.

But there has been no major re-examination of one of the major
factors contributing to tight supply: recent federal laws mandating
increased production of ethanol, which in the USA is generally made
from corn.

Many farmers today are growing crops for fuel, not food, a
development outside of USDA control and one that makes it harder for
the government to manage crop production. As much as a third of the
corn crop could be dedicated to ethanol production.

Commodity programs

The USDA accumulates stockpiles several ways. It buys dairy products
when prices are low. Farmers who grow wheat, corn, soybeans and
other grains can forfeit their crop to pay off loans. The USDA can
buy crops, including fruits and vegetables, when surpluses develop.

The federal government spends more than $60 billion a year on food
stamps, the school lunch program and other nutrition aid. Much of
that is in cash, but the programs can also benefit from surplus
commodities. The USDA on Thursday announced it would buy $50 million
in pork products for feeding children and school lunch programs, as
part of its effort to cope with rising food prices. The purchase
also helps pork producers who have been hit by rising grain prices.

In general, higher prices mean federal spending is rising, and many
school districts are being forced to raise lunch prices. High prices
and low supplies have probably had the most immediate impact on food
banks, which face rising caseloads and falling private-sector
donations as the economy slows.

"USDA food truly is some of the most nutritional that we receive. We
are located where there is no food industry other than retail
groceries and small restaurants. … We could not feed the people we
need to without the support of the USDA," says Rhonda Chafin,
executive director of the Second Harvest Food Bank of Northeast
Tennessee. America's Second Harvest, a network of 205 food banks
serving 25 million, is seeing a 20% rise in its caseload.

Food banks and other programs receive $140 million in annual
commodity donations, which could rise to $250 million in the five-
year farm bill under debate. The USDA provides extra food via a
bonus program, buying surplus goods as they become available.

The program is an add-on that varies from year to year, though food
banks have come to rely on it. The bonus began to dry up several
years ago as food prices rose, plummeting from about $250 million in
2003 to $58 million last year. The USDA barter program has partly
picked up the slack.

The Emerson Trust, the reserve for humanitarian aid, was created
when the government was swimming in supply. The trust isn't the main
U.S. food aid program but is an important backstop that's been
tapped seven times since 2002 to aid Africa and Iraq.

Sporadic replenishment

The trust has been sporadically replenished since the mid-1990s. In
addition to wheat, it now holds $117 million in cash: enough to buy
about 14.6 million bushels of wheat at the current price. Still,
that would leave overall supply down about two-thirds from original
levels. International feeding organizations, which have pushed for
years to get the trust replenished, note that it is the only U.S.
stockpile for emergency needs. Now, at a time when it is desperately
needed, they say, the stocks are not there.

Food aid "is going to have to be significantly higher if we're going
to continue to play the role we've played in the past; … $117
million is not much," says Lisa Kuennen-Asfaw of Catholic Relief
Services.

As is the case with many food programs, use of the trust has been
politically charged in the past. For example, wheat growers have
protested that pulling wheat out of the trust when prices are low
further depresses markets. Companies that have been paid for years
to hold supplies of wheat for the trust don't want to lose their
payments.

USDA's Keenum says the U.S. government has the will and the money to
continue providing needed resources to hungry people.

"We're not seeing a shortage of food in this country," Keenum
says. "The issue is having the resources to purchase food for
international and domestic needs."

http://www.usatoday.com/money/industries/food/2008-05-01-usda-food-
supply_N.htm

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