In food aid crunch, U.S. reluctant to tap crop trust
By Missy Ryan - Analysis
Fri Mar 28, 2008 4:18pm EDT

WASHINGTON (Reuters) - As the United States scrambles to prevent soaring food prices from eating into global food aid programs this year, the Bush administration appears reluctant to tap a "rainy day" stash of almost a million tonnes of wheat.

The Bill Emerson Humanitarian Trust, which contains 915,000 tonnes of grain, mostly wheat, and $117 million in cash, was set up as a fund of last resort when hunger emergencies erupt in the world's most vulnerable corners.

Several members of Congress, including Kansas Republican Jerry Moran, will send a letter to President George W. Bush next week, calling for extra funding for U.S. and U.N. food aid programs, an aide said.

They will also ask the administration to tap the crop trust for the first time since 2005, when hundreds of thousands of tonnes were used to help staunch famine in Africa.

Officials at the U.S. Agency for International Development, which runs the largest food aid program, and the Agriculture Department, which decides when to release crops from the trust, have not said whether they will tap the trust any time soon.

But its wheat -- stored and maintained in silos at a cost of millions of dollars a year -- takes on new importance as officials struggle with what many experts predict is a permanent upward shift in global crop and food prices.

USAID, whose flat budget is shrinking relative to soaring food prices, is bracing itself for reducing food donations unless it receives a last-minute funding injection from Congress.

After global food prices shot up close to 40 percent in 2007, the U.N. World Food Program has been sounding the alarm, too, as it seeks an extra $500 million or more for this year.

Despite a sharp drop in the last two weeks, wheat prices are still more than double what they were a year ago.

Corn and soybeans have had a record run, too, as investors pour money into commodity markets now driven by growing biofuel production and rising incomes in the developing world.

Against that backdrop, some aid groups say the time is right to tap the trust, a separate vehicle for food aid, especially as the clock ticks on the Bush administration's request for $350 million in supplemental food aid funding for fiscal 2008. Congress is not likely to vote on that petition, part of a larger Iraq spending bill, before late next month.

"It would be timely for the administration to use the trust to fill in the gap," Ellen Levinson, who heads an umbrella group of more than a dozen aid groups, said recently.

Sources in the aid community believe there may be resistance within the Bush administration to using the trust, which would require off-budget costs associated with shipping crops to distant lands and with replenishing what is taken from the trust.

ARE THINGS BAD ENOUGH?

There is also debate about whether the current price surge, which has triggered riots in poor nations and prompted some countries to impose export and price controls, constitutes a true "emergency."

Some fear tapping the trust would leave little on hand if a cataclysm -- such as the 2004 tsunami -- were to strike.

"The supplemental request approach makes more sense as a way to compensate for short-term, unanticipated price rises," said Emmy Simmons, a former senior official at USAID.

"As a taxpayer, of course, I begin to see an issue when the 'unforeseen -- need a supplemental' approach is used repeatedly," Simmons said.

In recent weeks, the chorus of voices has grown in favor of greater last-minute spending on food aid, with some suggesting the supplemental funding be as much as $600 million.

At the same time, many onlookers say deep reforms to U.S. food aid programs are needed to ensure the current squeeze is not repeated if prices indeed remain high.

Charles Uphaus, an expert on foreign aid at Bread for the World, says the time has come to overhaul a program designed in part to manage crop surpluses after World War Two.

"Higher prices should lead to a new approach to food aid, as it destroys the tattered remnants of the argument that we should buy U.S. commodities to help U.S. farmers," he said.

Many onlookers suggest scrapping rules that require shipping U.S. crops to places in need, rather than buying crops close to crisis zones, which is cheaper and faster.

"The parties with the most at stake in the food aid program are the processors and shippers, and they wield a lot of clout," said Uphaus.

The Senate is proposing some changes to the trust in the 2008 farm bill, now winding its way through Congress. The Senate bill would permit the use of futures contracts to hedge against price risks, but it is uncertain if the provision will be part of a final House-Senate version of the bill.

(Editing by Matthew Lewis)


Original article: Reuters
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