;fi§ONGRESS|ONAL 1 } ‘ - % » L I B R A R Y OF L CCCCCC ss EARCH VICE IIllIIfilTIflTlTLiFylITflI]fiLifIEImiflflliiilillll % MIAGRICDLTDRB: INTERNATIONAL TRADE AND AID a. p-. .5 ISSUE BRIEF NUMBER IB7301O AUTHOR: Mayer, Leo V. ' Sehior Specialist, Agriculture THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE MAJOR ISSUES SYSTEM '»DKTE ORIGINATED ZZQZZQ Q2 DATE UPDATED Q§;214§g~ FOR ADDITIONAL INFORMATION CALL 287-5700 0826 '. -' V ( ‘ CRS~ 1 IB73010 UPDATE-O8/21/80 l§§E§_2§§l!£Il9§ 7 Legislative activity in the 96th Congress relating to world agricultural issues has focused primarily on the development of an international food security reserve. At the request of the Administration, Chairman Foley of the House Agriculture Committee introduced H.R. 4489, titled the Food Security Act of 1979. This bill authorized the President to establish a 4-million ton stock of wheat to be used to provide emergency food assistance to developing countries at any time the domestic supply of wheat in the United States is inadequate to meet humanitarian needs. Joint hearings were held by the House Committees on Agriculture and Foreign Affairs on July 10, TV 1979. Subsequently, this legislation was superseded by H.R. 6635, which was voted out by the Foreign Affairs Committee on Feb. 28, 1980. Senate hearings were held by the Senate Agriculture Committee on S. 2258 (Talmadge) on February 25, 26, and 27 and March 6. This bill also authorized a u—million ton wheat reserve. markup and followup action is expected soon. EA§E§§QQE2-A!2-EQLlQX-A!§LX§l§ world grain supplies totaled 1.627 billion tons in mid-1980 with mid—year stocks forecast to be below 1979. The smaller carryover stocks in mid-1980 could be troublesome if U.S. crops are severely hurt by drought this year.7 This latest condition is not unusual; there have been alternating periods of shortage and surplus since world war II. Before that, statistics on world food conditions were so poor that little information was available. The most recent period of world food shortages began with shortfalls in world grain production in 1972. Production in 1973 was adequate to meet that year's needs, but provided no increase in world reserves. During 197u, drought in the 0.5. grain belt lowered grain production by no million tons despite maximum crop acreages. The smaller supplies in 197a raised grain prices sharply and 0.5. animal feeding declined, freeing up about 35 million tons of grain for shipment to other nations. These shipments reduced 0.5. and world food stocks to minimun levels at the end of the 1974 marketing year. cRs- 2 1373010 UPDATE-O8/21/80 fiorldy shortages of feedstuffs and food supplies, when they occur,p§§§g primarily the result of unfavorable weather that reuced grain productggn, while the number of people remains the same or increases. . ; ~ igw This created the serious world food problem that began in 1972 and ___ eased after 1976. Whether the variation in weather and crop production that caused the shortages will recur is under debate by scientists. THE WORLD GRAIN SITUATION AT A GLANCE , . Average , Forecast GRAINS 1 1975/76-77/78 1978/79 1979/80 ,1980/81 1i22;2digq.mi;;ed-ri§eL 4 -__-__.--_ million metric tons _r_..._.-- I Begin. Stocks 154 192 6 228 199» Production 1,312 1,456 1,399 .1,453_ Total Supply 1,466 1,647 1,627 1,652 ,; Utilization 1,292 1,419 1,428 A 1,453 at Ending Stocks 174 228 199 199 Trade 159 174 196 200 Source: USDA:-3u1y 22, 1980. CRS- 3 IB7301O UPDATE-O8/21/80 World grain conditions remained tight in 1975 but favorable growing :@§di¥i%nsxin 1976 raised total world grain production by over 100 million tons (12.2%) and rebuilt grain reserves to levels of a decade earlier. The‘ stock buildup continued with favorable world crops in 1977 and 1978 leading to exceptionally large stocks in mid-1979. Smaller world crops in 1979 led to the decline in stocks of grain in mid-1980. Throughout this period the United States has shipped large amounts of foodstuffs to needy nations under various government assistance programs. The largest government-financed farm export program is P.L. H80, the Agriculture Trade Development and Assistance Act of 195a, as amended. ‘Export shipments under this Act totaled $1.1 billion in FY78. Additional assistance was provided under the Foreign Assistance Act of 1961, as amended, with about $475 million of agricultural products exported under operations of AID (The Agency for International Development administers this Act; USDA administers P.L. #80). AID shipments are split about equally between Egypt and Israel. Both programs have been influential in easing food shortages overseas and in moving surplus farm commodities away from domestic markets. cRs- 4 1373010 UPDATE-08/21/80 MAJOR RECIPIENTS OF FOOD AID SHIPMENTS UNDER GOVERNMENT PROGRAMS (million dollars, fiscal years) Country 1975 1976 1977 1978 Korea 78.2 63.0 72.1 63.3 Egypt 88.8 185.7 300.3 020.0 India 210.7 106.7 100.9 131.8 Israel 95.9 181.1 301.9 250.1 Indonesia 12.7 08.8 131.8 156.8 Somalia 1.6 0.9 0.1 10.9 Guinea 11.6 0 3.2 15.6 Philippines 10.0 17.3 08.9 15.1 Peru 5.7 6.3 0.7 17.0 Pakistan 100.0 106.0 51.6 60.2 Bangladesh 211.1 158.2 66.5 103.9 Algeria 0.0 0.0 5.3 0.1 Dominican Republic 5.8 9.7 9.2 5.0 Chile 52.2 59.2 17.1 5.6 Bolivia 5.1 0.90 '6.0 10.6 Jamaica 0 1.3 2.9 12.0 Morocco 16.6 10.2 20.7 27.8 Haiti 5.5 7.0 19.5 13.8 Jordan 8.3 1.6 11.0 10.? Sri Lanka (Ceylon) 23.5 8.9 39.9 37.7 Tunisia 8.7 3.9 13.5 18;9 Sudan 8.1 0.8 6.6 12.8 Total 1,223.5 1,122.2 1,521.2 1,500.0 CRS— 5 IB73010 UPDATE-08/21/80 The longer term, more permanent world food problem is due to factors other than weather, primarily population growth and rising affluence. World population growth adds an estimated 70 million persons per year to be fed. About 85% of this is located in developing countries where food deficits are chronic.. THE FOOD-POPULATION SITEATION K; A GLANCE Growth Rates 1967-77 Population 1222; Annual Developed Countries 10% 0.9% Developing Countries 27 2.5 world 19 1.8 Food Production Developed Countries 20% 1 .8% Developing Countries 38 3.3 World 25 2.3 The rapid growth of population in developing countries is a major factor behind the concern over long-term world food conditions. while annual average increases in food output have generally kept pace with growing demand, as the data above indicate, there is concern that shortages of land, water, fertilizer, and fuel may lower future rates of food growth., If this occurs, most of the impact will fall directly on ' populations in lower income nations, which are also the nations with the Highest rates of population growth. In turn, the developed, higher income nations could be faced with growing demands for more food aid. This set of circumstances stimulated the U.S. call for a world food conference in 197a. CRS- 6 IB73010 UPDATE-O8/21/80 - ~ 3 t.‘ r 1 1-: -.- V _,x , 4,,» -... sir . . 0.5. policy toward the world food situation is contained in several different legislative authorities and programs. One set of programs affects the amount of output that U.S. farmers produce. These programs authorize voluntary "set-aside" crop acreages if carryover stocks become burdensome. Whether or note farmers continue to overproduce, despite the set-aside programs, depends on the incentives provided by the marketplace and the programs. a s A second set of policies that affect the U.S. response to world food conditions are the price support programs that guarantee farmers a minimum iilevel of prices for their products. All such policies are, authorized by specific legislative enactments. The major farm legislation currently in force, the Food and Agriculture Act of 1977, as amended, provides farm price and income stabilization programs for a four-year period ending in 1981. The price support levels iincluded in that law are relatively modest, designed to allow domestic market. prices that reflect world market conditions. The target price provisions of the law provide additional income supplements to farmers if, market prices fall below the target prices. There is also provision for establishment of reserves of grain to be held by farmers and released at some future point when the need arises. In the evaluation of future farm legislation, several issues arise regarding world food conditions: ' 1 Are government policies sufficient to stabilize domestic food supplies and prices of livestock feedstnffs during periods of world food scarcity? Is the 0.5. grain marketing system "geared-up" to meet the need of the next period of world food shortage? ' Is food aid an effective tool or a disincentive to increasing food production in recipient countries? Are there ways of organizing a world food reserve that will protect low-income countries during times of drought or high world prices? To what extent are social and institutional changes in developing countries a necessary prerequisite to increased food production? Is the current investment in agricultural research sufficient to provide a continuing flow of new technologies in coming years? What role should the United States fill in the growing dilemma over world population growth and the pressure placed upon the plant's resources by the 70 million persons added each year? I-.§§.l.§l-.A.I.I.9.E H.R. nfl89 (Foley by request, et al.) Food Security Act of 1979. Declares it to be the policy of the United CRS- 7 IB73010 UPDATE—O8/21/80 istates to develop a wheat reserve solely to provide for emergency food needs in developing countries. Directs the President to establish a reserve stock of wheat of up to 4,000,000 metric tons. Authorizes the President to release such stocks on a donation or sale basis to provide emergency food assistance to developing countries at any time that domestic supply of wheat in the United States is so limited that quantities cannot be made available except for urgent humanitarian purposes. Authorizes the release of up to 300,000 tons of wheat in any fiscal year for urgent humanitarian relief in a developing country (or countries) suffering a major disaster. Exempts such reserve stocks from limitations which may be imposed under the Agricultural Trade Development and Assistance Act of 1950 and the Export Administration Act of 1969. Introduced June 15, 1979. H.R. 6635 (Zablocki et al.) Authorizes the establishment of a food security reserve of wheat, and has other related purposes. Introduced Feb. 27, 1980; referred to Committees on Agriculture and on Foreign Affairs. S. 962 (McGovern) Amends the Agricultural Trade Development and Assistance Act of 1954 to encourage self-reliance in developing countries. Introduced Apr. 10, '1979; referred to Committee on Agriculture, Nutrition and Forestry. §§AElE§§ 0-5. Congress. House. Committee on Agriculture. Subcommittee on Oilseeds and Rice and Subcommittee on Livestock and Grains. Exports of 0.5. agricultural commodities. Hearings, 95th Congress, 1st session. Oct. 12, 1977. Washington, 0.5. Govt. Print. Off., 1977. 130 p. 0.3.. Congress. Senate. Committee on Agriculture. Subcommittee on Foreign Agriculture Policy. Foreign food assistance and agricultural development. Hearings, 94th Congress, 1st session. Washington, 0.5. Govt. Print. Off., Apr. 1975. 106 p. §§£9§2§_A§2-QQ!§B§§§£Q!AL_2-§Q!EEI§ 0.5. Congress. Senate. Committee on Agriculture. Agriculture in a world of uncertainity: the potential impact of rising costs of production on agriculture and rural America. Apr. 10, 1975. Washington, 0.5. Govt. Print. Off., 1975. - At head of title: 9uth Congress, 1st session. Committee print. 0.5. Congress. Senate. Committee on Science and Technology. Agricultural research and development: background papers. September 1975. Washington, 0.5. Govt. Print. Off., 1975. At head of title: 94th Congress, 1st session. Committee print. 0.5. and world food security. Mar. 15, 197a. Washington, 0.3. Govt. Print. Off., 1974. 71 p. At head of title: 93d Congress, 2d session. Committee print. Hunger and diplomacy: World Food Conference. Print. Off., At head of title: print. 01/04/80 09/07/79 11/04/73 03/01/78 09/29/77 09/10/77 09/09/77 05/2Q/77 om/o5/77 10/13/75 903/O1/76 02/Zfl/76 05/01/75 08/10/73 03/29/73 CRS- 8 IB7301O UPDATE-08/21/80 A perspective on the U.S. role at the Feb. 4, 1975. Washington, U.S. Govt. 1975. Committee 94th Congress, 1st session. > QEEQEQLOGY OF EVE.1‘1.'«L‘§ President Carter announced 1979/80 grain sales to the Soviet Union will be restricted to the 8-million ton level agreed to under the 1975 U.S.-U.S.S.R. 5-year grain agreement. USDA estimated 1979 Soviet grain crop at 180 million tons compared to 237 million tons in 1978. Premier Kosygin announced in Moscow that the 1978 grain harvest would likely exceed 230 million tons, compared to an average 182 million tons between 1971-75. USDA established emergency reserves of feed grains for disaster relief. President Carter signed the 1977 farm bill into law, (P.L. 95-113). House passed final version of 1977 farm bill, 283-107. Senate passed final version of 1977 farm bill, 63-8. Senate passed S. 275, the Food and Agriculture Act of 1977, to extend farm income support programs and P.L. 480 programs for 5 years, and food stamp programs for 2 years.’ USDA raised price supports on feed grains (corn $1.75/bu, soybeans $3.50/bu, sorghum $1.70/bu, barley $1.50/bu, oats $0.72/bu, rye $1.50/bu). White House raised price supports on major grains m(wheat, $2.25/bu; corn, $1.50/bu) commodities. USDA established an office of General Sales Manager to administer the Commodity Credit Corporation credit programs, P.L. H80 and export sales monitoring programs. Target prices and loan rates for 1976 crops were revised upward by USDA. ’ President Ford vetoed the 1975 Emergency Farm Bill to raise support and target prices for farm products. The Agriculture and Consumer Protection Act of 1973, a four-year bill, became law (P.L. 93-86). \ Price ceilings placed on beef and other meats. CBS- 9 IB730'iO UPDATE-O8/2'3/30 01/11/73 -- All export subsidies terminated; livestock grazing permitted on set-aside. 03/22/72 —- Wheat—export subsidies ended. 06/29/72 - Russian wheat sale negotiations began. Economic Research Service. The world food situation and prospects to 1985. Foreign Agricultural Economic Report no. 98. December 197a. 0.5. Library of Congress. Congressional Research Service. International food reserves [by] Harvey R. Sherman. (Continuously updated) » pIssue Brief 7u1u2 -r-— Soviet agriculture and the grain trade [by] John P. Hardt and Corbin B. Lyday. (Continuously updated) Issue Brief 75070