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47–118 PDF 2009

S. HRG. 110–717 

RESPONDING TO THE GLOBAL FOOD CRISIS 

HEARING 

BEFORE THE

COMMITTEE ON FOREIGN RELATIONS 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

MAY 14, 2008 

Printed for the use of the Committee on Foreign Relations 

( 

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html 

COMMITTEE ON FOREIGN RELATIONS 

JOSEPH R. BIDEN, JR., Delaware, Chairman 

CHRISTOPHER J. DODD, Connecticut 

JOHN F. KERRY, Massachusetts 

RUSSELL D. FEINGOLD, Wisconsin 

BARBARA BOXER, California 

BILL NELSON, Florida 

BARACK OBAMA, Illinois 

ROBERT MENENDEZ, New Jersey 

BENJAMIN L. CARDIN, Maryland 

ROBERT P. CASEY, JR., Pennsylvania 

JIM WEBB, Virginia 

RICHARD G. LUGAR, Indiana 

CHUCK HAGEL, Nebraska 

NORM COLEMAN, Minnesota 

BOB CORKER, Tennessee 

GEORGE V. VOINOVICH, Ohio 

LISA MURKOWSKI, Alaska 

JIM DEMINT, South Carolina 

JOHNNY ISAKSON, Georgia 

DAVID VITTER, Louisiana 

JOHN BARRASSO, Wyoming 

ANTONY J. BLINKEN, Staff Director 

KENNETH A. MYERS, JR., Republican Staff Director 

(II)

C O N T E N T S 

Page 

Biden, Hon. Joseph R., Jr., U.S. Senator from Delaware, opening statement ... 1 

Cardin, Hon. Benjamin L., U.S. Senator from Maryland ..................................... 35 

Casey, Hon. Robert P., Jr., U.S. Senator from Pennsylvania, statement ........... 32 

Corker, Hon. Bob, U.S. Senator from Tennessee, statement ............................... 21 

Feingold, Hon. Russell D., U.S. Senator from Wisconsin, statement .................. 23 

Fore, Hon. Henrietta, Administrator, U.S. Agency for International Development and Director of U.S. Foreign Assistance, Washington, DC ..................... 6 

Prepared statement .......................................................................................... 9 

Responses to questions submitted by Senator Russell Feingold .................. 78 

Isakson, Hon. Johnny, U.S. Senator from Georgia, statement ............................ 34 

Lazear, Hon. Edward P., Chairman, Council of Economic Advisers, Executive 

Office of the President, Washington, DC ........................................................... 11 

Prepared statement .......................................................................................... 13 

Lugar, Hon. Richard G., U.S. Senator from Indiana, statement ......................... 4 

Lyons, James R., vice president for Policy and Communications, Oxfam America, Washington, DC ............................................................................................ 59 

Prepared statement .......................................................................................... 64 

McPherson, Hon. M. Peter, president, National Association of State Universities and Land Grant Colleges, Washington, DC ............................................. 51 

Prepared statement .......................................................................................... 53 

Menendez, Hon. Robert, U.S. Senator from New Jersey, statement ................... 27 

Murkowski, Hon. Lisa, U.S. Senator from Alaska, statement ............................. 29 

Nelson, Hon. Bill, U.S. Senator from Florida, statement ..................................... 20 

Sheeran, Hon. Josette, Executive Director, World Food Programme, United 

Nations, Rome, Italy ............................................................................................ 40 

Prepared statement .......................................................................................... 43 

Voinovich, Hon. George V., U.S. Senator from Ohio, statement .......................... 24 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

International Food Policy Research Institute, prepared statement by Joachim 

von Braun and Rajul Pandya-Lorch ................................................................... 80 

Maritime Food Aid Coalition, prepared statement by Bryant E. Gardner ......... 83 

(III)

(1) 

RESPONDING TO THE GLOBAL FOOD CRISIS 

WEDNESDAY, MAY 14, 2008 

U.S. SENATE, COMMITTEE ON FOREIGN RELATIONS, Washington, DC. 

The committee met, pursuant to notice, at 9:33 a.m., in room 

SD–419, Dirksen Senate Office Building, Hon. Joseph R. Biden, Jr. 

(chairman of the committee) presiding. 

Present: Senators Biden, Feingold, Bill Nelson, Menendez, 

Cardin, Casey, Lugar, Hagel, Corker, Voinovich, Murkowski, Isakson, and Barrasso. 

OPENING STATEMENT OF HON. JOSEPH R. BIDEN, JR., 

U.S. SENATOR FROM DELAWARE 

The CHAIRMAN. Today the Committee on Foreign Relations will 

examine a topic that is making headlines around the world: The 

global food crisis. The famous Nobel laureate, the father of the 

Green Revolution, had a great quote I thought some time ago. He 

said: ‘‘Without food, man can live’’—excuse me. ‘‘Without food, man 

can live at most but a few weeks. Without it, all other components 

of social justice are meaningless.’’ 

Today we meet here with millions of men and women around the 

world, and children as well, facing the fact of hunger and starvation. The price of indispensable staples—wheat, rice, and maize— 

has doubled in the last 3 years. People are worried, they’re angry, 

and some are even rioting. From Haiti to Egypt, to Bangladesh, 

riots have broken out as people demand the right for affordable 

food. 

For millions of people in the world who live on less than a dollar 

a day, higher food prices are the difference between a full stomach 

and hunger. For many it’s the difference between life and death. 

The effects of the global food crisis are also felt here in the 

United States of America. At home, the price of eggs has jumped 

35 percent. It was interesting, if I can be anecdotal for a minute. 

My mother is 91 years old and lives with me and I take her shopping at the local supermarket. I got such an earful from my mother 

last time around, Dick, her pointing out at 91 she doesn’t ever remember prices rising so quickly. And I kept telling her: Mom, it’s 

OK; you will not starve. 

But all kidding aside, it’s amazing the impact food, even in the 

United States, is having on retired people, people of modest income 

and without any help. A gallon of milk costs 23 percent more. Even 

Sam’s Club and Costco are limiting the amount of rice consumers 

can purchase at any one moment. 

2 

This crisis has caught policymakers unprepared. For 20 years, 

foreign assistance funding for agricultural development has been 

declining. This is not a criticism of the Bush administration. It was 

declining during the Clinton administration and the former Bush 

administration. Necessary investments in my view have not been 

made. Donor nations lack a coherent food security strategy and our 

response has been, I think, somewhat belated and disjointed. 

The typhoon that devastated Burma, the earthquake that hit 

China, these natural disasters bring their own challenges. But the 

food crisis, which has been called a silent tsunami, didn’t come 

without warning. Many of the factors have been obvious for years. 

This crisis is, to state what everybody and all our witnesses I’m 

sure agree, is unacceptable morally and it’s unsustainable politically and economically. 

Along with Senator Lugar, I recently convened a series of hearings on smart power to examine whether we have the right institutions and nonmilitary instruments to deal with the new threats 

and challenges. The global food crisis is just such a new challenge. 

Our response exposes our weaknesses, but it also points the way 

to needed reform. 

Experts, many of whom we have here today, experts cite many 

factors for today’s high food prices. Few seem to be new. Without 

proper planning, foresight, and coordination, this crisis might have 

been managed—with proper foresight. But we’ve not changed 

course as the price of food has nearly doubled in the last 3 years. 

Only now, with widespread hunger and civil unrest, has the drumbeat of concern reached a high enough pitch to awaken us to take 

action. 

As all of the world’s religions tell us, we have a moral obligation 

to feed the hungry. We once had the vision to do that. It was called 

the Green Revolution. It transformed agricultural practices in 

countries from Mexico to India. It allowed food production to keep 

pace with population growth and it saved a generation from famine 

and starvation. It was a model of what vision, planning, and 

resources can do. 

But since then our global food policy has lacked vision, lacked 

planning, and I believe, lacked resources. Without concerted action 

from our government and the international community, I think 

we’re in danger of erasing recent progress to eradicate hunger and 

poverty. 

The World Bank estimates that potentially 100 million new people could slip back into extreme poverty because of high food prices. 

Today I am asking and I am inquiring of the witnesses for a new 

approach to food policy and the global food crisis. I believe it’s imperative we rededicate resources and attention in four areas, the 

details of which I’m anxious to have fleshed out for us by many of 

our witnesses. 

First, in my view we need to reinvest in agricultural development. Some have called for a new deal for global food policy. I support those calls. What the world needs is a second Green Revolution and that means funding for innovation, research, and new 

techniques. 

Second, it seems to me we need to make sure institutions are organized effectively to address the food challenge. A report from the 

3 

Government Accounting Office to be released later this month concludes that the United States and other donors have not made food 

security—that is cutting hunger in half by 2015—a top priority. 

This report also shows that we lack an integrated strategy for dealing with agricultural development and food policy. Various U.S. 

agencies are pursuing isolated agricultural strategies that don’t 

seem to share a common vision. Reform needs to happen quickly 

and immediately, the details of which again are important and 

hopefully we’ll discuss them as well. 

Third, we should ask the hard questions about existing food policy. Does our current biofuel policy, which I have supported, divert 

too much corn from fuel—from food to fuel? Does it make sense? 

How much is it diverting? What are the consequences of it? I hear 

estimates everywhere from 3 to 30 percent, and I think I’m anxious 

to hear what the witnesses have to say. 

Should we provide more flexibility for our food aid program and 

allow USAID to locally purchase, as the administration has suggested, locally purchase food abroad to feed the hungry people, instead of requiring them to buy American and all the transportation 

costs associated with transporting that food? 

Finally, the international community should consider a global 

compact on food that eliminates crippling food tariffs afflicting the 

poorest countries. For those countries trade is not a matter of competition. It’s simply a matter of fairness. 

Both panels today are well placed to help us with the inquiry 

and to address these three critical questions: Why is there a food 

crisis? Could we have avoided the crisis? And how do we need to 

respond in the immediate and in the future to this crisis? 

Administrator Henrietta Fore and the Chairman of the Council 

of Economic Advisers is here today, a very distinguished panel, and 

they’re going to start the hearing. They are at the forefront of U.S. 

Government efforts to respond to the food crisis. 

I understand, Administrator, you’re just back from Burma and 

facing the aftermath of that typhoon. 

In our second panel we’ll be joined by Executive Director Sheeran 

of the U.N. World Food Programme and Dr. Peter McPherson, 

former Administrator of USAID and president emeritus of Michigan State University; and James Lyon, vice president of Communications and Policy of Oxfam. 

I would close with the following quote that my staff found for me 

from President Kennedy. He said: ‘‘Never before has man had such 

a capacity to control his own environment, to end thirst and hunger, to conquer poverty and disease, to banish illiteracy and massive human misery. We have the power to make this the best generation of mankind in the history of the world or to make it the 

last.’’ 

That was more than a generation ago. It seems to me it still 

holds today. 

So I look forward to hearing the testimony this morning, and I 

will yield to Senator Lugar, who has a genuine expertise in this 

area after years of having been chairman of not only this committee but the Agriculture Committee, and a senior member on 

that committee as well. 

Senator Lugar. 

4 

STATEMENT OF HON. RICHARD G. LUGAR, U.S. SENATOR 

FROM INDIANA 

Senator LUGAR. And a family farmer. 

The CHAIRMAN. I beg your pardon. And a family farmer. 

Senator LUGAR. I join you, Mr. Chairman, in welcoming our distinguished witnesses to this hearing examining global food supply 

shortages and the United States response. I applaud the administration for its announcement on May 1 that it intends to increase 

food and development assistance by $770 million, in addition to a 

pending supplemental request for $350 million and the release of 

$200 million from the Bill Emerson Humanitarian Trust. 

The U.S. Agency for International Development, the World Food 

Programme, and the Food and Agricultural Organization estimate 

that people in nearly 40 countries are now facing food shortages 

and potential social unrest because of the increase in food prices 

and the decrease in the global availability of some cereal grains. 

The current crisis has developed from a complex web of factors. 

Expanding affluence in emerging economies, like China and India, 

has improved diets for hundreds of millions of people and led to increased global demand for food. Simultaneously the highest oil 

prices on record have driven up food costs all along the farm-tomarket chain. The surge in oil prices has increased transportation, 

packaging, and fertilizer costs and provided the impetus for developing alternative fuels such as ethanol. 

We’ve also experienced droughts in some food exporting countries, expanded trade barriers, a weakening of the U.S. dollar, increased commodity speculation, and market-distorting subsidies. 

These factors have come together to make the current food problem particularly acute. But we should be clear that food shortages 

are likely to recur frequently if the United States and the global 

community fail to open up agricultural trade and invest in agricultural productivity in the developing world. Unfortunately, the 

United States and other international donors have deemphasized 

assistance for rural development and agricultural productivity. In 

1980 agricultural projects accounted for 30 percent of the World 

Bank’s lending. By 2007 they represented less than 13 percent. 

U.S. foreign assistance for agriculture has declined from an average of a little over $1 billion annually in the 1980s to an average 

of $328 million since 2000. 

Globally, only 4 percent of official development assistance from 

all donors in 2007 was allocated for agriculture. This amounts to 

neglect of what should be considered one of the most vital sectors 

in the elimination of poverty. In fact, two new studies from the 

U.N. Department of Economic and Social Affairs show that funds 

spent on agriculture are more beneficial to economic growth than 

spending in other sectors. 

The effects of the current food situation likely would have been 

ameliorated if more of the world’s poor farmers had access to better 

technology, titled land, small loans, extension support, and accessible markets. 

Beyond resources, we need a more constructive debate about biotechnology and agricultural trade. World leaders must understand 

that over the long term satisfying global demand for more and better food can be achieved only by increasing yields per acre. In the 

5 

1930s my father, Marvin Lugar, produced corn yields of approximately 40 to 50 bushels per acre. Today Lugar Farm yields about 

150 bushels per acre on the same land in Marion County, IN. 

The Green Revolution from 1965 to 1985 saw the introduction of 

high-yield seeds and improved agricultural techniques that 

resulted in near doubling of cereal grain production per acre over 

20 years. But yields may have to be doubled or tripled again. Increasing acreage under production or ending the use of biofuels will 

not satisfy the growth in food demand and these steps come with 

serious environmental and national security costs. 

We need a second Green Revolution that will benefit developed 

and developing countries alike. 

In the context of global food shortages, Europe has to reexamine 

its opposition to genetically modified seeds that have the potential 

to dramatically increase yields. Global food shortages also should 

prompt reconsideration of the protectionist world agricultural trade 

system and the harmful farm subsidies of Europe and the United 

States. 

Even as we increase yields, we must scale back agricultural subsidies and trade barriers that raise prices and undercut many 

farmers in the developing world. These policies are distorting agricultural trade and decisionmaking on a global scale and preventing 

many potentially productive farmers in the developing world from 

accessing markets. 

In most cases agricultural subsidies and trade barriers have no 

rational basis other than the protection of politically powerful constituencies. The United States should seek commitments to double 

current levels of agricultural assistance and remove export barriers 

and import tariffs. We should also enhance our leadership on agricultural research by maintaining support for a U.S.-created network of global research centers. 

Some critics have singled out corn ethanol as the primary culprit 

in the food crisis and they have called on Congress to scale back 

or even halt corn ethanol production. In effect, they ask us to 

choose between feeding the hungry or producing biofuels. But increased demand for corn-based biofuels is just one of numerous factors that have contributed to higher food prices. Compared to last 

year’s 146-percent price increase for wheat, 70-percent increase for 

rice, neither of which is used for biofuels, the 46-percent increase 

in corn was relatively modest. 

While we should understand the impact of biofuels on fuel supply, we must not lose sight of why our Government is attempting 

to stimulate biofuel use. Chairman Biden and I have held at least 

a dozen hearings in the last few years that have highlighted the 

extreme national security and environmental risk of our dependence on imported oil. The United States deliberately undertook a 

program to develop biofuels because it is one of the best immediate 

responses to our acute energy vulnerability and the problem of 

climate change. 

Cutting ethanol production now would leave us even more 

vulnerable to the political whims of governments that control 80 

percent of the world’s oil reserves. The enrichment of these governments obstructs many of our major foreign policy objectives, includVerDate Nov 24 2008 14:53 Feb 10, 2009 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 H:\DOCS\FOODCRIS BETTY
6 

ing our efforts to end the genocide in Darfur, to stop Iran’s nuclear 

program, to combat terrorism, to bring peace to the Middle East. 

Rather than cutting production of ethanol, we should replace the 

current ethanol subsidy system with an oil price floor that will provide assurances to long-term investors in all renewables, and we 

should eliminate the import tariff on ethanol to admit supplies 

from Brazil made from sugar cane. 

If corn biofuel production is curtailed, we will see additional 

pressure on global oil prices and a withering of the nascent biofuel 

distribution infrastructure, and that infrastructure is essential if 

we are to hasten the commercialization of cellulosic technology, 

which promises abundant ethanol from nonfood sources like switchgrass and forest waste. Cellulosic technology has the potential to 

far outrun corn in the volume of ethanol produced and it can do 

so at a lower cost. Wide commercialization of cellulosic ethanol 

would radically improve the energy outlook for rural areas all over 

the world. 

Finally, we should remember that the world’s poor are suffering 

not just from high food prices, but from the staggering effects of 

$120-per-barrel oil. Developing countries are more dependent on 

imported oil, their industries are more energy intensive, and they 

use energy less efficiently. Fertilizer and fuel for agricultural 

machinery is dramatically more expensive. 

Without a diversification of energy supplies that emphasizes environmentally friendly options, the national incomes of energy-poor 

nations will remain depressed, with negative consequences for stability, development, disease eradication, and nutrition, unfortunately. 

I appreciate especially this opportunity to engage our witnesses 

today on these topics. They are well prepared to enhance our discussion. 

I thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much, Senator. 

The floor is yours, madam. Welcome again. Thank you for being 

here. 

STATEMENT OF HON. HENRIETTA H. FORE, ADMINISTRATOR, 

U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT AND 

DIRECTOR OF U.S. FOREIGN ASSISTANCE, WASHINGTON, DC 

Ms. FORE. Thank you very much, Mr. Chairman. 

The CHAIRMAN. I might add, I should have said and I had in my 

statement that I compliment the administration on its moving now 

very aggressively to deal with this problem. 

Ms. FORE. Thank you, Mr. Chairman. Your outline of your points 

I think has a great deal of congruity with the plans that we’ve been 

thinking about, so I think we have a very good basis to build on 

for the future. So thank you. 

Senator Lugar, yes, we believe we need to invest more in agriculture and in biotech and in production and productivity throughout the developing world. So I thank you both very much for your 

comments. 

Today we are facing an extraordinary number of humanitarian 

crises that strike the hardest at the world’s most destitute people. 

It is times like these where, working in close collaboration with 

7 

Congress, America’s humanitarian global leadership performs at its 

highest level. 

Yesterday I returned from Burma, where Admiral Keating, Commander of the United States Pacific Command, and I accompanied 

the initial C–130 relief flight, which brought basic humanitarian 

supplies such as bottled water, blankets, mosquito nets, for the 

Burmese people. 

Clearly, we face major challenges ensuring that our assistance 

reaches those most in need. We are in a race against time, as 

hundreds of thousands of Burmese are in extremely dire circumstances. 

The catastrophic cyclone in Burma, hitting that country’s major 

rice-producing region in the middle of the rice harvest, is a reminder of the fragile food situation we face in many developing 

countries. We are in the midst of a global food crisis unlike other 

food crises that we have faced, one that is caused not simply by 

natural disasters, conflict, or any single event such as a drought. 

It is not localized, but pervasive and widespread, affecting the poor 

in developing countries around the world. 

From January to December 2007, the International Food Price 

Index rose by 43 percent, compared with just 9 percent in 2006. 

While sharply higher prices have been welcome news for some 

farmers, they mean hardship for many and for the poorest, subsisting on $1 a day or less, food price increases mean deprivation 

and real hunger. 

For the poorest 1 billion, living on just a dollar per day, very 

high food prices mean stark choices between taking a sick child to 

the clinic, paying school fees, or putting food on the table. Africa 

and Asia are suffering the most, but even in our own hemisphere 

Haiti is gravely affected. 

Experts tell us that the situation underlying the crisis is not a 

temporary one and demand for grain is outstripping supply. Our 

response is therefore three-pronged. We integrate immediate, near 

term, and longer term components, all of which are needed to 

address the core causes of chronic hunger. We plan to increase our 

efforts in three key areas: 

First, expand our humanitarian assistance, looking at the most 

critical needs globally; two, attack the underlying causes of food insecurity through a significant increase in staple food production; 

and third, address policy barriers and trade policies that are adversely impacting food prices. 

We will save lives both through short-term, immediate food 

assistance and long-term help to increase agricultural production 

so that food, whether domestically produced or traded, is both more 

available and more affordable. We will respond to urgent needs, 

but also will help small farmers increase production of key food 

staples in targeted countries and regions. 

Because the underlying condition of this situation is impacted 

primarily by the increase in price rather than the global supply of 

food, newly affected hungry people, especially those in urban areas, 

can be assisted through carefully targeted assistance. For example, 

targeted voucher programs can help the poorest access basic food 

staples without undermining commercial incentives for local food 

production and marketing. 

8 

As you know, the President moved quickly by requesting $770 million on May 2. Of that, $395 million will enable USAID’s Food 

for Peace Office to meet its ongoing emergency needs by maintaining purchasing power and addressing new food needs in both rural 

and urban areas. 

In addition, $225 million of international disaster assistance will 

support critical nutrition interventions: Increase access to farm 

inputs such as seed and fertilizer; improve abilities to monitor 

widespread vulnerability; and local procurement and distribution of 

commodities to stimulate production in surplus areas. 

Our immediate efforts will help provide stability in the short 

term. This will provide the foundation to achieve medium and 

longer term goals that will help increase supply. 

Years of high growth and low prices result in reduced attention 

to, and investment in, agriculture, rural infrastructure, and markets. The President’s emergency request will therefore increase our 

own investment by $150 million for fiscal year 2009 in agricultural 

development assistance funding and work to leverage additional 

resources from the private sector. 

We are seeking to increase our investment in agricultural research, harnessing science and technology to boost productivity 

growth and environmental sustainability, and we will continue to 

urge countries to end commercial trade and food aid restrictions on 

biotechnology-based crops. As we have seen in past food crises, distribution of food aid can be significantly complicated by barriers to 

biotechnology crops. 

I urge members of this committee to take the leadership role in 

overcoming global barriers to the use of modern science to help 

solve the problem of chronic world hunger. 

We are also reaching out to our G–8 partners, applauding their 

efforts and encouraging them to do still more. This June I will be 

part of our delegation to the United Nations Food and Agricultural 

Organization high-level conference on world food security, at which 

global leaders will gather to coordinate efforts to meet this 

challenge. 

Partnership with the private sector and with nongovernmental 

organizations features prominently in these efforts. We will continue to invest in markets and work with countries and regional 

institutions to foster trade and the rapid movement of food from 

areas with excess supply to those where shortages are occurring. 

Taking a whole of government approach, we will work closely 

with partner countries, the World Bank, the IMF, foundations, and 

other organizations to encourage wise policies that favor agricultural trade, avoiding export restrictions and other market interventions that exacerbate the supply-demand imbalance. We are 

advancing agreements on trade in the Doha Round and promoting 

national and regional commitments to invest in agriculture. 

United States leadership is essential and failure is not an option. 

Though I’ve concentrated on the causes of the problem and its solution, we must never lose sight of the terrible cost—terrible human 

cost—of hunger. Even short-term hunger can unalterably affect a 

child by exposing him or her to disease, threatening normal cognitive development and lifelong productivity, and, tragically, even 

early death. 

9 

Yet the problem posed by high food prices is one we know how 

to solve. In doing so we can recommit to ending this scourge of 

chronic hunger. 

Thank you very much and I’d be happy to answer any questions. 

[The prepared statement of Ms. Fore follows:] 

PREPARED STATEMENT OF HENRIETTA H. FORE, DIRECTOR OF U.S. FOREIGN ASSISTANCE AND ADMINISTRATOR OF U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT, 

WASHINGTON, DC 

Thank you Chairman Biden, Ranking Member Lugar, and distinguished members 

of the committee. I appreciate the opportunity to be here today to address this important issue. 

We are in the midst of a global food crisis unlike other food crises we have faced; 

one not caused by natural disasters, conflict or any single event such as drought. 

It is not localized—instead it is pervasive and widespread, affecting the poor in developing countries around the world. 

I just returned last night from Burma, where Admiral Keating, Commander of the 

U.S. Pacific Command and I accompanied the initial C–130 relief flight, which 

brought basic humanitarian supplies such as mosquito nets, blankets, and bottled 

water to the Burmese people. The catastrophic cyclone in Burma, hitting that country’s major rice producing region in the middle of the rice harvest, is a reminder 

of the fragile situation we face in many developing countries. As I stood watching 

our aid ‘‘From the American People’’ move one step closer to reaching those in desperate need, I realized once again the impact our efforts can have around the world. 

The international food price index rose by 43 percent from March 2007 to March 

2008, compared with just 9 percent in 2006. While sharply higher prices have been 

welcome news for some farmers, they mean hardship for many, and for the poorest 

subsisting on $1/day or less, food price increases mean deprivation and real hunger. 

For the poorest 1 billion, living on just a dollar per day, very high food prices can 

mean stark choices between taking a sick child to the clinic, paying school fees, or 

putting food on the table. These are the people who already were spending half or 

more of their meager incomes on food. Their options are few—eating cheaper, less 

nutritious foods, skipping meals, or simply going without. Africa and Asia are suffering most, but even in our own hemisphere, Haiti is gravely affected. Children are 

especially vulnerable; the World Health Organization maintains that more than half 

of all early childhood deaths are linked to underlying malnutrition. While malnutrition is often due to disease and causes other than inadequate calories, insufficient 

food is an important factor. 

The rapidly increasing cost of food is also weakening the ability of governments 

of both poor and middle-income countries to sustain growth, protect the vulnerable, 

or even to maintain order. The fear of food riots, even in some middle-income countries, presents a new dynamic that puts pressure on sound decisionmaking for longterm growth and stability. The same high prices also limit our own ability to respond to critical emergency needs around the world through our food-aid programs. 

Experts tell us the situation underlying the crisis is not a temporary one; demand 

for grain is outstripping supply. A decades-long decline in real food prices due to 

new technology and more efficient markets and trade has been rapidly reversed, 

with far-reaching consequences. Current global stocks of grain make prices even 

more sensitive to shocks, whether from a drought in Australia or floods in our Midwest. 

What has led to these sudden changes in food prices? Rapid worldwide economic 

growth, the associated dietary shifts to grain-intensive livestock products, and the 

expanded use of biofuels as a less significant factor, are all demand side factors that 

have boosted prices. On the supply side, droughts, a lack of investment in technology and markets, and competition for land and water have slowed production 

growth in some countries. Restrictive trade policy responses by major exporting 

countries have led to further price increases. Higher energy costs have raised the 

cost of production for farmers and have increased the costs of getting goods to the 

market. Thus, a range of fast onset and slower building factors have combined to 

fundamentally alter the food supply and demand balance, with the resulting high 

prices expected to persist for at least the next few years. 

Our response is three-pronged, integrating immediate, near term, and longer term 

components, all of which are needed to address the underlying causes of chronic 

hunger. We plan to increase our efforts in three key areas: (1) Expand humanitarian 

assistance, looking at the most critical needs globally; (2) attack the underlying 

10 

causes of food insecurity through a significant increase in staple food production; 

and (3) address policy barriers and trade policies adversely impacting food prices. 

Humanitarian food assistance is critical to stabilizing the worst aspects of the crisis, but it alone will not provide a durable solution. Our approach spans protection 

for the vulnerable growth in agricultural production consistent with market principles, access to markets and advancement of global policy solutions that foster 

trade and investment in agriculture. 

Thus, we will save lives both through short-term immediate food assistance and 

long-term help to increase agricultural production, so that food, whether domestically produced or traded, is both more available and more affordable. We will respond to urgent needs, but also will help small farmers increase production of key 

food staples in targeted countries and regions. 

We seek to take full advantage of new approaches toward meeting humanitarian 

needs and expanding development investment as we respond to this new kind of 

food crisis. Our response must be swift, innovative, and well-targeted, and directly 

address the structural threat of hunger. 

There are millions of newly hungry people in rural and urban settings as a result 

of rising prices. Our immediate aid efforts will focus on humanitarian goals of protecting lives and livelihoods, especially for those in urban environments and for the 

rural landless. Additionally, these efforts will support political and economic stability necessary to transition to nonemergency social protection interventions and 

longer term efforts to increase food production. 

Because the underlying condition of this situation is impacted primarily by the 

increase in price, rather than the global supply of food, newly affected hungry people, especially those in urban areas, can be assisted through carefully targeted assistance. For example, targeted voucher programs can help the poorest obtain basic 

food staples without undermining commercial incentives for local food production 

and marketing. 

The scope of the current problem underscores the need to make our food aid programs as effective and as efficient as possible. This is one of the reasons why the 

administration continues to seek the ability through legislation to use up to 25 percent of P.L. 480 Title II funds for the local purchase of food aid commodities. Under 

the current system, U.S. procured commodities can take up to 6 months to reach 

the beneficiaries. In addition, less than half of every dollar spent actually goes to 

purchasing food in the United States. Local purchase authority will increase the 

timeliness and effectiveness of the U.S. response to overseas food aid, especially in 

urgent situations requiring a strategic response, and also helps create markets for 

local farmers. 

Of the $770 million requested by President Bush on May 2, $395 million will enable USAID’s Office of Food for Peace to meet its ongoing emergency needs by maintaining purchasing power and addressing new food needs in both rural and urban 

areas. An additional $225 million of International Disaster Assistance will provide 

support for programs such as critical nutritional interventions, increased access to 

farm inputs, improved ability to identify, monitor and respond to vulnerability, and 

local procurement and redistribution of commodities to meet urgent needs for vulnerable populations while stimulating production in surplus areas. 

Our immediate efforts will help provide stability in the short term. This will provide the foundation to achieve medium and longer range goals that will help increase supply. The starting point is the recognition that growth in agriculture has 

for some time not been keeping pace with demand. In developing countries between 

the 1960s and 1980s, yields of the main cereal crops increased by 3–6 percent a 

year. Now annual growth is down to 1–2 percent below the increase in demand. 

Years of high growth and low prices resulted in reduced attention to, and investment in, agriculture, rural infrastructure, and markets. The President’s emergency 

request will allow us to begin to reverse this by increasing our own investment by 

$150 million in FY 2009 in agriculture development assistance funding while working to leverage additional resources from the private sector. 

We are seeking to increase our investment in agricultural research, harnessing 

science and technology and its application to boost productivity growth and environmental sustainability. We will continue to urge countries to end restrictions to acceptance of biotechnology-based crops, in either commercial trade or food aid. As we 

have seen during past food crises, distribution of food aid can be significantly complicated by barriers to biotechnology crops. 

As Nobel Peace Prize laureate agronomist Norman Borlaug and others have argued, we must end the debate over the benefits of biotechnology-based crops. The 

United States is uniquely positioned both scientifically and politically to apply agricultural biotechnology as a tool in building global food security. As we have seen 

11 

with corn and cotton already, biotech crops that are resistant to pest and disease 

can boost productivity in developing countries. 

We are developing and preparing to deploy new strains of wheat that are resistant to the emerging stem rust epidemic that Dr. Borlaug warns is making its way 

toward the breadbasket of South Asia. As part of our strategy for the medium term, 

we will continue investment in development of biotech food staples for use in Asia 

and Africa, where we have developed varieties of cassava, cowpea, potato, and other 

crops that lower costs and boost production. We also are making a major investment 

in development of drought tolerant rice and wheat for South Asia, to increase food 

security and provide a bulwark against the effects of climate change. 

I urge the members of this committee to take a leadership role in helping overcome any global barriers to using modern science in an effort to help solve the problem of chronic world hunger. 

We are reaching out to our G–8 partners, applauding their efforts and encouraging still more. This June I will help lead the U.N. Food and Agriculture Organization (FAO) High Level Conference of World Food Security at which global leaders 

will gather to coordinate efforts to meet this challenge. Partnership with the private 

sector and nongovernmental organizations features prominently in these efforts. 

We will continue to invest in markets and work with countries and regional institutions to foster trade and rapid movement of food from areas with excess supply 

to those where shortages are occurring. We will step up efforts to promote more efficient flow of goods and services through value chains and regional trade corridors, 

especially in Africa where markets are still poorly developed. USAID support for 

commercial input markets for seeds and fertilizers, and output markets for commodities, will help to increase overall productivity, drive down costs, and make food 

more accessible. 

Productivity interventions in agriculture are some of the most effective drivers of 

poverty reduction and food security. Maximizing the management of scarce water 

resources, drought resistance seeds, and affordable fertilizers will help address the 

root problems of the world’s poorest people, 70 percent of whom live as small 

farmers. 

Sound policy approaches are critical to sustaining long-term growth and affordable food supply. Taking a whole of government approach, we will work closely with 

other donors, partner countries, the World Bank, IMF, foundations and other organizations to encourage wise policies that favor agricultural trade, avoiding export restrictions and other market interventions that exacerbate the supply-demand imbalance. We are advancing agreements on trade in the Doha round, promoting best 

practices and sound analysis on production of biofuels, and promoting national and 

regional commitments to invest in agriculture. 

I am confident we—the U.S. and other donors—can stem and reverse the supplydemand imbalance that exists in food staples. We know how to do it—we know what 

works and what does not; we know that we must rely much more on the private 

sector and on broad alliances than was the case in the first Green Revolution. We 

have new tools, and we need to use them: Markets, trade, and science will transform our approach. 

Political leadership can help solve this crisis. Within the last 2 weeks alone we 

have seen major commitments from world leaders pledging to leave no stone 

unturned in the global effort to confront this issue head on. 

Failure is not an option. Though I have concentrated on the causes of the problem 

and its solution, we must never lose sight of the terrible human cost of hunger. 

Even short-term hunger can unalterably affect a child by exposing him or her to 

disease, threatening normal cognitive development and lifelong productivity, or, 

tragically, even early death. Yet the problem posed by high food prices is one we 

can address—and in doing so we can recommit to ending the scourge of chronic hunger once and for all and ensure that the world is more food secure. 

The CHAIRMAN. Thank you very much. 

Mr. Lazear. 

STATEMENT OF HON. EDWARD P. LAZEAR, CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS, EXECUTIVE OFFICE OF THE 

PRESIDENT, WASHINGTON, DC 

Mr. LAZEAR. Thank you, Chairman Biden, Ranking Member 

Lugar, and members of the Senate Foreign Relations Committee. 

I appreciate the opportunity to be here to talk with you today 

about recent increases in global food prices. 

12 

Developing countries and lower income individuals are disproportionately affected by food price increases and the committee’s focus 

on this issue is particularly timely. There are a few measures of 

food prices. We focus on two. The first is the International Monetary Fund’s Global Food Index. This measure consists of virtually 

no processed foods, which may accurately reflect the consumption 

of individuals in developing countries. 

For the average consumer in the United States, we analyze the 

CPI. This index places heavier weights on processed foods which 

Americans consume in large proportions. 

Global food inflation was 43 percent during the 12 months ending in March 2008. While this rate is high, it is not unprecedented. 

Similar rates were seen in the mid-1970s and other periods that 

experienced high world food price inflation. But that makes the 

current situation no less difficult. 

Although the IMF Global Food Index increased 43 percent, the 

U.S. food CPI increased only 4.5 percent. The reason for the 

smaller rate of inflation is that Americans tend to consume highly 

processed foods and food in restaurants. When consumers in the 

United States purchase food from supermarkets, convenience 

stores, or restaurants, a large fraction goes to cover labor associated with preparing, serving, and marketing the food that we eat. 

This is much less true in developing countries. 

The effect of food price inflation on individuals in poor countries 

is even more pronounced because the poor spend a larger fraction 

of their income on food. The typical American spends slightly less 

than 14 percent of total expenditures on food. In contrast, Africans 

spend 43 percent of their expenditures on food and those subsisting 

on less than $1 a day in sub-Saharan Africa may dedicate as much 

as 70 percent of their expenditures to food. 

Americans also vary in the proportion of their incomes that they 

spend on food, but it is not too different across income groups. 

Food inflation is important even in the United States and it is 

useful to understand its underlying causes. Grains and seeds have 

experienced the most rapid price increases over the last 12 months 

ending in March. Wheat prices have increased by 123 percent, soybean prices by 66 percent, corn by 37 percent, and rice prices have 

increased by 36 percent. 

Increased demand in emerging markets is an important factor 

that contributes to food price increases. Rapid growth in emerging 

economies over the past several years has been accompanied by improving living standards, including better diets. Millions of people 

are becoming part of a growing middle class in these countries, 

with greater purchasing power. A consequence of this development 

is greater consumption of grains and meat, which use grain as feed. 

Emerging market food consumption has increased by nearly 45 

percent for the 2001 to 2007 period as compared with the 1991 to 

2000 period. This factor cannot entirely explain the recent spike in 

food prices, however, since consumption in these emerging economies has been growing steadily over the past decade and grain 

price increases have only risen noticeably over the past 2 years. 

We estimate that the increase in emerging market economies 

demand can account for about 18 percent of the rise in food prices 

over the past 12 months. 

13 

On the side of food supply, adverse weather has been a key factor 

in recent rises in food prices. Australia, China, and many Eastern 

European countries have experienced severe weather-related 

events that have lowered crop yield. Most analysts point to reduced 

harvests in these countries as the primary cause of large increases 

in wheat prices. A return to normal weather patterns should help 

to put some downward pressure on food prices. Unfortunately, the 

decline will be gradual since inventories of wheat have been depleted and rebuilding stocks of grain will keep prices high for a 

while. 

The contribution of biofuel production to recent food price increases may be a topic of particular interest to the committee. The 

bottom line is that ethanol production is a significant contributor 

to increases in corn prices, but neither U.S. nor worldwide biofuel 

production can account for much of the rise in food prices. 

Among the existing stock of biofuels, ethanol is by far the largest 

type, with corn-based ethanol accounting for a substantial portion 

of total ethanol. 

We estimate that the increase in U.S. corn-based ethanol production accounts for approximately 7.5 percentage points of the 37-percentage-point increase in corn prices over the past 12 months. The 

increase in corn-based ethanol production in the rest of the world 

accounts for as much as an additional 5.5 percentage points. 

Let me put this in context. Because corn represents only a small 

fraction of the IMF Global Food Index, we estimate that the increase in total corn-based ethanol production has pushed up global 

food prices by about 1.2 percentage points of the 43-percentagepoint increase in global food prices, or about 3 percent over the 

past 12 months. 

It appears that the renewable fuel standard has not yet become 

a contributing factor in increased ethanol production. At current 

corn and gasoline prices, ethanol production is profitable regardless 

of the mandate. Indeed, EIA’s projection for ethanol production in 

2008 suggests that we will supply 9.15 billion gallons of ethanol, 

including imports, which is above the 9 billion gallon mandate. The 

mandate may become a factor in the future. 

Other policies, ethanol subsidies, and tariffs, may also be factors 

contributing to the increased production of ethanol in the United 

States. 

In conclusion, it is possible that food prices may remain elevated 

over the next year, but we do not expect to see the rapid rates of 

global food price inflation that we saw this year. Some factors contributing to recent food price inflation, such as weather, should 

wane, but other factors, such as growing demand in emerging markets, will continue to put upward pressure on prices. 

Furthermore, agricultural markets may respond to higher farm 

prices and margins by increasing supply, which should alleviate 

high food prices over the next few years. 

I welcome your questions. 

[The prepared statement of Mr. Lazear follows:] 

PREPARED STATEMENT OF EDWARD P. LAZEAR, CHAIRMAN, COUNCIL OF ECONOMIC

ADVISERS, EXECUTIVE OFFICE OF THE PRESIDENT, WASHINGTON, DC 

Thank you, Chairman Biden, Ranking Member Lugar, and members of the Senate 

Foreign Relations Committee. I appreciate the opportunity to be with you today to 

14 

1Source: International Monetary Fund’s International Financial Statistics database, food price 

index. 2Source: USDA, http://www.ers.usda.gov/Data/FarmToConsumer/Data/marketingbilltable1. 

htm. 3Source: U.S. Department of Labor, Bureau of Labor Statistics, Consumer Expenditure Survey, 2006. ftp://ftp.bls.gov/pub/special.requests/ce/share/2006/income.txt. Typical American refers 

to an individual at the median income level. 4Source: Federal Reserve Board Staff calculation, IMF, and World Bank. 

5Source: The International Food Policy Research Institute 2020 Discussion Paper No. 43, ‘‘The 

World’s Most Deprived.’’ 6Source: U.S. Department of Agriculture, National Agricultural Statistics Service database. 

discuss the economic factors that have contributed to recent increases in global food 

prices. 

Developing countries and lower income individuals are disproportionately affected 

by food price increases, and the committee’s focus on this issue is particularly 

timely. For policymakers to develop an appropriate response, it is essential to understand the underlying causes of food-price inflation. The causes are many, and 

few are within our ability to control, especially in the immediate future. 

There are several measures of food prices. The international measure we have 

analyzed is the International Monetary Fund’s (IMF) Global Food Index. This measure includes vegetable oils, meat, seafood, sugar, oranges, bananas, and cereals 

(which we often refer to as grains). This index consists of virtually no processed 

foods, which may accurately reflect a consumption bundle of some individuals in developing countries. For the average consumer in the United States, we analyzed the 

CPI, both the total index and its food subcomponent. This index places heavy 

weights on processed foods, which Americans consume in large proportions. 

Global food inflation was 43 percent during the 12 months ending in March 2008.1

While this rate is high, it is not unprecedented. Similar rates were seen in the mid1970s and other periods have experienced high world food-price inflation. But that 

makes the current situation no less difficult. 

Although the IMF Global Food Index increased 43 percent, the U.S. food CPI increased only 4.5 percent. The reason for the smaller rate of inflation is that Americans tend to consume highly processed foods. When consumers in the United States 

purchase foods from supermarkets, convenience stores, or restaurants, a large fraction goes to cover labor associated with preparing, serving, and marketing the food 

that we eat.2 This is much less true in developing countries. 

The effect of food price inflation on individuals in poor countries is even more pronounced because the poor spend a larger fraction of their income on food. The typical American spends slightly less than 14 percent of total expenditures on food.3

In contrast, Africans spends 43 percent of their expenditures on food 4 and those 

subsisting on less than $1 per day in sub-Saharan Africa may dedicate as much as 

70 percent of their expenditures to food.5

Americans also vary in the proportion of their income that they spend on food, 

but it is not too different across income groups. Even individuals with incomes between $5,000 and $10,000 spend only 17.1 percent of their expenditures on food. 

Richer Americans spend a smaller share, but those with incomes exceeding $70,000 

still spend 11.3 percent of their expenditures on food. 

Because of the high level of processing associated with food consumed in the 

United States, rising energy prices are affecting consumers in the United States 

more than rising food prices. For example, with food prices rising 4.5 percent, Americans would have had to pay nearly $300 more in 2007 to consume the same basket 

of food they did the previous year. With gasoline prices rising 26.5 percent, Americans would have had to pay nearly $600 more for the same quantity of gasoline during the same period. 

Still, food inflation is important, even in the United States, and it is useful to understand its underlying causes. Grains and seeds have experienced the most rapid 

price increases over the last 12 months ending in March. Wheat prices have increased by 123 percent, soybean prices have increased by 66 percent, corn prices 

have increased by 37 percent, and rice prices have increased by 36 percent.6

Increased demand in emerging markets is an important factor that contributes to 

food price increases. Rapid economic growth in emerging economies over the past 

several years has been accompanied by improved living standards, including better 

diets. Millions of people are becoming part of a growing middle class in these countries with greater purchasing power. A consequence of this development is greater 

consumption of grains and meats, which use grain as feed. Emerging market food 

consumption has increased by nearly 45 percent for the 2001–07 period as compared 

15 

7Source: International Monetary Fund’s Finance and Development Magazine, ‘‘Riding a 

Wave,’’ March 2008, Volume 45(1). 8Source: U.S. Department of Agriculture, ‘‘USDA Agricultural Projections to 2017’’ Long-term 

Projections Report OCE–2008–1. February 2008. 9Since 2004, the increase in ethanol production in the United States has pushed up corn 

prices by about 20 percent. 

to the 1991–2000 period.7 Consumption in developed economies has increased only 

slightly, so a large share of the rise in demand can be attributed to increased consumption by emerging markets such as China. This factor cannot entirely explain 

the recent spike in food prices, however, since consumption in these emerging markets has been growing steadily over the past decade and grain-price increases have 

only risen noticeably over the past 2 years. We estimate that the increase in emerging market demand can account for about 18 percent of the rise in food prices over 

the past 12 months. 

On the side of food supply, adverse weather has been a key factor in the recent 

rise in food prices. Australia, China, and many Eastern European countries have 

experienced severe weather-related events that have lowered crop yields. Australia, 

for example, experienced 40 percent lower harvests for its major crops, including 

wheat, barley, and canola this year. While difficult to quantify the impact on food 

prices, most analysts point to reduced harvests in these countries as the primary 

cause of the large increase in wheat prices. A return to normal weather patterns 

should help to put some downward pressure on food prices, particularly wheat, as 

crop yields return to historic levels. Unfortunately, the decline will be gradual since 

inventories of wheat have been depleted and rebuilding stocks of grain will keep 

prices high for awhile. 

I recognize the contribution of biofuel production to recent food-price increases is 

a topic of particular interest to the committee. The bottom line is that ethanol production is a significant contributor to increases in corn prices, but neither U.S. nor 

worldwide biofuel production can account for much of the rise in food prices. 

Among the existing stock of biofuels, ethanol is by far the largest type, with cornbased ethanol accounting for a substantial portion of total ethanol. Corn-based ethanol production has increased dramatically over the past year with approximately 

25 percent of total U.S. corn production dedicated to ethanol production in 2007.8

We estimate that the increase in U.S. corn-based ethanol production accounts for 

approximately 7.5 percentage points of the 37-percent increase in corn prices over 

the past 12 months.9 The increase in corn-based ethanol production in the rest of 

the world this past year accounts for as much as an additional 5.5 percentage 

points. Combining the increases in ethanol production in the U.S. and the rest of 

the world, we estimate that the total global increase in corn-based ethanol production accounts for about 13 percentage points of the 37-percent increase in corn 

prices, or about one-third of the increase in corn prices over the past year. 

Let me put this in context. Because corn only represents a small fraction of the 

IMF Global Food Index, we estimate that the increase in total corn-based ethanol 

production has pushed up global food prices by about 1.2 percentage points of the 

43-percent increase in global food prices, or about 3 percent of the increase over the 

past 12 months. This estimate includes the indirect effects of the increase in cornbased ethanol production, through crop substitution and spillover effects into other 

food products. Looking back to 2005 and 2006, the effect of increased ethanol 

production on food prices during these 2 years taken together has been of similar 

magnitude. 

Based on the Department of Energy’s Energy Information Administration (EIA) 

actual and projected ethanol production levels, it appears that the Renewable Fuels 

Standard has not yet been a contributing factor in increased ethanol production. At 

current corn and gasoline prices, ethanol production is profitable regardless of the 

mandate. Indeed, EIA’s projection for ethanol production in 2008 suggests that we 

will supply 9.15 billion gallons of ethanol (including imports), which is above the 9 

billion gallon mandate. The mandate may become a factor in the future, if corn 

prices increase relative to gasoline prices and ethanol is no longer a cost competitive 

alternative to gasoline. Other policies—ethanol subsidies and tariffs—may also be 

factors contributing to increased production of ethanol in the U.S. We have not 

quantified the size of those policies’ effects. 

In conclusion, it is possible that food prices may remain elevated over the next 

year, but we do not expect to see the rapid rates of global food-price inflation that 

we saw this year. Some factors contributing to recent food-price inflation, such as 

weather, should wane, but other factors, such as growing demand in emerging markets, will continue to put upward pressure on food prices. Furthermore, agricultural 

16 

markets may respond to higher farm prices and margins by increasing supply, 

which could alleviate high food prices over the next few years. 

The CHAIRMAN. Thank you very much, Mr. Chairman. 

We’ll do 7-minute rounds if that’s all right with my colleagues. 

Mr. Chairman, let me start by asking you, to what degree is the 

food crisis due to the high price of oil and the declining dollar? Do 

you factor that at all? 

Mr. LAZEAR. We do, yes. These estimates obviously are estimates 

and we try to do our best to incorporate a variety of factors. The 

rising energy prices are significant, obviously because they affect 

the costs of producing agricultural crops. We estimate that high energy prices can account for as much as 20 percent of the increase 

in food prices. 

You mentioned the dollar. The dollar affects food prices in the 

United States, but does not affect food prices, for example, in 

Europe and other countries, where you don’t have the same kind 

of effect and in some cases it goes in the opposite direction. But if 

we looked at the United States, we estimate that the depreciation 

of the dollar can account for as much as 13 percent of the rise. 

The CHAIRMAN. What about the role of commodity markets? Are 

investors betting on scarcity? What’s going on there? 

Mr. LAZEAR. Investors can certainly have an effect on prices, particularly prices over time, so futures market prices relative to spot 

market prices. It’s unlikely that investors and speculation is having 

a significant effect on the current high price of food and primarily 

the evidence on that is that if you look at inventories, inventories 

for most goods are down as opposed to up. 

The logic is this. If investors were in there speculating, trying to 

buy up goods right now, they would be doing so in hopes that 

future prices would be even higher so they could buy low and sell 

high. If that were the case, what you’d expect to see is that inventories would rise. That doesn’t negate the possibility that investors 

are in those markets, but it does suggest that they’re not playing 

a major role, at least at this point, in affecting the spot prices that 

we see. 

The CHAIRMAN. Talk to me for a minute. Take me back. There’s 

been a constant decline on our part in the proportion of U.S. development assistance to agricultural programs. In the last 20 years 

that declined. It was as high as 20 percent. Now it’s about 3 percent. 

Obviously you’ve looked at this. What is the reason for that? 

Again, this spans administrations. It’s not a Republican or a Democratic policy. It’s spanned administrations. What is—to what degree is it responsible for—‘‘responsible’’ may be too harsh a phrase. 

To what degree has it contributed? Or put it another way: If we 

had maintained this investment at a 20-percent rate in these developing countries, is it likely that the circumstance would be different? And what caused us to change our attitudes and should we 

begin to shift back to a significantly larger investment in developmental assistance in agriculture? 

Ms. FORE. I think it’s a very good question and I think it’s very 

important for us as a nation to address it. I think that investing 

now would be enormously positive for the world at large. The world 

at large has underinvested in the last few years in agriculture, in 

17 

all aspects of agriculture, but now the time when we must step up 

and reinvest in agriculture and refocus on it, because there are 

humanitarian issues, there are production issues, such as Senator 

Lugar mentioned, and there are needed policy reforms. 

In all three fronts the world can really take a large step forward 

in how we approach agriculture. When you compare productivity in 

the United States with the developing world, the farmer per-acre 

yields, the African farmer has not had the same capacities and as 

a result food production is not as high per acre, the productivity 

is not as high. So it’s an enormous opportunity for the world to step 

forward and try to bring short-term, medium-term, and long-term 

solutions to this problem. 

The CHAIRMAN. What I’m trying to get at, if I could articulate my 

question better than I did, Senator Lugar and I share a similar 

view about what is a—even if, Mr. Chairman, your assessment of 

the impact of focusing on biofuels was larger—your estimate is a 

total worldwide 3 percent of the cost, of the 43-percent rise, relates 

to it. But let’s assume it was higher, and some argue it is. 

There are very important tradeoffs. We’re being asked to make 

big choices about energy, and not independence, but not such overwhelming dependence on, you know, tomorrow morning Chavez 

might wake up and decide he’s just not going to ship any oil this 

way. I’m being a bit exaggerated. 

So these are two competing, legitimate, substantial concerns. But 

it turns out I happen to be of your view, based on research that 

my staff has uncovered for me, that it is not a major factor, it’s not 

the primary factor in the increase. 

Going back to—if I can use that as a comparative note here, 

when you look at development, the AID decline, developmental aid 

for agriculture declined from roughly 20 percent of the AID budget 

to roughly 3 percent. Is that because of sort of benign neglect, just 

it was off the radar, or is it because we made other hard choices? 

Is the aid that’s available to us now—did we shift? Is the consequence of the shift a consequence of changing priorities or competing interests that two administrations in a row or three administrations in a row thought would warrant this decrease? Or did it 

just happen and no one was keeping their eye on the ball? 

That’s the point I’m trying to get at here. So I call for rededicating ourselves to significantly increasing the money for investment in agriculture, us the United States, while promoting the rest 

of the world to do the same, but we can control our agenda. Are 

we going to run into arguments saying, well, wait, when you do 

that, even if you increase the absolute number of dollars available, 

you’re going to be crowding out other very important things that 

have developed over the last 20 years that we need to be doing. 

Talk to me about that. My time is up, but just talk to me about 

that. 

Ms. FORE. Development assistance, as you know, is always a 

combination of factors. The areas that we feel are moving along 

fairly well in the world tend to get less attention in funding allocations and we move to the areas that seem to be most urgent. 

But we look around the world and we try to attack the root 

causes of poverty, though there are many aspects to it. So funds 

for many good reasons have gone to other programs. Agriculture 

18 

and food security were seen to be relatively stable. But productivity 

rates have dropped. The growth of population in the world has increased and a number of factors have come into play, and over the 

years we have just not invested as much as we could have and as 

a result we find ourselves now with budgets that are imbalanced 

in terms of agriculture. 

So it is a good time for us as a country to take our leadership 

position, in which we are a major factor in the world, we have enormous potential with private sector as well as public funds, and use 

this time to reinvest smartly, because we know we need to stretch 

the taxpayers’ dollar, in areas that will be most effective. 

The CHAIRMAN. Thank you very much. 

My time is up. I’m sure one of my colleagues will raise the other 

two areas of great concern to me, and that is the emerging markets, 18 percent accounted for—your estimate—but they’re going to 

continue to emerge, what are the projections; and also purchasing 

local food because transportation costs have gone up, I’m told, I 

think around 53 percent, something to that effect. It takes up 53 

percent of every dollar in food aid is transportation costs. Don’t 

hold me to that number. I should know it exactly. But I hope we 

talk about that before the panel leaves. 

Senator Lugar. 

Senator LUGAR. Thank you very much, Mr. Chairman. I just note 

that while we are discussing the world food crisis, the so-called 

Doha Round of the World Trade Organization has been stymied 

now for months, and some would say for years. The obstacles are 

largely agricultural issues, specifically enormous subsidies paid to 

European farmers because of the politics of France and Germany 

principally, and enormous subsidies paid to United States farmers. 

We are on the threshold of voting for a farm bill that maintains 

subsidy programs, right in the face of this, even though we will violate the WTO agreements we already have in six different ways, 

and that can bring retaliation upon the rest of our economy. 

Now, Senators and Members of the House remain oblivious of 

this and say, the heck with the rest of the world; we need to pay 

attention to domestic issues. 

Furthermore, our European friends have rejected genetically 

modified seeds, a terrible decision, largely protectionist in the same 

way as subsidies. We’ve had a 1930s syndrome that overproduction 

was the problem, and if you were a farmer you wanted less production and higher prices. 

Now, how to get over that is going to be very tough in our society, as well as in European society. But it is impeding free trade. 

So our analysts come along now and point out the real problem is 

trade barriers. Well, indeed. In agriculture, food, this is the most 

bollixed up part of the whole world trade system, despite all the 

other problems it has, with one country after another now putting 

up export barriers, trying to husband what’s left. For poor farmers 

inside, governments are often limiting prices to the farmer so the 

subsidies can be paid to many people who are very poor in cities. 

So that’s hardly an incentive for production, even if you had 

genetically modified seed and if the United States was generous 

with research efforts in Africa and elsewhere. We’ve really got to 

get real about this, because we react to, rather than plan for crises. 

19 

Furthermore, I would just point out that the speculation in grain 

prices in the United States has been enormous. Farmers note that 

the normal way of establishing a price, if you want to sell forward, 

has sort of gone out the window. People by electronic means around 

the world 24 hours a day are speculating in price surges. So the 

price of wheat, corn, what have you, if you’re a farmer may fluctuate 50 cents in a day per bushel, not on the basis of reality, but 

on the basis of hedge funds and with thoughts as to how money 

might be made from the trade. 

You can’t control all of that. These are factors in our life, but 

they have a huge implication. Just one more thought that comes 

from Martin Wolfe and the Financial Times yesterday, on a different subject. He points out that in fact the Chinese are eating 

better. Hard to quantify how many members of the Chinese population have moved from grain to meat, but a whole lot. By and 

large, they would say, why not. You in the United States have been 

eating well all these years. 

As a matter of fact, the Government of India said: We resent the 

thought that you’re talking about India’s eating better. There’s 

almost an implication we are the responsible parties for the world 

because finally we’re beginning to catch up with some of you. 

Wolfe points out that this is comparable to automobiles. We’ve 

got 480 cars per thousand population. The Chinese have 10 per 

thousand. In 2015, according to Wolfe, they will be the largest auto 

market and that means millions of additional cars using oil, and 

they will create a problem that makes whatever we have now virtually insoluble. 

What he’s saying is that you’ve got people in Dubai trying to buy 

farm land now in Pakistan, and with the full knowledge of the Pakistani Government, in the same way the Chinese are in Libya pinning down the last square foot of oil or natural gas, because other 

nations are not going to starve and they’re not going to be without 

mobility. 

Our real problems in terms of world peace really come from the 

fact that before people starve, they will fight. 

Therefore, this is not just a humanitarian imperative. It really 

comes with the whole posture of the world. 

Now, I share the chairman’s thought. Norman Borlaug, who has 

testified before our committee and the Agriculture Committee 

many times, really had it right. He brought the Chinese and the 

Indians to a status of virtual sustainability for a while, until they 

began to eat better and enjoy really the standard of living to which 

we’ve become accustomed. But others have never had that opportunity. 

Although Borlaug has been in Africa, he’s been inhibited by the 

seed problems created by the Europeans, as well as all sorts of 

other financial dilemmas. That really has to be on our minds. In 

the same way we try to help other countries become more energy 

independent, we are going to have to move aggressively in terms 

of the support of farmers. 

I just ask you, Administrator Fore, is there any comprehensive 

plan in the administration that goes beyond the emergencies of this 

particular crisis? Certainly we need to meet it and we need to meet 

it quickly. But if the trends I’m talking about are true, this is going 

20 

to be with us for one hearing after another, year after year, until 

some administration comes along with a recognition of what’s happening in the world and formulates a plan. 

Ms. FORE. Yes, Senator Lugar, you are right that this is a very 

complex series of issues that all interweave and interrelate with 

each other. It is going to take a multiyear, multidonor solution to 

this problem. So it is going to be a worldwide solution and it’s 

going to take us many years, and thoughtful, wise investments 

across the board. 

In the medium term, we know that we want to invest more in 

biotechnology. There have been significant improvements in pest 

resistant cotton and maize, in drought resistant seeds and rice and 

wheat, in cassava and potato and a number of other food staples. 

All of these will be important. And we will be looking at bottlenecks in transportation, which is often one of the problems. It’s the 

distribution of food so that you don’t have excess food supply in one 

area that is perishing before it is getting to market. 

The operation of markets for both inputs, like food and—seeds 

and fertilizer, as well as outputs, the actual staples. Ways that we 

can encourage trading systems and policies so that there isn’t the 

protectionism, so that the markets are operating freely. All of this 

will be part of the medium- and long-term solutions. 

In our proposal we have the beginnings of this. It is a good first 

step, but this is going to take sustained commitment over many 

years by the members of this committee and by Congress. 

Senator LUGAR. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Nelson. 

STATEMENT OF HON. BILL NELSON, U.S. SENATOR FROM 

FLORIDA 

Senator BILL NELSON. Mr. Chairman, Senator Casey was here 

before me and, with your permission and with his, I need to go to 

another committee, and may I just ask one question? 

The CHAIRMAN. Surely. 

Senator BILL NELSON. Ms. Fore, thank you for your public service. We’ve seen USAID cutting the funding for global agricultural 

research. So does USAID plan further cuts in the developing world 

and if it is are you prepared to reassess that decision? And talk 

just a little bit more about combining what you have done very 

effectively, health in Africa, with food of necessity, because they 

can’t take the AIDS drugs unless—if they have an empty stomach, 

they can’t stand the AIDS drugs. Are you applying that to Haiti as 

well, as you said, right here in our own hemisphere? 

Ms. FORE. Yes. Thank you, Senator Nelson. You are right that 

funding for agriculture and for agricultural research has been too 

low. The 2008 budgets do not have enough. We are looking forward 

to the 2009 budgets, in which we requested more funding. 

In this initiative that we have before you, this request, we have 

more funding for agricultural research. There are a number of very 

good institutes that we have been funding around the world and 

these are important to the solution. 

As we look ahead to how we can solve this in the medium and 

the long term, your comments about the health programs that we 

21 

are currently running, as well as the education programs that we 

currently have throughout the developing world, are part of the 

solution, because getting good nutrition to mothers and to children, 

especially young children, is very important. It’s important in their 

formative years. 

When I was in Ethiopia I visited an urban gardener program in 

which families, particularly children who lead households of HIV– 

AIDS, have been growing vegetables that they sell in the markets. 

It provides an income, but it also provides better nutritional content to the family and a little bit of income so that you can buy 

books for school. 

So there are ways that we can combine and integrate these programs. We have a number of programs in Haiti where we’ve just 

been reprogramming some of our assistance, about $6 million 

worth, that are food for work programs, so that young people can 

be helping with clearing canals and roads, all of which help move 

food to market. But they are working for food. 

These kinds of programs will certainly help and they become 

solutions for the medium and the long term. 

Senator BILL NELSON. Thank you, Mr. Chairman. 

I need to continue to work with you on Haiti, because here, only 

several hundred miles from our shores, is the poorest nation in the 

Western Hemisphere, and it’s a sad fact of life. 

Ms. FORE. We are the largest bilateral donor to Haiti and it is 

our largest food aid development program. So we will really look 

forward to working with you, Senator Nelson. 

The CHAIRMAN. Thank you, Senator. 

I say to Senator Casey, you can either have 3 minutes left on his 

time or wait your turn. You can choose which you want to do, 

because it would be unfair to not go back and forth. 

Senator. 

STATEMENT OF HON. BOB CORKER, U.S. SENATOR FROM 

TENNESSEE 

Senator CORKER. Mr. Chairman, thank you. I think this hearing 

is most timely. 

Witnesses, thank you very much for your testimony. I know 

there’s been some discussion about the farm bill and the fact is it’s 

going to pass. It’s going to pass, I think, by a veto-proof margin. 

So I think as we move ahead one of the major issues I hope we can 

peel away and focus on is the buy-local component. I know the 

farm bill has a $60 million pilot that allows us with aid, like you’re 

discussing, to buy locally. 

To me that’s one of the biggest problems that we have. In fact, 

as you mentioned, high food prices affect negatively those people 

that are trying to buy food and are net importers. On the other 

hand, if you’re a sustenance farmer in India and you’re living off 

a dollar a day in essence high food prices help you generate income. 

What we should be doing, instead of shipping in and distorting 

markets, is buying it locally and really building the local economy—we spend so much money on economic aid in these countries 

trying to help people with their economies. I think one of the most 

perverse things we do in this ag bill is not allow us to buy locally 

in these countries where we’re simultaneously producing food, but 

22 

at the same time raising the standard of living of people there that 

are very poor. 

I wonder if you want to add any additional comments to that or 

suggestions in that regard. 

Ms. FORE. Thank you, Senator Corker. You are exactly right that 

local purchase of food would allow us to get a number of benefits. 

The first is that it allows people to grow their own food. It allows 

farmers to earn an income and a livelihood throughout the developing world, because if we can increase the production in the developing world that in turn will meet the needs locally for their people. So there is a benefit of incomes, of availability, affordability, 

and access to food. 

The second is from a United States interest and efficiency point 

of view, our United States dollar will stretch further if we purchase 

locally food. It also means that we don’t have the shipping costs, 

the transportation costs. So all of that is very important as a part 

of the tools that we have, and we would very much appreciate your 

strong consideration of our request for local purchase options in the 

P.L. 480 account. 

Senator CORKER. It is my hope that as soon as this bill passes, 

together we will move ahead on provisions that alter that buy-local 

provision, so that we can do the right thing as it relates to these 

developing countries. I know that’s going to have to be done separately. I know getting an ag bill passed is most cumbersome, as 

we’ve seen, but I hope we can work together to make that happen. 

I want to focus for just a moment on Haiti. I know that Senator 

Nelson brought that up. I recently was there. You’ve mentioned 

how close it is to our country. I know that we’ve talked about this 

from a humanitarian standpoint and obviously this is a great country, a generous country, and certainly that is our primary motive 

in helping people with food. 

But I’m also concerned about the instability that these food 

prices have created. I was just recently with President Preval. I 

know that he’s trying to move ahead with economic growth. I’m 

worried about the fact if that does not occur, I’m afraid that the 

democratic transition will not continue in that country. 

I wonder if you could comment on his efforts to reduce the cost 

of rice and what else may be occurring there as it relates to instability in Haiti itself. 

Ms. FORE. Yes; certainly. We’re very concerned. Food is so important that it does create many strains on a society and it is creating 

instability in many countries, and Haiti is certainly experiencing it. 

I mentioned, with Senator Nelson, our program—we’ve been reprogramming funds for Food for Work. In addition, there’s $1 million to work with the Government of Haiti to try to back their plan 

for the reduction of prices for food staples. It’s a very important 

part. 

You have to have good plans and policies and good coordination 

for this to work. In addition, we’ve been looking at ways that we 

can send initial food assistance that would be for humanitarian 

purposes out of the warehouses that we have in Texas, perhaps $15 

to $20 million worth. All of this is a good start, but we will need 

to utilize our developing assistance programs in food aid that are 

currently going on in Haiti to try to increase them. We have a 

23 

strong increase in our 2009 budgets. It’s been one of the areas that 

we increased the most, so we will look at this as a multiyear problem and encourage its increase and its effectiveness within Haiti. 

Senator CORKER. Mr. Chairman, thank you, and thank both of 

you for your testimony. 

The CHAIRMAN. Senator Feingold. 

STATEMENT OF HON. RUSSELL D. FEINGOLD, U.S. SENATOR 

FROM WISCONSIN 

Senator FEINGOLD. Thank you very much for holding the hearing, and to our witnesses. 

Before I turn to the very serious global food situation, I’d like to 

briefly mention something important to Wisconsin’s hard-working 

farmers. Many articles and editorials are citing the increased revenues that farmers have recently been receiving for their crops and 

their production costs. I hope we can all agree that America’s 

small- and medium-sized farms aren’t to blame for the current 

problems. 

That said, these food insecurity problems are very real, and they 

are having a disproportionate impact across the Continent of 

Africa. In 1999 I commissioned a study by the GAO, which found 

that while undernourishment had been falling around the world for 

more than 30 years, nearly 40 percent of Africans still suffered 

from chronic food insecurity. This is unacceptable. The strength of 

African governments—and more worryingly their citizens—is being 

sapped every day by hunger, which in turn can contribute to instability, violence, and crime of significant proportions. 

In order to meet our own national security needs, and live up to 

our highest principles, we need to collaborate with others to fight 

starvation, help strengthen global food security systems and still 

ensure that we are adequately supporting American family farms. 

I’d like to now turn to just a few questions that relate to the comments I just made. Mr. Lazear, I understand that the U.S. President’s Initiative to End Hunger in Africa, launched in 2002, is the 

principal U.S. strategy to achieve its target of halving hunger in 

Africa. Could you tell me how much the President has requested 

to fund this initiative over the past 5 years and the impact that 

these funds have had in Africa? 

Mr. LAZEAR. I think on questions involving foreign aid I’m going 

to defer to my colleague; Ms. Fore, if you wouldn’t mind picking 

that up. I’m certainly happy to talk to you about any of the economic issues, especially the one that you mentioned earlier about 

the Wisconsin farmers. So I’d be happy to speak about that. But 

on issues involving the aid programs themselves, I am not the 

expert on that. 

Senator FEINGOLD. Ms. Fore, why don’t you try to answer it. 

Ms. FORE. Yes, it has been—the President’s Initiative to End 

Hunger in Africa has been very effective. We believe, as we have 

been talking about during this hearing, that we still haven’t invested enough in Africa. Your comments about the great need and 

the urgency are very important. For some of the people in Africa, 

70 percent of their income is spent on procuring food for their families. It’s a very high percentage, and for many of these people they 

are living on less than $1 a day. For those that are truly poor, 

24 

those who are living on less than 50 cents a day, three-quarters of 

them are in Africa. 

So this is a challenge that we all need to recognize and try to 

address globally, not just the United States alone. 

We have a number of approaches that are short term, that are 

medium term and long term, that help farmers to grow products 

and that are, I think, going to help immensely. If we can double 

production, if we can move on some of the policy issues, and if we 

can increase humanitarian assistance, all three of those will work 

together. 

The President’s Initiative to End Hunger in Africa is funded at approximately $200 million a year. 

Senator FEINGOLD. OK. In your opinion, Ms. Fore, what challenges have actually thwarted progress toward implementation of 

the World Food summit’s food security Plan of Action, and is 

achieving the target of halving the number of undernourished people worldwide by 2015 still possible? 

Ms. FORE. Well, we are all concerned about whether we can 

reach that. Now, we will have to move on all fronts if we as a world 

are going to meet these targets for halving world hunger. It is 

going to be an enormous undertaking. But if we can unite internationally behind good policies, if we allow markets to work, both 

markets for fertilizer and seed, markets for the selling of staples, 

good post-harvest techniques, the way to store food, so that we can 

get them to the markets, as well as incentives to encourage local 

farmers to grow food, I think we will have a chance. 

But we will have to use all possible tools at hand to be able to 

do this. 

Senator FEINGOLD. In that regard, we have seen rapid growth in 

markets for local and regional food in the United States as a way 

of improving sustainability, and reducing transportation costs and 

increasing returns for farmers and their communities among other 

benefits. Are there similar benefits from encouraging local and regional food systems in the countries where USAID provides aid 

and, if so, how do we or should we support them? 

Ms. FORE. Yes, very large benefits. As you well know from your 

home State, the private sector is the most important part in all of 

this. They are the ones who are increasing the production of food 

staples in the world. They are the ones who are financing the processing of food, the transportation, as well as the markets. 

They are going to be the most important factor in this. There is 

great possibility, enormous challenge and opportunity for them to 

help in this. It should be a big public-private partnership that is 

going to solve this problem. 

Senator FEINGOLD. Thank you very much. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much. 

Senator Voinovich. 

STATEMENT OF HON. GEORGE V. VOINOVICH, U.S. SENATOR 

FROM OHIO 

Senator VOINOVICH. Thank you, Mr. Chairman. 

As a member of this committee, there are so many areas on 

which we’re supposed to be experts. I just caught the tail end of 

25 

the Senator from Indiana’s comments, and I would suggest that 

you sit down with Senator Lugar and members of the relevant 

executive branch agencies and listen to what he spoke about today. 

I think the tendency of policymakers, when we confront a problem, 

is to shotgun it and not put together a comprehensive plan. 

Food insecurity is going to be with us a long time and the sooner 

we recognize that and craft a comprehensive plan to address the 

problem, the better off we’re going to be and the better off the 

world is going to be. 

I think that we have to recognize that rising food prices are 

affecting many sectors of the United States. There are some folks 

out there today who want to blame the food price increases on ethanol production. I have commented to my colleagues that we might 

not fully understand how food prices are determined. So I have 

asked the Government Accountability Office to look into this crisis 

and the following specific questions: What are major factors, both 

nationally and globally, that contribute to the rise in food prices; 

to what extent do Federal ethanol incentives and the diversion of 

food to fuel contribute to this crisis; what effect will persistently 

high food prices have on the American economy; and which groups 

in the United States are most affected by high food prices? 

I’ve been involved with hunger issues in this country since I was 

mayor of the city of Cleveland in the early 1980s. We have a gigantic warehouse and a refrigerator now. Many people today are running out of their food stamps and are hungry. So first we need to 

focus on the domestic need, and then on the international situation. 

I met with a group of Ohio pork producers today, and they said, 

‘‘You’ve got to pass the Colombia Free Trade Agreement. If it 

weren’t for our export market, we’d be dying right now.’’ In the 

first quarter of this year, producers have seen a 278-percent increase in the export of pork to China. That’s another factor in rising food prices—this increasing demand. 

In addition, there is a lot of technology out there being used. My 

wife Janet and I were in Israel in January. We traveled there for 

the dedication of the George and Janet Voinovich Technology Center in the Negev. A strong partnership exists between Ohio and 

Israel in terms of sharing technology. 

Consider the degree of food security that Israel has achieved and 

compare that with other countries that have the same kind of terrain and so forth. Israel has unbelievable technology there that I 

think would be useful to the rest of the world. Unfortunately, Mr. 

Chairman, part of Israel’s problem is that it cannot disseminate 

this technology to countries that could benefit because of the antiIsrael bias that prevails in many of those countries. 

But that’s where I’d start. They’ve done it. They’ve done it. 

So I would like to know how much thought has gone into 

addressing the global food crisis on a comprehensive basis rather 

than taking a fragmented approach, and then believing that somehow it’s all going to work out? 

Ms. FORE. Thank you, Senator Voinovich, and I’m very glad to 

hear about your new innovation and technology center. 

I think that the approach that we are recommending, that is in 

the President’s recommendation and request, calls for integrating 

many aspects of development and encouraging both short-term 

26 

humanitarian assistance and medium- and long-term approaches to 

try to get at the root causes for food insecurity around the world. 

Many of these issues are going to lie in the technology sector. Some 

will lie in the private sector. Others will lie in how to train and 

build capacity in countries, something as simple as ridge line rows 

that are horizontal so that runoff and the loss of water are not 

occurring. 

So it’s information as well as technology and help. But we, as the 

United States, as the U.S. Agency for International Development 

and with other government agencies, are now focusing on a whole 

of government approach, something that will be more effective than 

our efforts have been in the past few years, when we were underinvesting in agriculture. 

But we will certainly take Senator Lugar’s thoughts and comments and look forward to working with everyone on the committee 

for ways that we can approach this. This is a beginning. This is a 

time when we need to band together. It will have to be a multiyear 

effort and it will have to be a multidonor effort if we are to successfully meet the challenges for food security. 

Senator VOINOVICH. Well, I would underscore that I would get 

Senator-Professor Lugar involved in this. He’s an expert in the 

agriculture issues. He’s probably one of the best minds that our 

government has in the area of foreign policy and he understands 

how important it is. 

We also ought to consider where we allocate our resources. There 

are three efforts under way right now to recommend how the State 

Department should integrate them. We had a wonderful hearing 

here with Dr. Joseph Nye and former Deputy Secretary of State 

Richard Armitage about the issues of smart power, hard power, 

and soft power. They urged that we need to review how we allocate 

resources amongst our national security agencies. We’re pouring an 

unbelievable amount of money into the Defense Department today 

and we are operating in a whole new environment. What we do to 

address hunger and AIDS and other issues is so much more important to the well-being of our public diplomacy in the long run than 

anything else we can do. 

It seems that the left hand isn’t talking to the right. I think we 

should begin reviewing how we allocate our resources and ask 

whether we could redirect some money from the Department of 

Defense budget to the food crisis and other humanitarian issues we 

face today. 

One of the best legacies this administration might be able to 

leave in this particular area is to do the homework necessary to lay 

out all of the aspects of this comprehensively and then say to the 

American people, and to us, ‘‘here’s how we get the job done and 

here’s what we’re going to have to do to change the way we’re 

doing things if we expect to be successful with it.’’ We just can’t 

keep doing things the way we have in the past. 

Ms. FORE. Yes, Senator Voinovich, I take your point. I know your 

keen interest in management and, as you know, Secretary Rice and 

I have requested additional funds for hiring more Foreign Service 

officers, who at USAID could help on agriculture and in a number 

of other areas, health and education, as we were talking about 

27 

before. All these areas interrelate in trying to solve this very complex food security crisis. 

Senator VOINOVICH. Thank you. 

Thank you. 

The CHAIRMAN. Thank you very much. 

Senator Menendez. 

STATEMENT OF HON. ROBERT MENENDEZ, U.S. SENATOR 

FROM NEW JERSEY 

Senator MENENDEZ. Thank you, Mr. Chairman. 

Madam Administrator, good to see you. Mr. Lazear, good to see 

you. 

Let me just start off with saying that as we talk about meeting 

the global food crisis, of course first and foremost it is a humanitarian issue because it is the very essence of people’s existence. But 

I also would urge us to be thinking about it in terms of security 

issues. I want to echo some of the comments made by Senator Nelson and Senator Corker as it relates to Haiti. Large numbers of 

Haitians clearly in search of essential food have been going in large 

numbers into the Dominican Republic, a country in and of itself 

which is pretty poor. And that has caused the Dominican Republic 

to engage in its border and repatriate people, only to find them 

back on the streets of Santiago, the old capital of the Dominican 

Republic, where crime has increased significantly. 

So it is one example right here in our own hemisphere of the consequences of a lack of food, first and foremost in a humanitarian 

context, but also how it relates that people will go to where their 

necessities drive them. So this is also a potential source of conflict 

and we need to think about it that way as well. 

In that respect, I see on page 3 of your testimony that you said 

that ‘‘attacking the underlying causes of food insecurity through a 

significant increase in staple food production.’’ Are you talking 

about that in the world; are you talking about that domestically? 

Because the OECD has said that since the 1980s we have been diminishing our efforts in terms of agricultural development assistance and there are some who have called for giving that a greater 

priority within the overall USAID assistance. What are you referring to when you say increasing staple food production? Home; 

abroad? 

Ms. FORE. Since we are the United States Agency for International Development, that reference was to abroad in the developing world, so that farmers can grow more food that can be available and affordable at home, in their home countries. 

Senator MENENDEZ. And how specifically does the agency intend 

to pursue that? 

Ms. FORE. We have a number of proposals, which include looking 

at increasing production. So we would like to focus, let’s say for 

Africa, on doubling production in the coming years. If we can double the production of food staples—this would be wheat, rice, cassava, maize—these are important in the diet of Africans and, as 

you know, Africa as well as Asia, but particularly Africa, is our 

most challenged continent. So the increased focus on how to get 

higher production and productivity out of local farms is one important area to focus on. 

28 

The second is looking at transportation bottlenecks, so that you 

can transport goods to market faster and not have post-harvest 

losses, that vegetables and fruits are not spoiling on the way to 

markets because they are unable to make it across the border or 

they are unable to make it into a town, and when they get there, 

that there are operating markets. Markets that can help bring food 

products to those who need them more effectively as well as markets that provide seeds and fertilizer, can all help solve this food 

insecurity problem. 

Senator MENENDEZ. But what do you look at within the context 

of your budget? In the percentage term, what are you looking at 

in terms of increasing your effort in this regard? 

Ms. FORE. In this request we have $150 million for Development 

Assistance, and in the International Disaster Assistance account 

we are requesting $225 million, it is not long term; it’s for medium 

term. So we can use every dollar well. It will be focused on these 

kinds of markets. It will also be focused on how we can increase 

food production in rural areas because, as you know, part of the 

problem that is before us is rural farmers leaving their farms and 

heading into the towns for food. But that creates a different problem for us, so it would be better if we can get more help to the 

rural farmers, so that they can grow, transport, and sell to those 

who are already in the towns. 

Senator MENENDEZ. Let me ask you a different question. You 

mentioned—and I’m glad to see it—in your remarks that talking 

about immediate food aid, especially for those in urban environments and for the rural landless, you say in your testimony, the 

World Food Programme has described the new face of hunger, 

which is increasingly urban. In these urban areas it is not that 

food is unavailable; it is that it is priced outside of the scope of 

their ability to acquire it. 

How does our response need to change to bring stability to urban 

areas? That’s one question. 

The other question is, whether it is yourself or Mr. Lazear who 

might talk about this: The world rice market is in crisis, with export prices soaring to $1,100 per ton in April 2008, up from $375 

per ton at the end of 2007. That’s a huge increase. If we don’t take 

action soon, prices may double again. According to the research of 

the Center for Global Development, the release of rice stocks being 

held by Japan and China can bring prices down now, possibly cutting them in half by the end of June. But this can only happen if 

our government lifts its objections to the reexport of rice previously 

imported from the United States. 

I see the specter of rice that could be used to help the world’s 

hungry be used for feed and livestock in Japan and China, versus 

being used to feed human beings. So what’s our view of that? 

What’s our view of how we deal with the new face of hunger in the 

world that is more urban, in which there is commodities available, 

but the price doesn’t allow it to be purchased? 

Mr. LAZEAR. Why don’t I start on that. In terms of the price, 

when prices are high it has to be because of one of two factors, 

either supply or demand. There is nothing else. The demand side 

is not something that we want to discourage because when demand 

is high it’s high because people are becoming wealthier, they’re 

29 

moving into the middle class, and as a result are able to afford 

more food, and that’s a good thing from a humanitarian point of 

view, not a bad thing. So that’s not something that we view as a 

problem, although obviously it does put pressure on prices for those 

individuals who are least able to afford it, at least in the short run. 

Over the longer haul, the way to alleviate these problems is to 

make sure that we have the incentives that are appropriate to enhance supply. You mentioned one in your comments about restrictions on movement of grain across international borders. That’s a 

significant problem. We think that some of the policies, not only 

our policies—of course, we are very open as compared with other 

countries, at least in terms of our agricultural practices. But some 

of the countries that are in the most serious situation right now in 

terms of high urban prices are ones that are very restrictive in 

terms of their willingness to allow crops to come into their countries. 

So one of the things that I would argue would be most important 

is to try to push forward in the Doha Round, try to succeed in that. 

We’ve been working at it. As you know, it’s a very tough go. But 

getting countries to open up their borders to the kinds of shipments 

that we’re talking about, so that the people living in the cities who 

are now suffering from very high prices, as you mentioned, will be 

able to see prices go down as supplies come in. 

Ms. FORE. I will just add to that, Mr. Chairman. Exactly right 

in terms of the policies that will make food more affordable urban 

centers; but we’ve also been looking at voucher programs, so that 

you can give a voucher to someone in an urban area who is hungry, 

and they can go to the local markets and use it to buy food. Thus 

you’re encouraging private businesses to operate, and you want to 

create as many incentives for the private markets to work, both in 

urban and in rural areas. 

Senator MENENDEZ. Mr. Chairman, one final comment. I appreciate that the world has a rising middle class. That’s great. But if 

you are starving and if you are on the verge of maybe dying as a 

result of it, that is no solace. So I hope that when we look, for example, at the rice issue with China and Japan that we just don’t 

take the position that in the context of insisting on making sure 

there is rising demand, that we don’t meet the humanitarian need 

at least in the short term. That’s when I get worried about our economic theories versus the theories of how we deal with human 

beings. 

Mr. LAZEAR. I wouldn’t disagree with that. 

Ms. FORE. And we have a very large request for humanitarian 

assistance. 

The CHAIRMAN. Thank you. 

Senator Murkowski. 

STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM 

ALASKA 

Senator MURKOWSKI. Thank you, Mr. Chairman. 

And I thank both of the witnesses for a great deal of very solid 

information this morning. I think what we have heard from my colleagues here—I would echo what Senator Voinovich has said about 

your statement, Senator Lugar, and a recognition that it’s not 

30 

always just about the amount of money, but if we don’t have real 

and meaningful reforms, not only in this country in terms of policies, but with the other countries that we’re dealing with on the 

food aid, we’re not moving ahead. I appreciate a great deal the 

comments that you have made. 

As I listen to some of what we have heard here this morning, I’m 

struck with the similarities of what I hear when I’m down in the 

Energy Committee just on the third floor here in the Dirksen 

Building. We’re talking about the ever-increasing price of energy, 

how it’s affecting not only people in this country but people worldwide. We’re trying to dissect the problem. Is it supply; is it demand; is it speculation on the market? 

We’re talking about the same principles here: A growing economy 

in China that is allowing for a level of consumption, whether it’s 

with energy or whether it’s with food, seeing it in India as well; 

those issues that affect the supply side, whether it’s the adverse 

weather conditions; the policies that we put in place here as they 

relate to corn ethanol or biofuels and how that impacts the availability. 

As we debate these issues in the Energy Committee, we have 

come up with no silver bullet. We have come up with no quick fix. 

I feel we’re talking about the same here today, that there is no 

quick fix to how you deal with the food crisis, not just in this country but throughout the world, that it is a global crisis, that it will 

be with us for years to come. What we have to figure out is how 

we move forward in a manner that will yield positive results and 

more immediate results. 

The frustration is very, very genuine, and I think it goes back 

to what Senator Lugar said. There have to be serious and substantial reforms before we’re going to see long-term relief there. 

I want to ask a question that ties into what we’re seeing within 

the energy sector globally. Over about the past decade now we’ve 

seen a very significant rise in the state-owned oil companies, to the 

point that they now control over 70 percent of the global oil 

reserves. I think it might have been the chairman here who mentioned that we now are seeing foreign governments, particularly 

those in Asia, that are encouraging their companies to invest in 

farm land overseas in other countries to grow food for the people 

back home. We’re seeing China looking to Australia to purchase 

land and farming ventures there. The South Koreans are looking 

at land in Mongolia. 

Is this a growing trend that we should be concerned about or is 

this just the inevitable? And I throw that out to either one of you. 

Mr. LAZEAR. Well, let me just make a couple of comments. First, 

with respect to the food issue and how it relates to energy, I think 

that’s a very important point, because one of the things that we 

sometimes forget when we look at one in isolation is, first of all, 

they are interrelated, as the chairman asked me earlier when we 

talked about how large was the effect of energy price rises on food 

price rises, and it’s quite significant. It’s a big factor. So that’s one 

area in which they’re obviously interconnected. 

The second point I would make is that there is a bit more hope 

on the food side, I would say, than on the energy side in terms of 

things happening in the relatively short run. The reason for that 

31 

is that at least on the food side we know that part of it is caused 

by temporary adverse weather conditions that hopefully will not be 

repeated. So we can at least anticipate that if things revert to normal we’ll see less upward pressure on food prices. 

In the energy sector, I think things are somewhat different, because obviously weather is not a factor there. It’s other things, 

more associated with trends in global demand, that cause some 

more difficulties there. 

In terms of land purchases in other countries and supplying food 

to the people, generally I think our view is that we like to see markets work in the least distorted fashion. If that means that some 

countries are relatively better at growing food and other countries 

are relatively better at doing other things, we would like to see the 

market help to make that possible, because that means that food 

will be the cheapest around the world if that happens. 

So I guess my answer to you would be that what we would encourage is that we don’t impede transactions either in services or 

in purchases of goods or possibly even land as it relates to the 

movement, flows of factors and efficiency-enhancing kinds of market approaches across countries. 

Senator MURKOWSKI. Let me ask then about those countries that 

have implemented export bans on various commodities. You’ve indicated that you believe that this is a significant problem. What 

are we seeing in terms of smuggling of commodities out of countries to gain a higher price elsewhere, and how is this affecting border security issues? 

Mr. LAZEAR. We don’t have data on smuggling, but I think you’re 

pointing to a very important issue, because what you’re really 

focusing in on is that when the government creates distortions and 

incentives to subvert the system by going around the system, what 

you end up having is a much more inefficient way of allocating resources to the uses that are willing to pay the most. That’s what 

you see with smuggling. So that’s obviously an adverse outcome of 

this. 

We’ve been encouraging countries to eliminate their export restrictions. We think that’s bad for other countries and also for the 

country in question, because what it does is it creates distortions 

even within that country in terms of promoting sectors that temporarily benefit from those export restrictions, but in the long run 

may not be the best for the people even of that country. So I think 

you’ve targeted a very important issue there and one that we’re 

certainly quite sympathetic to in terms of the way you approached 

it. 

Senator MURKOWSKI. Ms. Fore, did you have anything you 

wanted to add? 

Ms. FORE. May I? There’s one other area that Senator Lugar will 

know from family farming, which is that in the developed world 

there’s often access to finance if you are a farmer, and finance then 

allows you to buy equipment, irrigation systems, seeds, fertilizers, 

all of the things you need to run efficient and high productivity 

farms. So we have been looking at financing mechanisms for entrepreneurs, for farmers throughout the developing world. I think 

good financing mechanisms will be key to being able to own and 

farm land throughout the developing world. 

32 

Senator MURKOWSKI. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much. 

The distinguished Senator from Maryland’s going to yield to the 

Senator from Pennsylvania. So, Senator Casey. 

STATEMENT OF HON. ROBERT P. CASEY, JR., U.S. SENATOR 

FROM PENNSYLVANIA 

Senator CASEY. Mr. Chairman, thank you very much. 

I do want to note for the record that Senator Cardin did something that doesn’t happen very often. He allowed us to jump the 

line. And for that reason, any time that Senator Nelson had, I will 

yield back to Senator Cardin. [Laughter.] 

I have to go to preside, so I’m going to be very brief. But I do 

want to note that we appreciate the fact that the chairman called 

this hearing on this issue and for his work on this issue, as well 

as—of course—the ranking member, Senator Lugar, who’s done so 

much work in this area for many years. We want to commend both 

of them for that. 

I want to get right to my point. To say this is a crisis across the 

world is a dramatic understatement. We’ve got, by the estimate of 

the United Nations, 37 countries that face some kind of severe food 

insecurity, that means almost one-fifth of the world’s countries are 

facing that horrific nightmare. So it’s really about a humanitarian 

crisis. 

There’s a moral gravity to this problem which I think we all recognize. But also, increasingly we all understand that this is about 

security or insecurity in these countries that could be breeding 

grounds for terrorism or at least the increase of terrorism. So it’s 

as serious as it gets. We don’t need to say that any more directly 

than that. 

But I wanted to ask about something very basic, four words: 

‘‘Food on the ground.’’ I think both of our witnesses know that a 

lot of Members of Congress have been concerned about the amount 

of extra money, the added money that the President is requesting 

for this year’s supplemental; a reportedly $350 million. I’m very 

happy about that. We know that $200 million came from the trust. 

We’re happy about that. 

But I and others, months ago now, sent a letter to the appropriators saying: We need $200 million more on top of the $350 million. 

I’m putting the other $200 million aside because I don’t think we 

should count that in this discussion. So discussing only the $350 

million the President’s proposed, we’re proposing at least another 

$200 million, and that’s where the conflict is. 

I’m happy that the President’s come up with $770 million and I 

was all set to compliment him. I was getting calls from reporters 

the other day. In fact, I did one interview where I commended the 

President on it, and then I realized, or our staff realized—that’s 

why I hire smart staff—that it’s for fiscal year 2009, which means 

spending authority would not come into play until October 1 of this 

year. Food on the ground wouldn’t be realistic until who knows, 

November, December, January. 

So my question is, Why won’t the administration, not just in the 

context of the crisis, but also is in juxtaposition for what it’s asking 

for on Iraq and Afghanistan? This money is a scintilla of what we 

33 

spend in a week or a month in Iraq. By some estimates we spend 

as much as $400 million a day in Iraq, and we’re asking for $200 

million right now so that people can get food hopefully in June, 

July, and August, instead of waiting until November, December, 

January. 

Tell me why the administration won’t agree to the $200 million 

more? 

Ms. FORE. Well, you know that the supplemental request for 

$350 million was prepared last fall and that was before we saw 

many of the price increases. But this request will help with the 

price increases as well as other aspects of the crisis. When one is 

preparing these budgets, one never knows what lies ahead, and it’s 

a good first step. Then as the year begins to unfold, as the supplemental is considered by Congress—we have more information now 

than we had last fall. So the supplemental request will help with 

food on the ground—four very important words. 

The other area that could help a great deal would be local purchase authority. If we could have local purchase authority in our 

P.L. 480 account, it would allow us to purchase food in the local 

markets and it would then mean that we would not have as much 

time or cost, the American dollar would be stretched further, and 

the shipping time from the United States to countries would also 

be reduced. Thus food on the ground by this summer would be 

more likely. 

So those are two ways that one can help. 

Senator CASEY. Well, I want to press the question again. Will the 

administration agree to $200 million on top of $350 million? That’s 

the only question I have. And if they won’t, if they won’t even begin 

to—they’ve had this in front of them now for many, many weeks. 

For the life of me, I can’t understand that. 

It was bad enough a month ago, before what we saw in China 

in the last couple of days, before what we’ve seen in Myanmar. Crisis after crisis is unfolding, and we’re asking for just $200 million 

more. I don’t get a sense from you that you’re going to make any 

kind of an announcement today, a reversal of policy. 

But I would urge you to go back to the administration and keep 

pressing this. You know these issues. You’ve dealt with them firsthand and you’ve been very passionate about them. It doesn’t make 

any sense to me. 

Apart from Iraq, the urgency—I just wish that the actions by the 

administration, some of which have been great—$770 million is 

great, but that’s for 2009. I just wish that the actions by the 

administration would match the urgency and the gravity of the 

human misery that we’re seeing affected by these—by food prices 

and the food insecurity that comes with it. 

Ms. FORE. Thank you, Senator Casey. We’re working with the 

funds that we have now to try to maximize their impact and to try 

to be sure that we’re getting it to the places most in need. But I 

hear you. 

Senator CASEY. Keep pushing. 

Thank you. 

The CHAIRMAN. Thank you very much. 

Senator Isakson. 

34 

STATEMENT OF HON. JOHNNY ISAKSON, U.S. SENATOR FROM 

GEORGIA 

Senator ISAKSON. Thank you, Mr. Chairman. 

I want to go back to a comment by Senator Voinovich. Israel has 

done the most remarkable job of taking some of the most desolate, 

arid land in the world and producing unbelievable agriculture. So 

I just want to echo what George said about that. 

If there was any way, I would like to see USAID, being the deliverer of aid, information and technology, match some of Israel’s 

technology and advances and get it into some of these countries, 

particularly in Africa. Africa has so much commonality of landscape and arid land with Israel. This would be a huge help. It is 

remarkable what Israel has done with no water and with tough, 

tough soil to deal with. 

The second thing I want to say is, having gone to Ethiopia and 

worked with USAID in 2002, you made a comment that I had not 

really focused on until you said it. In some of these areas where 

hunger is a huge problem and where we need subsistence agriculture to meet basic needs, it’s not only that we don’t have the agriculture, but that there is no mechanism of transporting or there 

is not a good transportation system in these areas to get the food 

to where it needs to go. 

Is USAID doing anything to look at that issue of transporting 

food and saving food in these countries where there is so much 

need? 

Ms. FORE. Yes. Senator, it’s a very interesting issue and sometimes it just becomes so practical and so basic. Some of the programs we have are border customs, so that if you are moving goods 

on the road from Mombasa inland and you are moving through 

Kenya and you’re going into Uganda that it would take you a few 

hours to get through the checkpoint, rather than 5 to 6 days, because in 5 to 6 days food can spoil. It is taking too long. So transportation corridors are very important, and it is an area that we’ve 

been working on. 

We’ve also been working on some areas such as the weights and 

size of trucks that are allowed on roads and across borders, because 

the transportation system and the transportation networks need to 

function regionally. There need to be good trading hubs regionally. 

In Africa we’ve identified about 15 corridors that, if food could 

move with good transportation and good roads, we think we could 

reach probably 75 percent of the poorest in Africa, and that then 

would lead to greater food security. 

So transportation is going to be a very key part of this. Fuel 

prices of course tie into this. It’s very complex, but transportation 

is definitely one of our areas of interest. It’s part of our approach 

for the medium-term and the long-term development. 

Senator ISAKSON. So it’s more an issue of border crossings than 

availability of transportation that’s the difficulty in Africa? 

Ms. FORE. Well, availability of transportation is also important, 

to local markets, so that food moves from the farmer, from his or 

her farm to the local market, because it’s affordability of food, it’s 

availability of food, and it’s access to it. So it’s all of these that are 

important. 

35 

Senator ISAKSON. Chairman Lazear, the popular perception is 

that corn-based ethanol has driven the price of corn from $2.25 a 

bushel to over $6 a bushel. In your statement, you said biofuel contributes to the price increase, but it doesn’t have much of an effect. 

I think that’s what you said. Is that correct? 

Mr. LAZEAR. Not quite, Senator. What I said was if we looked at 

the effect of ethanol production on overall increases in food prices, 

it wouldn’t have much of an effect. If we were looking at corn specifically, it would have a larger effect. It wouldn’t account for the 

rise from $2 to $6, but it would have a larger effect. 

Senator ISAKSON. It’s my understanding that there has been 

some shift from production land for wheat growing to corn, because 

of the demand for corn and that in turn impacts the price of wheat. 

Is that correct? 

Mr. LAZEAR. Indeed, yes. And in fact when we said 3 percent on 

food prices, we’re taking into account the indirect effects that 

you’re mentioning, where you do have some spillover into the 

wheat market and to other markets as well. But the effect on corn 

prices is quite significant. We estimate that it would be—the U.S. 

ethanol production can account for about 20 percent of the rise in 

corn prices and the worldwide ethanol production can account for 

about another, oh, another 10 to 15 percent there. 

Senator ISAKSON. It seems to me—you’re the economist, but it 

seems to me that we’ve got the double whammy of increased demand and decreased supply hitting at the same time. The supply 

is as much because of weather and disasters as anything else, but 

the demand is due to improved diets in countries such as India, 

China, and other places. Is that correct? 

Mr. LAZEAR. Absolutely, that is correct. So they’re both going on 

simultaneously and it’s unfortunate because we’ve had again significant adverse weather consequences that have had huge effects 

on the supply. Again, it affects crops differently. It tends to affect 

wheat more than it does corn in terms of the prices. But the effect 

on wheat has been dramatic. 

Senator ISAKSON. Thank you very much. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much. 

Does anyone have any closing questions for the panel? 

Oh, Senator Cardin. 

Senator CARDIN. I didn’t give up my time. I yielded. 

The CHAIRMAN. I am so sorry. 

Senator CARDIN. That’s quite all right. I wasn’t going to let you 

get away with it. 

The CHAIRMAN. You have a half an hour. [Laughter.] 

STATEMENT OF HON. BENJAMIN L. CARDIN, U.S. SENATOR 

FROM MARYLAND 

Senator CARDIN. Thank you, Mr. Chairman. And let me thank 

Chairman Biden and Senator Lugar for their longstanding leadership on this role that the United States has played on humanitarian relief in regards to hunger around the world. I’m just very 

proud to serve with the two of you on this committee and look for 

ways that we can make the U.S. programs more effective. 

36 

One of the things I would hope that we would learn from today’s 

hearing and from what’s happening internationally is that I expect 

the problems of hunger and the cost of food to be a continuing problem. I don’t think we’re going to solve it in the next 6 months or 

12 months. The United States has many tools at its disposal, 

including, as Ms. Fore has indicated, the USAID’s role in helping 

developing countries with their capacity in food development. We 

have the World Food Programme, and our participation in that. We 

have the Emerson Trust, which was designed to help in these types 

of circumstances. We have our influence over private sector involvement and what they do to help, and our influence in other 

countries. 

Senator Voinovich mentioned Israel as a model for development 

in arid countries and Israel itself has initiated many programs 

with other countries to try to help in their food development. 

The chairman mentioned our trade policies, which are certainly 

a critical point. 

My first question is, What are we learning from this? Is there a 

better way that we could organize the tools that we have in this 

country to help the growing problem of food, the distribution of food 

internationally, and the problems of hunger? Will there be suggestions made as to how we can be more effective in dealing with 

these international challenges? 

Ms. FORE. Well, let me mention one thing and then turn it to the 

chairman. One area that we think has enormous promise is the 

area of biotechnology. You have mentioned Israel, but also India, 

China, many other countries, have been working in biotechnology. 

We have a number of food staples that we have been working on 

that can help increase production throughout the developing world. 

But there are also some threats that we see, such as wheat stem 

rust, that needs addressing, because the world’s food supply is 

something that we need to protect, to grow, to encourage, to invest 

in. We just need to be investing more and more smartly in the 

years to come, to work with multilateral donors, international 

organizations and other countries, bringing with us America’s leadership in agriculature. 

Mr. LAZEAR. You actually stole most of my thunder, which is 

fine. I’m perfectly happy to have you do that. 

The only thing I might add to that is that one of the things we 

can do is by ensuring that markets can function appropriately we 

can smooth some of these problems out so that they’re less pronounced over time. A big problem of course is that if you intervene 

and create incentives to, say, hold off, to hold things off the market, 

so investors, as Chairman Biden had mentioned earlier, have incentives to enter those markets, what you do is you don’t have the 

supplies available during those periods when prices are going to be 

highest and when there is a crisis situation. 

So hopefully we’ll learn our lesson from this and make sure that 

we don’t put ourselves in the same situation in the future. 

Senator CARDIN. Let me ask you specifically about the Emerson 

Trust. We’ve talked about the replenishment funds, but as I understand it the authorization is much larger than the amount of capacity that it currently has. It holds wheat, but it could hold corn and 

rice, among other commodities. 

37 

Are we looking at perhaps coming forward with a more ambitious 

role for the trust in the future in dealing with certainly temporary 

problems, not just in this country but internationally? 

Mr. LAZEAR. I’m sorry, I thought you were talking to—— 

Ms. FORE. Do you want me to? 

Mr. LAZEAR. Go ahead. I thought that was directed to you. 

Ms. FORE. The Emerson Trust has been one of the many tools 

that we have used to good effect in times of food crises and emergencies. But we are starting to think through what our other options are, what sorts of flexibilities can we create with the tools 

that we have as a nation to address food crises around the world. 

So we will look forward to working with this committee on the future of the Emerson Trust, and how we can use such tools that 

need replenishing, but also can be utilized in times of crises. 

Senator CARDIN. It just seems to me that the authorization level 

is so much higher than what we traditionally have used in the 

trust. I know that’s going to be reauthorized in the farm bill that’s 

on the floor, but I would hope that we would take a look at that 

becoming a more effective tool in dealing with some of the ongoing 

problems. 

Mr. Chairman, let me ask you one question if I might. 

The CHAIRMAN. Sure. 

Senator CARDIN. Wrong chairman. This chairman here. 

The CHAIRMAN. Good. I’m glad you have to answer it. [Laughter.] 

Senator CARDIN. It’s on the trade policies. You talked traditionally about the problems we have in the WTO in opening markets, 

and I couldn’t agree with you more, particularly with the export 

subsidies that we see in Europe and Asia. It was very disappointing to see that is what really brought down this current 

round. But it seems to me that one of the current problems we’re 

having is countries are trying to hold onto their crops now, rather 

than making them available internationally as they should. 

So it seems to me we have a somewhat different challenge right 

now in regards to the world agricultural markets. What role can 

the United States play to prevent countries from trying to hold 

onto their crops, preventing the international economic forces to 

work appropriately? 

Mr. LAZEAR. Absolutely, I think that that point is an extremely 

important one. We’ve seen what I would think of as major distortions of markets by countries prohibiting exports of crops to countries that really need these crops at this point, where we could see 

prices falling pretty significantly if crops were allowed to move 

across those borders. 

You’re really asking me a political question in terms of what we 

could do to encourage that. That’s really not my area of expertise, 

but I would say that we should certainly push this very strongly, 

because prohibiting crops from moving to those countries that need 

them the most is very problematic at this point. I couldn’t agree 

with you more. 

Senator CARDIN. Well, thank you. 

Thank you, Mr. Chairman. I guess my last question is to you. 

What are you serving for lunch today? 

The CHAIRMAN. Hang around. The menu is open. 

38 

Thank you, Senator, and I apologize for thinking your yielding 

was yielding. But thank you very much. 

Let me say before—do you have any further questions, Dick? 

Senator LUGAR. No. 

The CHAIRMAN [continuing]. Before I dismiss the panel, and 

thank you both for giving us so much time, one of the frustrating 

things that Senator Lugar and I and Senator Cardin and others 

who care, as most of us do, deeply about issues like this, and 

PEPFAR, the Global AIDS Fund, Darfur, and all these human 

catastrophes that are around the world that we have the capacity 

to do something about, is that it’s hard to get them up on the agenda in a way that we’re able to overcome objections of just a very 

few people. 

I was very proud of the work that Senator Lugar’s staff and mine 

did in working with the administration on something they should 

be complimented on, on PEPFAR, on dealing with the global AIDS 

funding, and we increased it significantly and made some real 

changes, real compromises, and it was ready to roll, and a few Senators on the floor are stopping us moving on it. 

One of the purposes—I remember Chairman Fulbright when I 

first served on this committee telling me he thought the most useful purpose of this committee was as an educational tool. It’s a 

means by which to inform our colleagues. We don’t have that much 

legislative authority. It’s not like when I was chairman of the Judiciary Committee or chairman of the Agriculture Committee, where 

there’s more you can actually legislate. You don’t legislate foreign 

policy. 

One of the things I want to raise with you, because we’d like very 

much, Madam Secretary, to work with you, is that I really do think 

the point made by the chairman is that one of the great contributions you can make and the administration can make to the next 

President, whether it’s John McCain or Barack Obama or Hillary 

Clinton, whomever, is to bequeath them a beginning of a reorganized effort here that’s consequential and coordinating, so they 

don’t start from scratch, because the truth of the matter is there 

are some big ticket items here. 

One of the pieces of it—and this is reason for me for some degree 

of optimism—is that there are scores of significant people in the 

United States who neither run NGOs nor are government officials, 

but who are very, very bright and wealthy individuals who are willing to make significant financial and personal sacrifices, as we’ve 

seen in the fight against AIDS, and I would argue here in this 

area. 

This is anecdotal, but I think it’s the reason Americans should 

be optimistic. I was talking to a friend of mine who is a very successful investment banker, who called me the other day—and I 

hope he won’t be embarrassed; his name is Terry Meehan in New 

York. He said: Look, Joe, I’d like to come and see you, he said, because I’d like to devote the next 3 or 4 years of my productive life 

here in doing something about the food crisis. I want to be involved. I want to get deeply involved with my resources as well as 

whatever skill I can bring to bear. 

So I just would hope that as you’re thinking about it, the administration is thinking about it, and we’re thinking about it, and the 

39 

witnesses we’re about to hear, is that there’s got to be an even better way to sort of coordinate. And I’m not suggesting that the Terry 

Meehans of the world are the solution to the problem. I don’t mean 

to suggest that. But a better way to coordinate from the United 

States the totality of our resources, human as well as financial, to 

deal with what everyone has acknowledged and you both pointed 

out is a problem that is not—is emerging. It’s difficult now; it’s 

going to get bigger. But it’s not without solution, it’s not without— 

it’s not without answers. 

So I just raise that with you. I would ask, Madam Secretary, 

whether you’d be willing to, over the next months, just to be able 

to work a little bit with our staffs to see if we can try to either follow on, build on what you’re already proposing or follow on with 

maybe some ideas about how we just change the dynamic here. 

I know your forte is management. It is something I think we desperately need, and we’d like to work with you. 

Ms. FORE. Thank you, Mr. Chairman. I would welcome that. This 

is a time when we really will have a chance to do something significant and multiyear and public and private, including foundations and other countries. 

The CHAIRMAN. As I said earlier, I cannot speak for any of the 

candidates, although we all three know all of them well because 

they’re colleagues. But I believe, I know that Senator Obama and 

I know that Senator Clinton, and I believe that Senator McCain, 

would be very, very interested in beginning to reshape the organizational chart here so that they’re in a position to be able to hit 

the ground running. 

Again, that is not a criticism of the administration. I’m not trying to suggest anything other than we all acknowledge we need a 

new model here. 

So I thank you very much. Thank you both for being here. 

Ms. FORE. Thank you, Mr. Chairman. 

Mr. LAZEAR. Thank you. 

The CHAIRMAN. Our next panel is a very distinguished panel: 

The Honorable Josette Sheeran, she’s the Executive Director of the 

United Nations World Food Programme, the largest operation in 

the world. It is the largest humanitarian agency, with an annual 

budget exceeding $3.1 billion. Ambassador Sheeran was appointed 

to her current position on November 2006. Previously she was confirmed by this committee as Under Secretary for Economic, Energy, 

and Agricultural Affairs at the State Department. 

The WFP has recently released an advisory donor appeal for 

$755 million. We look forward to hearing from her today, as well 

as how we can best support the effective response right now and 

what we need to do in this immediate crisis. It’s not going to be 

over soon, as we’ve all said. 

And also, Dr. Peter McPherson, president of the National Association of State Universities and Land Grant Colleges. Dr. McPherson has a long and distinguished history of working with development and food issues. He’s a former ambassador—excuse me— 

Administrator of USAID, and also President Emeritus of Michigan 

State University. 

He’s a founder and cochair of the Partnership to Cut Hunger and 

Poverty in America. Dr. McPherson, your long involvement with 

40 

U.S. food policy and agricultural issues is especially helpful to this 

panel now. 

I might add parenthetically, unrelated to this, we’re trying very 

hard to move along the legislation we talked about. We’re trying 

to make that part of a package of some very good legislation that’s 

come out of here where we can force those who are holding this up 

to have to deal with it on the floor. So it is one of the four priorities, I just want you to know. It’s an unrelated issue. 

Finally, James Lyons is the vice president of Policy and Communications of Oxfam America. Mr. Lyons served in the Clinton 

administration as Under Secretary for Natural Resources and 

Environment in the Department of Agriculture. His responsibilities 

during that period included drafting conservation and forestry titles of the 1990 farm bill, which are a big deal in my State, the 

conservation pieces of that, the reason why I supported the bill. 

Mr. Lyons also represents—as a representative from the NGO 

community, your perspective on these issues is critical in providing 

us with a better understanding of how we got to this point and 

what we need to do and consider in the short term as well as the 

long term, but in this immediate crisis. 

So I thank the panel for being here. Thank you for your commitment, and I yield to you, Madam Secretary, to begin with. Thank 

you, and thanks for being here. You’re back before the committee 

and not having to be confirmed for anything. 

STATEMENT OF HON. JOSETTE SHEERAN, EXECUTIVE DIRECTOR, WORLD FOOD PROGRAMME, UNITED NATIONS, ROME, 

ITALY 

Ms. SHEERAN. Yes; exactly. 

Well, Mr. Chairman and Senator Lugar, I want to thank you so 

much for this opportunity to come and explain what we’re seeing 

out there on the front lines of hunger. News reports and images of 

deadly riots in Haiti, triggering the collapse of the government, and 

in more than 30 nations around the globe, are stark reminders that 

food insecurity threatens not only the hungry, but peace and stability itself. 

Some say there are only seven meals between civilization and 

potential anarchy. At the seventh meal lost, people are reduced to 

fending for their survival and the survival of their children, fraying 

the very moorings of society. 

Ensuring access to adequate, affordable food and nutrition is certainly one of the fundamental roles of government and indeed of 

civilization itself. Yet today many governments, despite their best 

efforts, are finding it more and more challenging to ensure that 

those basic needs are met. In part, this is not only about record 

high prices for the world’s staple foods, but about the alarming and 

aggressive pace of those price increases. 

For example, in February rice cost the World Food Programme 

$460 a metric ton in Asia. Just 5 weeks after that, the price had 

shot up to $780 a metric ton, and a few weeks after that it had 

reached record levels at $1,000 a metric ton. This was on top of 

already steep increases in 2007. 

Consumers are getting hit worldwide. For some it is a painful 

pinch. For those living on less than a dollar or even 50 cents a day, 

41 

it is a catastrophe. Of course, we’re all consumers when it comes 

to food. Food is so basic to human survival that its denial is a 

denial of life itself. 

Today the global food supply system is groaning under the strain 

of skyrocketing demand, soaring cost of inputs, depleted stocks, and 

crop loss due to drought, floods, and severe weather. Last June I 

warned we were facing a perfect storm for the world’s most vulnerable. Today I believe we are in the eye of that storm. 

That storm is made even more complex when the world is hit 

with unexpected disasters, such as Cyclone Nargis in Myanmar or 

the massive earthquake in central China. The cyclone last fall in 

Bangladesh threw thousands into desperation and devastated more 

than 300,000 hectares of rice crops. According to USAID’s Office of 

Foreign Disaster Assistance, the total number of disasters worldwide on average is now 400 to 500 a year, up from an average of 

125 in the 1980s. 

I have traveled in recent months to Ethiopia, Kenya, Senegal, 

Mali, Egypt, and Syria and talked with farmers and consumers. 

They express confusion and frustration as to what is robbing them 

of milk for their children, their weekly portion of meat, or, for those 

who make less than 50 cents a day, reducing them to a single bowl 

of grain or one piece of bread. With little awareness of the macroeconomic forces at play, many blame their own leaders or local suppliers, millers, traders, or anyone else, threatening confidence in 

fragile democracies and markets. 

The world’s misery index is rising as soaring food and fuel prices 

roll through the lives of the most vulnerable, a silent tsunami that 

knows no borders. Most do not know what has hit them. 

The issue here is resiliency. For those living on less than 50 

cents a day, there is no place to retreat. This is the new face of 

hunger, with people who were not in the urgent category just 

months ago joining the ranks of desperation, and it is more urban 

than we have seen before. For many, their coping strategies have 

already been greatly weakened. As you have read, many are 

reduced to mudcakes, for example, in Haiti or black flour, which is 

cassava flour that is blue with mold, in Burundi. In Burundi, even 

the cost of black flour has tripled. 

Of greatest concern here is the threat of severe malnutrition, 

especially on highly vulnerable groups such as under-2-year-olds, 

pregnant and lactating mothers, HIV/AIDS patients. For a child 

under 2, we now know that nutritional deprivation will stay with 

them for a lifetime. 

As Secretary General Ban Ki-moon has said, this crisis threatens 

the hard-earned development progress of many nations across the 

range of millennium development goals. 

Perhaps the most fundamental question will be, Is this challenge 

fundamentally different than the food price and supply crisis of the 

early 1970s, which was ultimately followed by an era of cheap and 

abundant food and oil? Or are we witnessing a structural shift in 

global agricultural markets, a new era of rapid and persistent 

growing demand for food bumping up against resource limitations 

in fossil fuels, land and water? Is all of this coupled with increasing 

climatic changes that introduce unprecedented levels of uncertainty 

into annual agricultural yields? 

42 

How accurately and effectively we answer this question may be 

one of the top peace and security issues of our time. 

The Secretary General of the United Nations has pulled together 

a task force to help unite global action from the United Nations to 

the World Bank, to regional organizations and countries. Among 

the action steps that I’d like to highlight are most critical for those 

who are under pressure right now; hunger pressure. 

First, we have to help governments alleviate the immediate suffering and malnutrition. This was the root of WFP’s extraordinary 

emergency appeal. This is a cup from our school feeding program 

in Rwanda, and today we’re actually able to put 40 percent less 

food in this cup than we could even last June, simply due to the 

rising food prices. But also we are seeing a new face of hunger, increased demand in many countries, including 2.5 million people in 

Afghanistan, for example, who were newly identified as hungry due 

to the soaring prices. 

The second issue I’d like to raise is humanitarian access to food. 

As you’ve heard, dozens of nations have put export controls on food 

and have imposed high taxes on food exports. The World Food Programme has three challenges. Today over half of our food is purchased in more than 80 different countries, including 69 countries 

in the developing world. Today we have humanitarian supplies 

blocked in countries that have put on export controls. We’re finding 

fewer and fewer countries we can procure food from, threatening 

our pipeline in Somalia, Afghanistan, and other places. Others like 

Joachim van Braun of IFPRI have warned that we need to set up 

a global humanitarian grain stock to get us through this challenge. 

But today I would call on all nations to respect the movement of 

humanitarian food despite whatever blocks they have and to help 

us be able to meet the needs that are out there. 

The third is to help nations ramp up safety nets. Many of those 

are overwhelmed right now, school feeding and productive safety 

nets such as Ethiopia has in place. 

The fourth option I’d highlight is urgent action on agricultural 

inputs. One would think—and Senator Lugar, as a farmer you 

would know—when prices are high farmers plant more. I was just 

in the Rift Valley in Kenya and meeting with 40 farmers there and 

was very shocked to learn they’re planting much less than they 

were a year ago. This isn’t because of the disturbances there, but 

this is because the cost of inputs has skyrocketed. So fertilizer was 

1,700 shillings in December, is now 4,000 shillings, just 12 weeks 

later or 16 weeks later. And they simply cannot afford the inputs. 

As you know, they have no access to credit to do that. 

We are hearing this is happening from FAO and IFAD all over 

the developing world, and we need these harvests to be big and 

better than last year, not to be less. So we need urgent action on 

inputs, and FAO has called for $1.7 billion for fertilizer and seeds. 

The fifth area I’d highlight that’s so important is the work by the 

African Union, NEPAD, and CAADP, calling on the countries of 

Africa to invest 10 percent of their budget in agriculture. The countries that have, such as Malawi and Ghana and others, are actually 

beating the hunger curve. If all countries in Africa did this, there 

would be an extra $5 billion of investment in agriculture on the 

table immediately. 

43 

The World Bank is doubling their investment in long-term agriculture. I know this morning you focused on this, which I think is 

very critical. The IMF will help with import financing, balance of 

payment. This is critical. 

Then the last thing I’d highlight, and perhaps most importantly, 

is support for efforts like the Green Revolution in Africa and other 

efforts to get up yields, to bring the kind of science and research 

and technology to these countries, but also to look at the infrastructure and market challenges they face. 

I want to assure you that the Secretary General has pulled us 

all together. We had our first task force meeting on Monday. The 

United States leadership is also critical, and I want to pass on to 

this committee what I hear all over the world in refugee camps, villages, HIV/AIDS clinics: Thank you, America. The American people 

provide more than half of the world’s food assistance to the hungry. 

This means one out of every two potentially starving people that 

are reached with external aid, is provided for by America. 

This is a noble legacy. But of course no one wants to depend on 

another any longer than they need to in order to meet their food 

needs. Some decades ago America unlocked the keys to food abundance through the vision of people like Dr. Norman Borlaug, and 

we urge America’s leadership at this time to help bring an era of 

food abundance throughout the world. 

As President Kennedy said: ‘‘Food is strength. Food is peace. 

Food is freedom. Food is a helping hand to people around the world 

whose goodwill and friendship we want.’’ That goodwill is at the 

root of the founding of Food for Peace and also the World Food Programme. 

We thank the President of the United States for the request that 

he has made through the Emerson Trust and also for the $770 million in the 2009 budget to help. We also thank the Members of 

Congress who are leading efforts to ensure that upcoming supplementals can help close the immediate and urgent gap that we have 

in funding. 

I just want to end on a positive note, which is the world today 

is nurturing more people than it has throughout human history. 

We have cut the proportion of hungry in half from 1969 to today. 

We just are not keeping up with the pace of increase we need to. 

But many countries are on track to meet the Millennium Development Goal of cutting the proportion of hunger in half, from Ghana, 

Chile, Brazil, Malawi, Vietnam, and others. We must stay the 

course. We must stand by them. Many are doing the right things, 

and that’s why I’m a long-term optimist. 

Thank you. 

[The prepared statement of Ms. Sheeran follows:] 

PREPARED STATEMENT OF HON. JOSETTE SHEERAN, EXECUTIVE DIRECTOR, WORLD

FOOD PROGRAMME, UNITED NATIONS, ROME, ITALY

Mr. Chairman, distinguished members of the committee, I thank you for giving 

me the opportunity to meet with you today to explain what we are seeing out there 

on the frontlines of hunger. 

Today we come together to address one of the most pressing global issues of our 

time—the impact of soaring food prices on the world’s most vulnerable and the hungry. News reports and images from deadly riots in Haiti, triggering the collapse of 

the government, and in more than 30 nations throughout the globe are stark reVerDate Nov 24 2008 14:53 Feb 10, 2009 Jkt 000000 PO 00000 Frm 00047 Fmt 6633 Sfmt 6621 H:\DOCS\FOODCRIS BETTY
44 

minders that food insecurity threatens not only the hungry but peace and stability 

itself. 

Some say there are only seven meals between civilization and potential anarchy— 

at the seventh meal, lost people are reduced to fending for their survival—and the 

survival of their children, fraying the very moorings of society. Ensuring access to 

adequate, affordable food and nutrition is certainly one of the fundamental roles of 

government, and, indeed, of civilization itself. 

Yet today, many governments, despite their best efforts, are finding it more and 

more challenging to ensure that those basic needs are met. In part this is not only 

about record high prices for the world’s staple foods—but about the alarming and 

aggressive pace of those price increases. For example, in February rice cost $460 a metric ton; just 5 weeks after that prices reached $780 a metric ton and just a few weeks after that it reached record 

levels at $1,000 a metric ton. 

Other commodities have doubled or tripled in price over the past year. Consumers 

are getting hit worldwide—for some it is a painful pinch, for those living on less 

than a dollar, or even just 50 cents a day, it is a catastrophe. 

Of course, we are all consumers when it comes to food. Food is so basic to human 

survival that its denial is a denial of life itself. Today, the global food supply system 

is groaning under the strain of sky-rocketing demand, soaring cost of inputs, depleted stocks, crop loss due to drought, floods, and severe weather. Last June, I 

warned we were facing a perfect storm for the world’s most vulnerable. Today, I believe we are in the eye of that storm. 

That storm is made even more complex when the world is hit with an unexpected 

disaster, such as the cyclone last fall in Bangladesh, which devastated more than 

300,000 hectares of crops. 

And Cyclone Nargis in Myanmar—which hit the rice producing delta at a critical 

time, has not only left an estimated 1.5 million people fending for survival, but has 

threatened a critical source of food supply in that region. 

WFP has launched an Emergency Operation to provide food assistance to 750,000 people for a period of 6 months, at a cost of $70 million, and a Special Operation 

to provide logistics and emergency telecommunications services for the joint international humanitarian effort, with a budget of $50 million. I thank the U.S. Government for approving $13 million in support of these operations. 

A critical issue now is access. WFP has managed to reach more than 28,000 people with food aid so far, with 14 international and 214 national staff in-country. Our 

flights are allowed to bring in some supplies, but far from enough—a massive effort 

is needed to save lives, such as was launched after the tsunami in Asia or the earthquake in Pakistan. The Secretary General has expressed his deep concern and urged 

the government to allow for a major scaling up of global assistance. Strong international engagement and support is needed to ensure that the people of Myanmar— 

already among the poorest in the world—can recover from this calamity. 

With the soaring food prices, I believe we are facing a challenge that is humanitarian as well as strategic, with moral, political, economic, and security dimensions. 

It is clear that an immediate international response is required to address this 

global crisis and to ensure that the underpinnings of long-term solutions are in 

place. The United Nations is coming together to tackle these challenges, under the 

leadership of the Secretary General, who has declared the food crisis an emergency, 

the World Bank President, who has called for a ‘‘new deal’’ on global food policy, 

and all the members of the Secretary General’s task force that met in New York 

on Monday. 

United States leadership is also crucial to help address the global challenges facing the world’s most vulnerable. Let me pass on to this committee the message that 

I hear in refugee camps, schools, villages, and HIV/AIDS clinics across the world: 

‘‘Thank you, America.’’ The American people provide more than half the world’s food 

assistance to the hungry. This means one out of every two starving people reached 

with external aid in the world is provided for by America. That is a noble legacy. 

America, some decades ago, through science, technology, and hard work, and 

through the vision of people like Dr. Norman Borlaug, unlocked the keys to food 

abundance. America also decided to reach out, regardless of friend or enemy, to 

those in need, helping build goodwill and stability for the post-World War II generation. 

George Marshall, when laying out his grand plan for postwar economic recovery, 

saw this assistance as a vital and dynamic part of American foreign policy. I believe 

that meeting the current challenges of the global food crisis can be just as crucial 

a cornerstone of U.S. foreign policy in today’s volatile world. 

As President Kennedy said: ‘‘Food is strength, food is peace, food is freedom, food 

is a helping hand to people around the world whose goodwill and friendship we 

45 

want.’’ This goodwill was at the root of the founding of Food for Peace and also of 

the World Food Programme. 

At WFP, we are heartened by the response and support of the United States in 

this time of need for the world’s most vulnerable. The President’s request for $770 

million, on top of the $200 million released from the Bill Emerson Humanitarian 

Trust, is most welcome—and urgently needed to prevent deep and permanent cutbacks in our life-saving food assistance programs and operations around the world. 

I encourage you and all Members of Congress to urgently support the President’s 

request. We also thank the Members of Congress who are taking the lead to ensure 

that there is adequate funding for this crisis in upcoming supplementals. The American people have a long history of providing aid to others in times of great need. 

Now is another critical time when the U.S. needs to lead. 

Other nations have stepped up to the plate, including Japan, many nations in Europe and the European Union, and Canada which announced last week a total untying of all contributions, providing WFP with cash to purchase food from poor farmers in the developing world. 

It is important to note that the world today is nurturing more people than ever 

before in human history, and we have cut the proportion of hungry in half, from 

about 37 percent in 1969 to 17 percent last year. With advances in seed, fertilizer, 

and production technologies we have doubled yields for many crops for the past 

three generations. 

But we are not keeping apace of demand. The absolute number of hungry people—defined as those unable to meet the basic caloric and nutritional requirements 

for human health—has continued to grow to 860 million, with an estimated 4 million people added every year. WHO calls hunger and undernutrition the No. 1 

threat to public health, killing more people than HIV/AIDS, malaria, and tuberculosis combined. Every 10 days the world loses 250,000 people to hunger-related 

deaths, the equivalent of the casualties from the Asian tsunami. The vast majority 

of those casualties—160,000—will be children. 

Now the World Bank estimates that an additional 100 million people will be 

thrust into deeper poverty and hunger due to the soaring food prices. The director 

general of the Asian Development Bank believes that a billion people in Asia are 

seriously affected by the surging costs of daily staples. 

I have traveled in recent months to Ethiopia, Kenya, Senegal, Mali, Egypt, and 

Syria and talked with farmers and consumers, they express confusion and frustration as to what is robbing them of milk for their children, their weekly portion of 

meat, or, for those who make less than 50 cents a day, reducing them to a single 

bowl of grain or one piece of bread. With little awareness of the macroeconomic 

forces at play, many blame their own leaders or local suppliers, millers, traders and 

anyone else—threatening confidence in fragile democracies and markets. The 

world’s misery index is rising as soaring food and fuel prices roll through the lives 

of the most vulnerable; a silent tsunami that respects no borders. Most do not know 

what has hit them. 

The issue here is resiliency, and for those living on less than 50 cents a day there 

is no place to retreat. This is the new face of hunger, with people who were not in 

the urgent category just months ago, joining the ranks of desperation. 

Many nations also are exhausting their own coping strategies, with grain reserves 

reaching record lows, foreign currency reserves to purchase costly food imports depleted and mitigation strategies, such as removing import taxes on food, already accounted for. Joachim von Braun, the director general of the International Food Policy Research Institute, warns that, quote, ‘‘The world food system is in trouble and 

the hot spots of food risks will be where high food prices combine with shocks from 

weather or political crises. These are recipes for disaster.’’ 

Perhaps the fundamental question will be: Is this challenge fundamentally different than the food price and supply crisis of the early 1970s, which quickly followed by another era of cheap and abundant food and oil? Or are we witnessing a 

structural shift in global agricultural markets, a new era of rapid and persistent 

growing demand for food crashing against resource limitations in fossil fuels, land 

and water, coupled with climatic changes that introduce unprecedented levels of uncertainty into annual agricultural yields? 

These are the questions we must urgently ask, because they must inform an urgent global response. The answers, and the actions, will determine whether together 

we enter an era of opportunity and hope; or a world of scarcity where nations and 

individuals fend for themselves, with the world’s bottom billion losing out once 

again. 

Let us quickly explore three subjects: (1) The revolution in food aid; (2) the new 

face of hunger; (3) a global call to action. 

46 

REVOLUTION IN FOOD AID

The World Food Programme is the world’s urgent hunger institution—you turn 

to us when all else fails to prevent life-threatening food and nutrition vulnerability. 

We have been undergoing a transformation in how it does business—this is not your 

grandmother’s food aid. 

WFP is the world’s largest humanitarian organization and charged with the responsibility to meet hunger when all other systems collapse. Today, WFP manages 

a global lifeline that can reach any corner of the world in 48 hours—as we did after 

the war in Lebanon and we will today in Myanmar following the devastating 

cyclones there. WFP uses thousands of planes, ships, helicopters, barges and, if 

needed, donkeys, camels, and elephants. We deliver not only food, but an array of 

life-saving goods for dozens of partners, including medicines for WHO. Our Humanitarian Air Service brings 400,000 humanitarian and development workers in and 

out of disaster zones each year—including 10,000 in and out of Darfur each month. 

Today we reach up to 90 million people a year threatened with starvation and acute 

malnutrition. We are also among the most efficient in the world, using only 7 percent of our budget on overhead. We have state-of-the-art controls on food distribution, from purchase to consumption. 

WFP is 100 percent voluntarily funded; receiving no assessed funds from any 

source. When WFP was founded back in the early 1960s, it literally was a surplus 

food program with nations of the world sharing their bounty with the world’s hungry. This saved many millions of lives, but also could be a rather blunt instrument, 

leading at times to a mismatch between populations and food products and could 

lead to disruptions in local agricultural markets. Today, less than 2 percent of our 

food is surplus donation. And today, up to 55 percent of our budget is cash, allowing 

us to purchase food from farmers throughout the developing world. Today, 80 percent of WFP’s cash for food is used to procure food in the developing world. This 

year, this will infuse around $1 billion into poor farming economies. Today, in all 

of our operations, WFP asks how we can use food and food assistance to not only 

meet critical emergency needs, but, whenever possible, to work in concert with governments and other organizations, such as FAO, to ensure urgent hunger interventions help strengthen local food security and local markets and solutions on a more 

lasting basis. 

To that end, we have: 

(1) Upgraded our needs assessments and vulnerability analysis—which we conduct for the global system—to include local market conditions. Thanks to a 3-year 

project just completed, we can now assess down to the household level what is causing the hunger vulnerability—is it, for example, crop failure or that food in the markets is too expensive? Obviously, that would inform our response. 

(2) We seek to ensure our hunger responses support local markets and farmers 

whenever possible. For example, during the recent floods in Mozambique, food could 

not reach the victims, and they could not afford to buy it—but there was plenty of 

food on local markets. In that case 80 percent of the food for the victims was purchased from Mozambiquan farmers—creating a win/win solution. 

(3) To that end, we are asking our board to approve a broader tool box or responses to hunger that can be more nuanced in protecting local markets while addressing urgent hunger and nutrition needs. These responses range from bringing 

in commodities when necessary, such as in Darfur where 70 percent of the more 

than 3 million people we feed everyday are fed with American commodity aid and 

there is not enough extra local food to purchase; to local purchase where often there 

is no food on the shelves but there is food on the farms but no infrastructure to 

get it out, and WFP can go and get it as we do in the DRC where we tripled our 

local purchases this year in the middle of major conflict; also one tool we are looking 

at is targeted food vouchers or cash as we did in Indonesia after the economic troubles there in the 1990s and may be appropriate in the context of the current challenge; to food for work and assets; to local capacity building in food security systems 

and infrastructure. 

(4) We have also introduced what I call my 80/80/80 solution: Today 80 percent 

of WFP’s cash for not only food, but also land transport is spent locally and 80 percent of WFP’s staff is locally hired. This helps build permanent local capacity and 

knowledge about food security. I am adding another 80 to my 80 solution—because 

also more than 80 percent of our activities take place outside of our headquarters 

in Rome or in the major cities of our partner countries. We are deep into the rural 

economies, helping improve desperately needed local infrastructure. 

We seek, whenever possible, that food is transformed into a productive investment 

into these economies. To that end, WFP, in exchange for life-saving food has trained 

local populations and, over the past four decades, together we have planted over 5 

47 

billion trees in the developing world, helping stabilize ground soil; have demined 

and built tens of thousands of kilometers of vital feeder roads, including over the 

past few years reopening more than 10,000 kilometers of roads in DRC, Angola, and 

Southern Sudan. Last year, the Government of Southern Sudan became one of our 

top 10 donors as WFP partnered with them in reopening roads for farmers, and 

building schools and hospitals—allowing us to reduce dependency and cut general 

food distribution in half. 

In all our work, we now look at what I call the value chain of hunger to ensure 

our interventions are coherent with the work of governments—our No. 1 partners— 

and our U.N. partners such as FAO, UNICEF, WHO, UNDP, and our vital NGO 

partners such as CARE, World Vision, Oxfam, Caritas, and the Red Cross and Red 

Crescent movement. 

On local purchase, I will just give you one example in Senegal. President Wade 

has called for action on goiter, a huge challenge for Senegal where virtually none 

of the salt for local consumption is iodized. They have big salt producing companies 

that do iodize but it all gets exported. To support the President’s call to action, WFP 

decided that we would purchase our salt for our programs in Senegal from 7,000 

village salt producers and, partnering with the Micronutrient Initiative, we helped 

the villagers purchase the equipment and receive training in the technology to iodize the salt. 

Today 7,000 salt producers—most of them women—have a steady income and 

they provide 100 percent of the salt needs for our Senegal program. In fact, they 

now produce iodized salt for the local markets, which is helping address what President Wade called one of the biggest health challenges in Senegal. This is a win-win 

situation. The salt-ladies of Senegal are so good that we were able to now buy some 

of their salt for our regional programs. There are now many such examples. Last 

year, in our school feeding program in Ghana, 100 percent of the food is purchased 

locally. This is the kind of win-win solution that we feel can use food assistance to 

break hunger at its root. 

THE PERFECT STORM

Let me address the challenges we face—and the action we feel is needed—to address what I call the ‘‘new face of hunger.’’ Soon after joining WFP, I looked at our 

portfolio of work and became very concerned about the trends. The world was consuming more than it produced, food stocks were being drawn down and the stockto-use ratios were at all time lows. When did this tip into a crisis mode for the 

world’s most vulnerable? While things were already difficult, I would point to last 

June as the launch pad for a period of aggressive and relentless price increases that 

have left poorer nations and WFP itself reeling. Between June of last year, as I 

mentioned, when we priced our program of work for 2008, and February of this 

year, our cost drivers of food and fuel had increased 55 percent. This pattern of aggressive increases has continued for most commodities, with the exception of wheat, 

which has dipped down a bit recently. And sorghum prices have also skyrocketed. 

There are a confluence of factors cited for the increases—the very positive economic boom in many major developing countries, with the increased prosperity causing a change in diets toward meat and dairy products, which takes more grain to 

feed livestock; the cost of energy with oil prices driving up costs across the entire 

value chain of food production; to the fusing of food and fuel markets, with more 

and more food being purchased for industrial uses such as biofuels; with increasingly severe weather throwing in additional supply shocks. 

These factors have created a supply and demand challenge that may take some 

years to sort out. Food supply is relatively inflexible and vulnerable to unpredictable 

factors such as weather—record droughts in Australia greatly affected global wheat 

supplies and prices in recent years. According to USAID’s Office of Foreign Disaster 

Assistance, the total number of disasters worldwide on average is now 400–500 a 

year, up from an average of 125 in the 1980s. 

And there have been what I call the follow-on factors—nations shutting down export markets further tightening supplies. In addition hoarding and market speculation are also now contributing factors. For example, the great increase in futures 

markets and hedging on agricultural products, which is linked to the depreciating 

dollar, has increased price volatility. 

THE GLOBALIZATION OF HUNGER

This is creating perhaps the first globalized humanitarian emergency. It has been 

said that a hungry man is an angry man. Food riots and protests have broken out 

throughout the world, triggered by a new face of hunger in urban areas, which have 

attracted the majority of the world’s population in search of opportunity. While it 

48 

has been said that famines are incompatible with democracy, I will tell you that 

some of the world’s gold standard new fledging democracies are the nations under 

most pressure now. These nations, many of which are dependent on imports to feed 

up to half—or more—of their populations are reeling under the combined hit of 

record food and fuel prices. 

Countries are coping with food inflation and import dependency in different ways. 

Many have removed import tariffs, sacrificing revenues, but alleviating price pressure. Today it is estimated that more than 40 nations have imposed export controls 

on commodities, greatly restricting global markets. Today WFP—a buyer in more 

than 80 nations, has humanitarian food trapped in nations that have banned exports. In addition, WFP is finding fewer and fewer nations willing to sell us food 

for export. We are having trouble buying food for our Afghanistan program, with 

Kazakhstan, Pakistan, and others imposing steep export restrictions. Today, onethird of the globe’s wheat suppliers, have banned exports. Countries most at risk 

are developing nations that are import-dependent and already experiencing an additional shock from conflict, floods, droughts, or storms. Think here Afghanistan, Somalia, Haiti, Burundi, Mauritania, and others. 

WFP has mapped countries on a scale of high vulnerability to low vulnerability— 

by far the greatest vulnerability is in Africa. We have also mapped individual vulnerability: Most urgent to watch here are those whose health is already fragile or 

critical—the under 2-year-olds, pregnant and lactating mothers, HIV/AIDS patients, 

refugees, and IDPs who cannot meet their own food needs. The new face of hunger 

is also more urban than before. As the world’s most vulnerable struggle on the thin 

edge of survival we are seeing negative coping strategies in full force: 

—For those living on less than $2 a day, education and health are being sacrificed. 

Livestock is being sold off. 

—For those living on less than a dollar a day, milk, protein and fruits and vegetables have become rarities, if at all. 

—For those living on 50 cents a day, it is a catastrophe, with whole meals being 

lost, or whole days without food, or diets totally devoid of nutritional content. 

Let me give two examples. 

In Haiti, this experience of compounding vulnerability with coping strategies 

already having been greatly weakened, and as you have read, mud cakes—originally 

used for medicinal purposes only—are now sold, and consumed, as a staple. Even 

those prices have shot up. 

In Burundi, the staple now for the poorest of the poor is something called ‘‘black 

flour’’—it is cassava that is moldy and looks something like blue cheese—even that 

has gone up threefold. 

As Secretary General Ban Ki-moon has said, this crisis threatens the hard-earned 

development progress of many nations across the range of Millennium Development 

Goals. 

WFP CONCERNS

Here are our concerns at WFP: 

First, in a time of increased need, WFP is able to reach fewer people than even 

just months ago. Due solely to soaring prices, today WFP has 40 percent less food 

in the pipeline. For our programs, this is a direct impact. I was just in Kenya, in 

the Kibera slums, at a school where many of the children rely on WFP for their only 

food each day. Some are now taking home half their cup of food for younger siblings 

who do not have any. 

For these children the vulnerability is profound. We are not talking about meat, 

potatoes, vegetables, and a little desert that get sacrificed in hard times. It is the 

one cup of porridge. As you have seen, we announced this week that we have to 

cut 450,000 school lunches in Cambodia and we have another number of countries 

where we will have to be rolling out cutbacks. 

Second, right now, as I have already mentioned, we have an emerging new face 

of hunger. WFP estimates that an additional 130 million will be unable to meet 

their foods needs due to the high prices crisis. 

Third, we are concerned about access to food supplies. For example, we tried to 

buy wheat this fall to make biscuits for the victims of the floods in DPRK and for 

10 days, and for the first time in our memory, we could not buy it anywhere in the 

markets in Asia. In past weeks we have had commodity contracts broken. Between 

the time we made the contract and picking up the food 2 weeks later, prices had 

risen so quickly that the grain went to a higher bidder, with the supplier willingly 

paying WFP the 5-percent performance bonds to get out of our contract. We also 

have food aid trapped in nations as I mentioned. We also are finding fewer and 

49 

fewer markets open to procurement at all, with an estimated up to 40 nations currently under some level of export controls. 

The fourth is connected to that. One would expect that the natural reaction from 

farmers to high prices would be to plant more and that is happening throughout 

the major developed economies. But in the developing world, there are indications 

that the reverse is happening in many places. I knew that most poor farmers were 

not benefiting from the high prices because half the hungry in Africa are farmers 

who cannot even produce enough for their own family. Most are so disconnected 

from markets that they really cannot benefit. What I did not realize and what I saw 

in Kenya when I visited the Rift Valley. Fertilizer has gone from 1,700 shillings 

there in December to 4,000 shillings just 12 weeks later. This—the breadbasket of 

Kenya—farmers were planting one-third of what they were planting a year ago. According to the International Herald Tribune this is happening in other places such 

as Laos, and FAO and IFAD say this is happening throughout the developing world. 

These farmers are retreating to subsistence mode, withdrawing from markets until 

things stabilize. This could indicate serious shortages in upcoming harvests, further 

compounding our challenge. 

My fifth concern is that many of the policy reactions globally and locally may actually be helping feed the crisis, not people. It is understandable that nations will 

use whatever levers they have to alleviate pressure and help meet the needs of their 

people. Yet some of these may deepen the challenge. Today, many of the world’s 

farmers are under price controls, further discouraging increased planting. Inputs 

rise, but food prices are under a ceiling. A range of major food exporters have put 

blocks on food exports almost overnight, from China to Vietnam to Argentina to 

Kazakhstan. This global rash of ‘‘beggar thy neighbor’’ responses will not provide 

a solution. In addition, many nations who can afford to are stockpiling, further 

tightening supply and driving up prices. 

And last, I am concerned that, as high prices persist, we are entering a second 

phase of this challenge, one that is threatening not only caloric intake, but nutritional status and livelihoods. In our vulnerability mapping of household needs, is 

finding that coping strategies, such as selling off livestock and other possessions, 

shifting to cheaper foods, sacrificing health and education, are being depleted, without any clear indication that relief is in sight. 

A GLOBAL CALL TO ACTION

What should be done? We must take this crisis as a global call to global concerted 

action to support the governments and people hardest hit and to help stabilize the 

global response. The Secretary General’s task force was formed to help provide a 

coherent strategy of response. We are working closely together—all of us—WFP, 

others at the U.N., with the World Bank and IMF. The Secretary General has appointed coordinators Sir John Holmes and David Nabarro to help on this global action plan. 

Among the actions that we—the WFP—see as urgent are: 

First, we do have to help governments alleviate immediate suffering and prevent 

a crippling outbreak of severe malnutrition that could set global development back 

by decades. When there is no food to be had, we must keep the humanitarian pipeline full. We are working with partners such as UNICEF and WHO to scale up 

therapeutic feeding to reach children most at risk. We have the tools—we can reach 

children quickly and can alleviate acute humanitarian crises. 

Second, we need humanitarian access to food and today I call on all nations to 

provide procurement access for humanitarian purchases. IFPRI’s Joachim von 

Braun has urged the world to consider humanitarian grain stockpiles that can be 

drawn down on systematically over the next few years as we adjust to this challenge. We urge a dialogue on this issue. 

Third, we must help nations ramp up safety nets such as school feeding and productive social safety nets, as WFP does in partnering with Ethiopia. To this end, 

we call on Congress to urgently include the substantial predictable funding for the 

McGovern-Dole School Feeding Program in the current farm bill. School feeding is 

one of the most powerful human rights programs for girls—if a school meal is provided, or if girls receive extra food rations to take home for perfect attendance, parents who would never allow their girls to go to school do. Our programs see a revolutionary almost 50-percent attendance rate for girls. 

Fourth, to ensure the next harvests, we need action—urgent action—on agricultural inputs, priced out of the reach of poor farmers—FAO estimates that $1.7 billion is needed urgently. IFAD is deploying an action plan on fertilizers that will put 

an immediate $200 million in the reach of governments that want to act. 

50 

Fifth, the African Union, under NEPAD and the comprehensive agricultural development plan (CAADP) has called on all governments in Africa to invest 10 percent of their budget in agriculture. Nations that have, such as Ghana and Malawi, 

are beating the hunger curve. The average investment is now 4 percent throughout 

the continent. Shifting to 10 percent would put an additional $5 billion on the table. 

Sixth, the World Bank has doubled its investment in agriculture in Africa and has 

activated globally to assist governments on short-term and long-term solutions. 

Seventh, the IMF has announced plans to help nations deal with import financing 

challenges—and balance of payments issues. 

Eighth, and perhaps, most critically, as FAO has called for, we must all join forces 

to boost agricultural production, especially in the developing world. The Gates and 

Rockefeller Foundations have formed the Alliance for a Green Revolution in Africa— 

or AGRA—under the leadership of Kofi Annan, and there are the fantastic contributions of Norman Borlaug, and others such as Jeffrey Sachs and many, who are joining to boost production with the African Union and governments throughout the 

world. These efforts can help ensure an era of plenty and stability for all. 

CONCLUSION

At the 1974 World Food Conference in Rome, Henry Kissinger gave what he considered one of the most important speeches of his career. In response to that food 

crisis, he set the bold objective that, ‘‘within the decade no child will go to bed hungry, that no family will fear for its next day’s bread, and that no human being’s future and capacities will be stunted by malnutrition.’’ 

He called upon the world to act urgently, saying: ‘‘No social system, ideology or 

principle of justice can tolerate a world in which the spiritual and physical potential 

of hundreds of millions is stunted from elemental hunger or inadequate nutrition. 

National pride or regional suspicions lose any moral or practical justification if they 

prevent us from overcoming this scourge. 

‘‘In short, we are convinced the world faces a challenge new in its severity, its 

pervasiveness, and its global dimension. . . . Let us agree that the scale and severity of the task require a collaborative effort unprecedented in history. 

‘‘And let us make global cooperation in food a model for our response to other 

challenges of an interdependent world—energy, inflation, population, protection of 

the environment.’’ 

A number of countries have been on track to reach the Millennium Development 

Goal on hunger and will by 2015 if we stand with them—Ghana, Chile, Brazil, Malawi, Vietnam, and others. We must stay the course. Many countries are doing the 

right things. We must stand by their side. 

I am an optimist. My ancestors were from Ireland and left during the famine and 

yet just two generations later we have left an economy of famine to one of prosperity. It can be done. 

I believe that increased demand should create opportunities. This ‘‘perfect storm’’ 

has dramatically raised awareness that food cannot and must not be taken for 

granted. The world has also awakened to the fact that the food supply chain—from 

imports, to planting, to harvesting, to processing, to storage and delivery, and all 

the supporting market structures, from access to credit, risk mitigation, commodity 

exchanges, crop surveys, and water access—are all vital to world stability and prosperity. 

This crisis has also raised awareness that we have to prepare for the challenges 

of climate change; the Intergovernmental Panel on Climate Change predicts that 

some food insecure areas of the world, particularly in rain-dependent African nations, could see current yields drop by half in the next 12 years. 

There are also opportunities, not only for the American farmer, but hopefully for 

poor farmers in Latin America, Asia, Africa, and elsewhere. Seventy percent of African farmers are women, who typically bear more of the risk—and receive less of the 

gain—than any farmers in the world. In fact, almost half the world’s hungry are 

marginalized farmers with little or no access to fertilizer, seeds, tractors, credit, 

markets, or extension services. With concerted determination, now is the moment 

this can change. 

Defeating hunger is achievable; it requires no new scientific breakthrough. We 

have the weapons to defeat hunger, and I thank you for working with us to do so. 

The CHAIRMAN. Thank you very much. I’ve read your entire 

statement. We’ll put your entire statement in the record as well, 

with your permission. 

Dr. McPherson. 

51 

STATEMENT OF HON. M. PETER MCPHERSON, PRESIDENT, 

NATIONAL ASSOCIATION OF STATE UNIVERSITIES AND 

LAND GRANT COLLEGES, WASHINGTON, DC 

Dr. MCPHERSON. It’s good to be here, Mr. Chairman. 

The CHAIRMAN. It’s good to have you here. 

Dr. MCPHERSON. I realize that, as the other members came in, 

when I usually testified before you in the 1980s none of them were 

here, but you were. 

The CHAIRMAN. As was Senator Lugar. 

Dr. MCPHERSON. The two of you, exactly. 

The CHAIRMAN. It’s a frightening thought. 

Dr. MCPHERSON. It’s good to be before you, sir. 

I’d like to make a few quick comments. I have submitted a longer 

statement, of course. One, I think it’s very important to target the 

efforts that we do carefully. The pregnant women, the very young 

children, are particularly vulnerable. We know what it does to the 

lives of people if they don’t have food as very young children. 

Second, I think it’s important that AID have great flexibility in 

where and how they buy the food for the delivery. This is something that the World Food Programme has been doing. I think 

about half your food is flexible in that manner. The case I think 

is very strong today. 

Next, as I’ve been listening back and forth about the 40 countries 

or so that are restricting food exports by taxes or even more complete export restrictions, it really—it reminds me of a negative 

Smoot-Hawley, isn’t it? I think that’s kind of the way to think 

about this, is that we’re constraining in a time of emergency instead of opening up. 

The last point I’d like to make on the immediate set of issues is 

that we need to be sure that the effort we do to extent practical 

doesn’t compromise the longer term response. The idea which has 

been talked about a lot of free fertilizer, for example, instead of 

some sort of subsidized, but not too much, voucher system, is a 

much more practical idea. We need to build those distribution 

structures, the private sector and so forth. And I’m afraid that 

emergency will compromise the longer term efforts if we’re not 

careful. 

Let me talk about those longer term efforts. First of all, Senators, I think your opening statements today were just outstanding. 

We need to as the U.S. Government, the administration and congressional leadership, need to come together in some way to make 

this a priority. I don’t think—I think if we’re not careful we won’t. 

There needs to be some sort of coherent policy. Perhaps it’s organizational, Mr. Chairman, but I think it clearly is some major 

effort. I agree with Senator Lugar that you can’t have ethanol be 

the totally bad policy here responsible for all this. If you do that, 

we’re going to end up thinking if we could get through that we’ll 

solve the rest of it, and that simply isn’t the case. Whatever contribution it makes, it isn’t the whole. The whole is very large indeed. 

There’s a lot of support out there to some sort of—if there could 

be some leadership articulation and drive, there would be a lot of 

support for it. I notice, as you have, that a number of private parties—you had that call, Senator Biden. But there are so many peoVerDate Nov 24 2008 14:53 Feb 10, 2009 Jkt 000000 PO 00000 Frm 00055 Fmt 6633 Sfmt 6602 H:\DOCS\FOODCRIS BETTY
52 

ple out there like that. The Gates Foundation is really making a 

major effort in agriculture in Africa. 

Myself and several colleagues in the last couple weeks have put 

together a little coalition of groups. You’ll see this letter. We’re 

what we’re calling the Coalition for Agricultural Development. It 

has some 70 signatures of university associations, my colleague 

here Oxfam, Bread for the World, and many others. It’s saying: 

Look, we need a longer term agriculture. 

So there’s support, there’s interest. We don’t have the capability 

of articulating or driving it. It really needs—in this committee, 

leadership is in such excellent position. 

I think one of the ways to think about this is not just the next 

2 or 3 years, but over the next 15-to-30-plus years. IFPRI has done 

some really interesting work—they did it 3 years ago actually— 

where they said, OK, let’s look at population increases for the next 

few decades, let’s look at income increases, some of which clearly 

we can expect. You have to do this in various scenarios, but you 

can see that there’s going to be a lot more food required in this 

world than current technology or land would allow. 

There may be some extra land to use in the Ukraine or various 

places, but not enough. It’s going to have to be, as Senator Lugar 

has suggested, multiple increases. You mentioned when your father 

had, what, 50 bushel an acre. I remember growing up on my family 

farm there in Michigan, 75 was pretty good. But that same land 

today is 150 an acre. But it’s going to have to be a lot more. 

In Africa, the lowest per-hectare production region in the world, 

it can be a lot more for certain. So let’s look at this long term. We 

look at it long term, we realize that, not necessarily intentionally 

by anybody’s part, but food and agriculture has been neglected by 

our U.S. Government efforts for at least 20 years. It’s gradually 

just floated down. 

Now, I think we have to understand among ourselves that the 

earmarks for various activities have—and agriculture doesn’t have 

an earmark—has crowded it out. That isn’t to say that child survival and PEPFAR aren’t very important. I certainly supported the 

child survival. Remember the ORT activity that we worked so hard 

and drove, which was really the precursor to the child survival 

efforts. 

But those immediate efforts have had greater public appeal. You 

could measure them easier than this long struggle to increase food 

production. And in fact the agency, when I look at it today as opposed to in the 1980s, is much more of an immediate relief, delivery of goods and services organization than it is a development 

organization. Henrietta Fore, who I respect and I think she does— 

she’s deeply committed to this; she mentioned a number of things 

today. But the reality is that she doesn’t have money for most of 

those things. There just—there isn’t money. She’s working hard to 

reallocate, as some of your staff knows, and struggling. 

Now, what would a longer term effort be? And I’m going to stop 

because I realize that everybody is—your time for this overall hearing must be about done. It’s a complicated effort and country leadership—I work particularly in Africa—country leadership needs to 

take charge of it. There’s economic policy. Again, 100 percent inflation. A number of things—infrastructure, fertilizer, seed. In the 

53 

paper I delivered I worked pretty hard at setting forth a number 

of ideas about that. 

But when you look at sort of the IFPRI projections, current technology won’t produce the food. You have to produce—you have to 

have more than one more Green Revolution. You have to have multiples. Africa is a very complex place. Only one place won’t work, 

one revolution. It’s drought-resistant seeds, it’s seeds resistant to 

too much of various types of problems in the soils, and so on. 

And by the way, fertilizer is a real problem. We haven’t had new 

fertilizer technology since that produced by TVA over 3 decades 

ago. Urea, the most common nitrogen fertilizer used in the world, 

only 30 percent of the nitrogen in the urea applied actually gets to 

the plants. We need major efforts to increase the utilization rates 

for fertilizer, and there’s no serious research going into it. 

I would say one last point. Several people today, appropriately, 

applauded Israel’s just wonderful efforts. What Israel has, among 

many things, it has an educated population. It has human 

resources that are wonderful. What most of Africa doesn’t have is 

anything near like that. So as we work on technology and many 

other components here, I would suggest that people is a significant 

portion. 

I neglected one last matter about research. I strongly endorse the 

need for biotechnology. We’ve got to have it. We won’t get there 

without it. 

Thank you. 

[The prepared statement of Dr. McPherson follows:] 

PREPARED STATEMENT OF HON. PETER MCPHERSON, PRESIDENT, NATIONAL ASSOCIATION OF STATE UNIVERSITIES AND LAND-GRANT COLLEGES, A PUBLIC UNIVERSITY

ASSOCIATION, FORMER ADMINISTRATOR OF USAID (1981–87), CHAIR OF THE

BOARD, THE PARTNERSHIP TO CUT HUNGER AND POVERTY IN AFRICA, WASHINGTON, 

DC 

Let me begin my comments by saying we have an immediate problem that must 

be addressed, hopefully in a way that does not complicate long-term solutions. We 

also have a long-term and more complicated agricultural problem that the world has 

neglected over many years. A major, long-term recommitment is needed. The world’s 

population will continue to grow rapidly and we hope and expect that incomes will 

grow rapidly in several parts of the world. All of this means a greater demand for 

food. 

The committee asks that I comment on: 

• How did we reach this crisis? 

• What should be the short-term response? 

• What should be the steps taken to address the medium- and long-term problems 

of high food prices and food insecurity? 

HOW DID WE REACH THIS CRISIS?

A number of factors have contributed to the great jump in food prices, but the 

problem has been long in the making. 

Decades ago many felt we were going to run out of food and forecasted greater 

famines. In the 1960s there were still famines in India and China. The global think 

tank, the Club of Rome, warned of pending food disasters in the 1970s and some 

said that Thomas Malthus’ principles on population were right after all. However, 

the Green Revolution and other advances in technology and production methods and 

related investments in agriculture greatly increased production in important areas 

of Asia and parts of Latin America. Arguably more lives were saved by the Green 

Revolution than almost any event/technology in history. 

In the decades following the Green Revolution, the marvel of the new technologies 

that produced food abundance was taken for granted. The world assumed that further new technologies were not needed or would be generated without investment. 

The quote ‘‘There is plenty of food on the planet, it is just a problem of distribution,’’ 

54 

1Paper of the World Bank, ‘‘Rising Food Prices: Policy Options and World Bank Response,’’ 

April, 2008. 

was heard in donors’ halls. Varieties and production systems were not innovated nor 

adapted for dry and marginal lands that were brought into production as a means 

of increasing food supply. Governments and most international organizations cut 

back on agriculture development expenditures in developing countries. In 1990 

about 12 percent of global Official Development Assistance (foreign aid) went to agriculture, now it is about 4 percent. In the early 1980s, 30 percent of the World 

Bank lending was for agriculture but by the early 2000s it was down to 10 percent, 

despite the fact about 75 percent of the world poor live in rural areas. The U.S. 

Agency for International Development’s (USAID) reductions in commitment to agriculture was comparable. 

This reduction in agriculture assistance was part of a bigger pattern. The donor 

community, especially the bilateral donors, shifted its focus from long-term development investments into more short-term interventions. 

However, world population increased year by year and food demand continued to 

increase. Incomes in developing countries increased, especially in the high population countries of Asia. Higher incomes meant people could afford more food and 

changed their diets to include more meat, dairy products and processed foods. All 

of these products require more energy from cereal crops to produce than if the cereal 

crops were eaten directly by humans. The result has been a dramatic rise in the 

global demand for cereal crops. The dramatic increases in income in China have had 

a huge impact. 

Further, agriculture around the world is often a subsidized and controlled industry. That practice has restrained market forces from driving comparative cost and 

production advantages. The subsidies that drove production up in some countries reduced production in others that could not compete with subsidized food. 

Additional pressures have emerged recently. 

Using corn to produce biofuels increases the demand for corn and appears to increase its price as well. My understanding is that this is roughly the view held by 

the USDA’s chief economist. It is not easy to sort out biofuels’ impact on food prices. 

I note that the International Monetary Fund’s World Economic Outlook states that 

biofuels account for almost half of the increase in consumption of major food crops 

in 2006–07. 

Higher fuel prices have increased food production costs. For example, high energy 

costs greatly increase the costs of producing fertilizer, transporting food, and operating farms. 

Troubled bond and security markets have increased the money flowing into commodity markets. Liquidity and depth in the commodity futures markets are generally forces of stability over time and therefore positive influences in the longer 

term for users/consumers and farmers/sellers of grains. Accordingly, we have to take 

care in imposing regulations of these important markets so we do not distort their 

positive contributions to the stability of commodity trading. 

Grain reserves have declined from a high of 100 days of global consumption in 

2000 to 55 days currently and that has created a greater sense of market risk and 

an inability to buffer market fluctuations. 

There is drought in Australia and new export restrictions by a number of governments that do not allow markets to function efficiently. 

All of these and more have produced the food price crisis. 

WHAT SHOULD BE THE SHORT-TERM RESPONSE?

In determining the appropriate response we need to realize that ‘‘Food crop prices 

are expected to remain high in 2008 and 2009 and then start to decline as supply 

and demand respond to high prices; however, they are likely to remain well above 

the 2004 levels through 2015 for most food crops. Forecasts of other major organizations (FAO, OECD, and USDA) that regularly monitor and project commodity prices 

are broadly consistent with the projections.’’ 1

Clearly donors should provide a substantial amount of food and the World Food 

Programme (WFP) has called for that support. This need will not be just for 2008 

and so planning should be done accordingly. The WFP and USAID have substantial 

experience in delivering food to the most needy. This is difficult to do right. For example, needy pregnant mothers and very young children should get food or vouchers 

to buy food because food deficiencies of the unborn and very young are most likely 

to cause lifelong damage. It was always a challenge to be sure that the right schools 

got the food when I was a Peace Corps Volunteer in Peru in the 1960s working in 

55 

the Food for Peace school feeding program. It was too easy for the food to go to middle-class communities that had the most political power. 

Buying food in the developing world should be done without greatly increasing 

prices in the region of purchase. Purchases should be done as practical to provide 

a market for surplus production in the region’s poor countries. Achieving this balance is a challenge. The WFP and USAID need to be given great flexibility in where 

they purchase food. Food relief efforts should not only feed the needy, but also help 

build regional trade and encourage production in poor countries. 

Great care should be taken so responses to the crisis do not hinder longer term 

increases in production in developing countries. Free fertilizer, for example, can be 

another way of providing next year’s donor food. However, there can be serious longterm consequences of such an approach to sustained development. I will address 

this tradeoff below. 

Higher prices should quickly increase production in the developed world unless 

there are artificial constrains on doing so. In some countries, mostly developing 

countries, there are food export constraints. The Washington Post, in a May 11, 

2008, editorial, reported that ‘‘More than 40 countries have taken steps to discourage grain exports—or to stop them altogether.’’ Such constraints will hurt market 

operations and limit comparative cost advantages for the global food markets and 

should be discouraged. 

Generally there will be some increases in production in developing countries in 

response to higher prices. Orville Freeman, President Kennedy’s Secretary of Agriculture, advised me when I was USAID Administrator in the 1980s, ‘‘I have known 

farmers that could not read or write but I have never known one that could not add 

and subtract.’’ Nevertheless, many developing countries will have capacity issues 

that will prevent a full response, e.g., lack of farm to market roads, technology, fertilizer, appropriate varieties of food plants, etc. I will explore how to deal with these 

issues below. 

WHAT SHOULD BE THE STEPS TAKEN TO ADDRESS THE MEDIUM AND LONG TERM

PROBLEMS OF HIGH FOOD PRICES AND FOOD INSECURITY?

Commitments and Resources 

To deal with this situation there needs to be a recommitment by developing countries, international organizations and other donors to increase agriculture production and rural income in the developing world. About 75 percent of the world’s poor 

live in rural areas of developing countries, and these people need to produce more 

food. Africa is a major case in point. More than 60 percent of the people of sub-Saharan Africa live in rural areas and a large portion of those people are poor. It is clear 

Africa needs more agriculture production and income to feed its people and the 

world needs to increase food production and supply to meet an ever increasing demand. 

Developing countries, particularly those with large rural populations, need to use 

the food price crisis to reaffirm their commitment to more food production. A few 

years ago African heads of state committed to increase expenditures of their national budgets dedicated to agriculture to 10 percent. While the pledge was a substantial increase for many countries and has not been reached by most, strong action by national governments to support increased agriculture production and rural 

income is essential if the food crisis is to be successfully addressed. 

The World Bank is substantially increasing its commitment for food production 

in Africa after many years of decline. The International Fund for Agriculture Development (IFAD) is also working on agriculture issues very effectively. It is in the 

process of putting together its next replenishment and deserves support. 

The Millennium Challenge Corporation (MCC) is finding that countries are asking 

for a different portfolio than the priorities in the USAID budget, and one of the big 

differences is in requests for substantial help with agriculture. (MCC could be more 

effective if their agriculture and other programs could have a longer term horizon 

than 5 years. Also MCC money should be able to be spent on regional projects, e.g., 

transportation linkages that are often regional. Such regional expenditures are currently not allowed.) 

If the United States is to help solve this food crisis, as it helped in the past, 

USAID must return to a greater commitment to agriculture. The 2008 allocation of 

USAID includes, as I understand it, no allocation for core funding for the CGIAR, 

the international agriculture research centers. (One of those centers is located in 

Washington, the International Food Policy Research Institute [IFPRI] and is providing excellent analysis and policy advice on the food price issues.) Funding for 

Title XII: Famine Prevention and Freedom From Hunger Improvement Act that engages U.S. universities in building agriculture capacity in developing countries to 

56 

generate new means of food production is funded at only a small fraction of resources allocated in 1970s and 1980s. 

In fact agriculture assistance has been substantially reduced in the USAID budget 

over at least 15 years. (There was a limited increase in the early years of this administration under the leadership of the former USAID Administrator Andrew 

Natsios.) There were further major cuts in the 2008 budget and the 2009 budget 

submitted by the administration does not appear to increase agriculture above 2008 

levels. 

However, the President recently requested a food supplement bill that includes $150 million for long-term agriculture work. USAID Administrator Henrietta Fore 

is strongly supportive of this increase, and this Senate Foreign Relations Committee 

hearing is important to highlight possibilities. 

The historical global pattern has been that if the World Bank and USAID moved 

away from an area of investment other bilateral donors followed. Consistent with 

that pattern, bilateral donors’ interest in agriculture declined dramatically over the 

years. The World Bank and the United States should lead the way back to sustained 

and substantial support for long-term agricultural development. Such a step by 

USAID would signal a renewed commitment to the fundamental elements of development. In recent years USAID moneys have increasingly been used to respond to 

critical immediate needs with goods and services. I trust that most people at USAID 

believe producing more food in the developing world is central to healthy and better 

lives and would welcome additional resources for those purposes. 

Foundations, NGOs, and the private sector have become substantial factors. The 

Bill and Melinda Gates Foundation is providing leadership on agriculture issues in 

Africa. U.S private contributions to the NGO work in Africa in recent times have 

perhaps equaled the contributions of the U.S. Government and NGO contributions 

will continue to grow. 

Of great importance is emerging leadership from African countries. The African 

Union and NEPAD have developed the Comprehensive African Agricultural Development Program (CAADP) as a framework for coordinating assistance around strategic national and regional priorities. When practical, donors should support African-led efforts as suggested in CAADP. 

Programs 

I will focus my comments here on sub-Saharan Africa because the need for more 

food production is so great in Africa and, while parts of Africa like Southern Africa 

have the potential to be major grain exporters, Africa overall is a net food importer. 

More than 60 percent of the people in the region live in rural areas with agriculture 

being the primary source of income for many living there. Grain yields have stagnated for 45 years and current yields of cereal crops are about 30 percent of world 

averages. 

There is no single magic bullet to solve Africa’s food crisis. Each country and region has different histories, strengths, weaknesses, and challenges. There are, however, some lessons that stood the test of time. I would classify the lessons into two 

broad categories: (1) Efforts that support and encourage developing the whole country or region, including rural areas and (2) agriculture-specific assistance. Obviously 

these categories overlap. All of these efforts need to be led by Africans at the country or region level or they probably will not work. Donors need to provide strong 

support for African-led solutions. 

At the country level, the national leadership needs to be committed to broad-based 

economic growth and poverty reduction. That commitment must include an effort to 

improve food production and rural incomes. The commitment should also include 

mechanisms that allow the broad input of society into major government decisions. 

Sound economic policy is essential. It is hard to make progress with 100 percent inflation. There needs to be the rule of law, ease of entering business, and legal title 

to real estate including farms. The work of Hernando De Soto on legal systems and 

property rights is instructive in this regard. 

The country and donors need to foster and invest in appropriate infrastructure. 

Major infrastructure projects can change or overcome the history of a region. The 

Zambezi River divides Mozambique and the bridge being built over the river will 

tie the country and its markets together as never before. (The story of our Erie 

Canal is instructive. It was built in the 1820s and opened up the Midwest. The Erie 

Canal made Michigan wheat part of the international wheat market, so when the 

Crimean war in the 1850s increased world wheat prices, Michigan land prices increased, too.) In Africa new and revitalized corridors (rails and roads) to transport 

minerals and agriculture goods are being built or are under consideration. Most of 

these corridors involve more than one African country and so donors, including the 

United States, must consider this in their assistance programs. These corridors are 

57 

complicated and to be successfully completed will take many donors working together. The African Development Bank is taking a leadership role. The Hewlett 

Foundation and the Partnership to Cut Hunger and Poverty in Africa are working 

to encourage the full agriculture development impact of the corridors. 

There is no question that cell phones and Internet connectivity increase the flow 

on knowledge and increase economic growth. (The World Bank has announced that 

they will invest billions of dollars in connectivity in African over the next few years.) 

Electrical power to communities also has a dramatic impact. We need to remember our own fairly recent history with the impact of the Tennessee Valley Authority 

(TVA) and Rural Electric Cooperatives. 

Primary, secondary, and higher education are needed to build a country, including 

a strong agriculture sector. Educated people drive progress in the private and public 

sector. Development is about helping such people get the knowledge and tools they 

need so their work pays off. The creativity, energy, and drive of people are the most 

important sources of power for economic growth, but are too often forgotten or 

thwarted by governments and donors. 

The National Association of State Universities and Land-Grant Colleges 

(NASULGC) is undertaking a substantial effort to rebuild and expand partnerships 

between U.S. and African universities to address this human and institutional 

needs. USAID has provided some planning money for this effort. The number of students in colleges and universities in Africa has doubled in about 15 years and will 

continue to grow rapidly, but African higher institutions are not yet capable of absorbing these students and hence not yet capable of capturing the creativity of their 

national intellectual capital. 

Trade has a major role to play, including gains that might be made in the Doha 

round. Perhaps even more important for Africa is regional trade. African regional 

trade has not been part of the Doha discussions, as regional trade is traditionally 

not part of international trade rounds. In this situation that is unfortunate, though 

it would be complicated. There is some progress with regional trade agreements, 

e.g., East Africa, but most regional trade discussions are slow and unsteady. The 

transportation/development corridors mentioned above will help increase regional 

trade and will put pressure on governments to reduce trade barriers. 

In order to take advantage of current and future trade openings, many African 

countries need help in training and working through safety requirements and other 

standards. Meeting standards can often be demanding for small farmers even for 

in-country sales, especially as supermarkets take a growing share of local food sales. 

Farmer organizations/cooperatives can often play a major role in helping farmers 

meet standard and marketing. 

As for efforts that are more agriculture specific, there are a number of related 

needs. 

Farm-to-market roads are required to bring in seed and fertilizer and take out 

production. Such roads also connect rural communities to goods and governmentprovided services. These connections bring quality teachers for basic education; 

health care to address diseases such as malaria and HIV/AIDs; security and banking that allow markets to function more efficiently; and a range of other national 

services frequently absent in the rural context. 

Farmers need seed and fertilizer, and fertilizer costs have risen dramatically in 

recent times. There is a great debate in the development community on how to provide these inputs, particularly fertilizer. One group argues for free or nearly free 

fertilizer to kick start production and provide food. The other group, composed of 

a large portion of the agriculture development professionals, argues that free fertilizer will often be sold by farmers instead of used and will destroy commercial distribution systems and/or prevent such distribution systems from emerging. While 

such systems are needed to sustain effective fertilizer distribution, there is a long 

history in Africa of failed government distribution systems. Many agriculture development experts argue that, once established, huge subsidies will be politically impossible to reduce. These expenditures will probably crowd out other important investments by the governments in rural areas, e.g., roads, schools, etc. Some note 

that this year India will spend about $20 billion on fertilizer subsidies and some 

of that money would probably be better spent on longer term investments. 

I am concerned about free or nearly free fertilizer for reasons suggested above. 

Free fertilizer is an even bigger problem when it is distributed by governments. 

Properly structured voucher programs can be used wisely. Vouchers can be sold at 

a discount (not free) or earned by targeted groups of farmers and then redeemed 

for fertilizer from a commercial dealer. Such an approach supports and strengthens 

commercial distribution systems. Moreover, it is somewhat easier to reduce the subsidy over time when there is no direct government distribution. 

58 

A related issue is financing for farmers. There is no question that farmers and 

rural businesses need credit. Local moneylenders are often expensive and do not 

have enough capacity for the local needs. Government-owned farm credit banks in 

Africa have a long history of failure because farmers often do not think they have 

to repay government, and frequently politicians have encouraged farmers to treat 

the credit as a resource transfer. In some countries private banks are getting 

stronger and South African banks are now doing business in many African countries. A practical option may be for governments and donors to extend money to 

such banks to be lent out by the banks, with those banks incurring some real portion of the risk of nonpayment. These are complex arrangements to put together and 

may be more applicable for credit to rural businesses than for credit to farmers. 

(Note: Rural businesses are an important part of rural economic growth and increased local food production.) Another way to extend credit is through the commercial seed and fertilizer distribution systems. Such commercial entities also must 

bear part of the risk of nonpayment but these entities can insist upon payment for 

the credit extended the year before in connection with extending credit for this 

year’s seed and fertilizer. I should note that microcredit has an important role in 

rural Africa but their loans are usually small. 

It should also be pointed out that a majority of farmers in Africa are women and 

they must have equal opportunity to services like fertilizer, credit, and education. 

Creating new technology for African production is important. No doubt some technologies exist that are not being used or fully adopted. These opportunities must 

be exploited. However, we have never had a Green Revolution for Africa. While this 

may be more complicated in Africa because of its diversity of soils, climates, and 

crops, it is achievable if Africans and donors invest in research that is required to 

produce a new wave of varieties, breeds, and technologies to transform African food 

production. 

CGIAR and U.S. universities have a major role to play in this research. Their 

funding should be increased along with increased accountability. I expect for CGIAR 

this will mean continued change in the organizational structure under its able leadership and for U.S. universities, new innovative partnerships. 

The research needed includes a substantial effort with fertilizer especially in 

Africa where soil fertility is a major constraint on productivity. Major fertilizer products currently used by farmers were developed more than three decades ago. These 

fertilizers were designed in an era of energy abundance and their utilization rates 

by plants are low. For example, plants utilize urea at only about 30 percent efficiency. This inefficiency is alarming given urea is the dominate form of nitrogen fertilizer used globally. The energy equivalent of about four barrels of oil is needed to 

make one ton of urea, and so about 2.8 barrels of oil are wasted for every ton of 

applied urea. Phosphate, a primary nutrient needed for plant growth, is produced 

from phosphate rock using highly inefficient processes. In short, the world needs a 

major research effort to improve the effectiveness of fertilizer production and use. 

Fertilizer is a commodity industry and it is unlikely the industry alone will undertake the research. Some public investment is probably required. I chair the board 

of IFDC, an international organization based in Muscle Shoals, AL, and long involved in fertilizer issues. 

Biotechnology holds great promise to provide the varieties necessary to match 

Africa’s diverse environments and needs, and to do so rapidly and efficiently. Its 

strength is its ability to produce variability rapidly and precisely. I want to underline that biotechnology is only one of the many research tools needed and it should 

be used carefully and selectively. Perhaps the food crisis will make biotech crops 

more acceptable. Of course, the use of biotech crops must be properly regulated and 

African countries or regions working together should develop the capacity to have 

their own regulatory oversight and decisions on biotech plants. 

Extending new knowledge to farmers in Africa is a challenge. Personnel intensive 

U.S. style extension systems have not been financially sustainable in most of Africa. 

New combinations and approaches to extension include the use of computer information centers in villages, solar powered computers and cell phones to gather and exchange market prices around the country, and more and better radio use since most 

people have radios. Some of this is location specific. (Note: For extension to work 

you need to have knowledge or technology that really adds value to the farmer. 

They are usually smart about what they can do in their environment with their 

technology.) 

I mentioned universities as part of building a country. The agriculture education 

and the problem-solving capacity of African universities deserve a comment here. 

Ideally teaching, extension, and research should be organizationally tied together, 

a design that has worked well in U.S. land-grant universities. Universities need to 

train people who are capable of creating, working and leading the development of 

59 

a sophisticated agriculture sector. Only then will Africa significantly increase its 

food production. 

CONCLUSIONS

The food price crisis had some immediate causes but there have been pressures 

on demand for some time. In brief the world neglected the long-term development 

needs of agriculture for many years. 

Immediate relief is needed and I support supplemental funding for that purpose. 

Short-term relief should not be undertaken in ways that will complicate the longterm solutions. 

Dealing with the medium- and long-term food prices will require a major recommitment by developing countries and donors. I support supplemental money for 

long-term agriculture development as part of that recommitment. This is a huge and 

complicated job for everyone that needs to be lead by the developing countries themselves. We will need to continue to work on these matters for the foreseeable future 

because world population will continue to increase and incomes will go up substantially, especially in some parts of the world. We have a long-term supply side problem. All this work will need to be done in a period of global warming and other environmental issues. 

The CHAIRMAN. Thank you very much. 

Mr. Lyon. 

STATEMENT OF JAMES R. LYONS, VICE PRESIDENT FOR 

POLICY AND COMMUNICATIONS, OXFAM AMERICA, WASHINGTON, DC 

Mr. LYONS. Thank you very much, Mr. Chairman, Senator 

Lugar. It’s a pleasure to be here. We appreciate your interest in 

this issue. It is really an honor to join you and my colleagues in 

addressing this critically important issue. 

Oxfam America is part of a larger affiliate of organizations. We 

work in 120 countries around the world. One of the things that distinguishes us is that we accept no government money for the work 

we do. All our support comes from U.S. citizens and philanthropic 

organizations. 

I want to say from the outset that probably the easiest thing for 

me to do is just associate myself with your remarks and the 

remarks of Senator Lugar, and then I probably could cut my testimony short. I think you gave an excellent overview of the crisis 

that we face and outlined some of the critical elements of the 

solution. 

I’d just like to add a few thoughts to that discussion. First of all, 

I want to emphasize, as Josette had mentioned, we’ve seen price 

volatility in agricultural commodities over time. What’s unique 

about this crisis is the confluence in the hike of world prices for 

nearly all major food and feed commodities all coming together at 

once. 

Also, there are many indications that these high prices will be 

sustained over time, and many factors that may continue to drive 

them. A report that was just issued yesterday by the World Bank 

related to this is a projection that climate change will result in a 

15-percent reduction in agricultural production worldwide by 2080. 

So we can’t ignore that factor as we look forward. 

As has already been noted, the reason that these significant price 

increases have such a dire impact in the developing world is 

because, unlike most Americans who spend 10 to 15 percent of 

their disposable income on food, in the developing world people are 

spending 50 to 80 percent of their income simply to keep themVerDate Nov 24 2008 14:53 Feb 10, 2009 Jkt 000000 PO 00000 Frm 00063 Fmt 6633 Sfmt 6602 H:\DOCS\FOODCRIS BETTY
60 

selves and their families fed. Lacking the resources in a situation 

with high food prices forces them to make some very, very difficult 

decisions with consequences for their health, the education of their 

children, and their overall well-being. In fact, in some cases where 

they have to sell assets to feed themselves, their capacity to continue to make a living is compromised. 

The World Bank has studied the connection between food prices 

and poverty and estimates that there’s an expansion in absolute 

poverty of about 4.5 percent or another 100 million people in poverty as a result of what we’ve recently seen. As you’ve already mentioned, Mr. Chairman, there’s a clear connection between increased 

food prices and social unrest. World Bank President Zoellick has 

spoken to this, anticipating social unrest in at least 33 countries. 

He predicted this in April. We’ve seen many examples of this, including food riots and the ouster of the Haitian Prime Minister. 

I would note that the United Nations Global Information Early 

Warning System identifies 37 countries in crisis requiring external 

assistance. Twenty-one of these are in Africa, clearly a continent of 

considerable focus. And we’ve seen food riots in many of these. 

To bring home the national security issues, I just want to offer 

two examples. One is in Pakistan, a very important U.S. ally. Of 

56 million people living in urban areas in Pakistan, about 21 million are now deemed food-insecure by the World Food Programme. 

In response to the food crisis, Pakistan recently banned flour exports to Afghanistan. Of course, banning flour exports to Afghanistan greatly exacerbates neighboring Afghanistan’s food insecurity 

problems. So you can see the snowball effect in two important parts 

of the globe as it relates to U.S. security. 

Shortly after this occurred, the World Food Programme made an 

appeal for 89,000 metric tons of food, including wheat, beans, and 

cooking oil, to help the Afghans deal with their food crisis. 

Many nations face the impact of increased food prices and that’s 

been amplified, of course, by the increase in oil prices. Imports 

have been—inputs, excuse me, have been noted as one of the significant concerns. Certainly fertilizer costs are being driven here. 

But oil costs have another impact in that many of these countries 

that are food insecure are also importers of oil, so their ability to 

produce energy to maintain their basic infrastructure and their 

economies is also impacted. 

As an example, Ethiopia currently spends six times as much 

money on oil than it has received in debt relief from the Heavily 

Indebted Poor Countries Initiative some time ago. So the progress 

that was made through commitments by the United States and 

others to address this is now eroding. As a result, these countries 

are slipping backward because of these actually combined crises. 

I won’t talk about the causes of the problem. I will simply reinforce what was said about the fact that there’s clearly a connection 

between increased corn prices and corn-to-ethanol production. We 

believe this needs to be looked at very carefully with regard to the 

impacts on world food prices. 

We certainly don’t want to see a situation where energy security 

and food security are in conflict, and we certainly don’t want to see 

a situation where a commitment has been made, as it has been 

made in the United States, to build an infrastructure to produce 

61 

ethanol and then suddenly cut the legs out from under all those 

who are counting on that for their ability to build the capacity to 

help address U.S. energy security concerns. 

Accelerating research and development to move to cellulosic ethanol, as Senator Lugar mentioned, is a critical part of this. Our 

recommendation is some sort of high-level blue ribbon panel to look 

at this particular issue, to report back to the Congress by the end 

of the year, and to provide input to the new administration. If 

there’s a direct correlation between increased corn prices and world 

food prices, we can then determine if the additional incentives built 

into the energy bill and those contemplated in the farm bill—which 

may pass here shortly—should continue. So we would advocate for 

a reasoned approach to this, not the pendulum swing that some 

have argued for. 

Let me talk about solutions quickly, and many of these have 

been mentioned, so I’ll just reemphasize a couple. Then I want to 

raise an important point about the long-term solution. Obviously, 

in the short term, we need to deal with the immediate food crisis 

that we face. Meeting the World Food Programme’s request for 

additional funding and the additional request for funding from 

USAID that was mentioned, is critical. 

I want to point out something, though. USAID had made estimates about their additional food needs some time ago, before the 

food crisis hit. So I suggest that it would be useful to go back to 

the Administrator to get an up-to-date estimate of what increased 

aid would be necessary to get us on par with where they wanted 

to be simply a year ago. And I’d suggest the impacts have been 

somewhat escalated. 

Second, as you’ve already alluded to, Mr. Chairman, it’s important to get food aid to people more quickly and much more efficiently. This gets to the local purchase issue. For a long time, we’ve 

been a band of one beating on the issue of a change in the structure for our food aid system. It’s essential that we look at a change 

in law. We’re pleased to see the pilot program that’s included in the 

farm bill. We have lots of problems with the farm bill. But we 

think greater flexibility is really needed in the food aid system. The 

$60 million in the farm bill for a local purchase pilot is a drop in 

the bucket. 

The administration has proposed 25 percent flexibility in food 

aid. We think that would be an excellent change in policy and move 

us in the right direction. 

I just want to point out one thing. You mentioned the 50-percent 

reduction in cost. Actually, Mr. Chairman, an April 2007 study by 

GAO showed that increased costs have reduced the tonnage that 

can be delivered overseas by about 52 percent over the previous 

5-year average. Then if you look at additional costs, the actual impact on total emergency food aid in terms of reduced effect is 65 

percent. 

I’d suggest to you that’s the equivalent of telling your mother in 

Delaware that you’re going to give her $100 to purchase food, but 

first she’s got to buy a tank of gas, and then she can only buy her 

food in Washington, DC. 

The CHAIRMAN. I want to make it clear, it’s my mother’s money. 

[Laughter.] 

62 

Mr. LYONS. Well, I suggest to you, Mr. Chairman, that neither 

your mother nor you would be pleased with that outcome. 

So we think that’s an essential change in policy. The opportunity 

does exist to make that change in the context of the farm bill. The 

Bush administration has argued for that as many of us have. I’m 

pleased to see that the gentleman from Tennessee has said they 

want to address this issue. Somehow, some way, this needs to be 

addressed, because we’re wasting precious dollars that could be 

going to feeding people immediately. 

I’d also suggest the need to address an issue that came up just 

a few weeks ago, raised by two of your former colleagues, Senator 

McGovern and Senator Dole. That is the food aid assistance program for children in developing countries that was severely cut in 

the farm bill. I don’t see the logic to that and I think restoration 

is in order. We certainly have the assets, so I think that reinvestment is appropriate. 

I’ve already mentioned the intermediate step in my mind, which 

is to look at the connection between corn prices, corn-based ethanol 

production, and global food prices, and to offer some recommendations to guide a new administration as it moves forward. 

Most importantly, the global food crisis is clearly a long-term 

problem. This is the confluence of many issues that we should not 

ignore, and it’s going to take a comprehensive, strategic approach 

to dealing with the issues that we face. 

First, we clearly need to increase aid for agricultural production. 

As you pointed out in your opening statement, Mr. Chairman, agricultural aid has declined precipitously over the past two decades. 

We need to recognize that more than 70 percent of the poorest people in the world live in rural areas and depend on agriculture for 

their livelihood. So we’re literally cutting their lifeline by failing to 

make the investments necessary to help them grow food for themselves and hopefully for economic development. 

In Africa, 60 percent of the workforce depends on agriculture. We 

need only look at the United States to understand the importance 

of agriculture as a foundation for economic growth. One hundred 

years ago we were an agrarian society. Now, of course, agriculture 

is less than one-half of 1 percent of total U.S. GDP. Nevertheless, 

in many developing countries agriculture is as critical to them as 

it was to the United States over a century ago, and we shouldn’t 

ignore the lessons we learned in moving forward. 

To amplify that point, I just want to point out that the World 

Bank study that you referenced earlier also points out that poverty 

reduction impacts associated with agricultural investments have an 

impact two to four times greater than investments in other sectors 

in terms of GDP growth. It just shows the close connection to agriculture. 

I also want to point out—unfortunately, the Administrator is 

gone—that U.S. agricultural assistance has also declined in this 

year’s budget request from the administration to an all-time low of 

about $283 million this past year. Only $91 million of that, by the 

way, would go to Africa, a region of critical concern. 

Second, I want to emphasize that we need to modernize the overall aid system. You’ve focused on this, Mr. Chairman, in the work 

that you and Mr. Lugar are doing to look at how we reform our 

63 

overall aid system. Whether we call it smart power or smart development, we need to be smart about what we’re doing. We need to 

look at aid in a much more comprehensive way. We need to determine if improving aid effectiveness requires structural change, a 

change in law, or simply a change in the rules of the game so we 

have the capacity to respond more quickly and in a much more 

comprehensive way to these issues. It’s critically important, so we 

applaud your efforts to begin this process, which we hope will create a foundation for a new administration to look at the aid system 

and make changes necessary to make it much more efficient and 

effective. 

One thing that we certainly know that a new administration will 

face is, because of the large deficit, there are limited dollars to do 

what we need to do. So every dollar has to be extended as far as 

possible. 

When I joined the Clinton administration in 1993, the previous 

administration had left the nation with a huge deficit. What’s 

changed? The point I want to make is that the first thing we had 

to do was cut programs, cut staff, and reduce many of our capacities. Then we had to, as it was termed, ‘‘reinvent government,’’ 

understanding ways in which we could be much more efficient and 

more effective. We need to go back and I think reevaluate that 

approach. 

Finally, I want to emphasize something that Mr. Lugar raised in 

his tutorial in agricultural development and trade, which was outstanding. That is the point that an element of promoting economic 

development and restoring agricultural production in developing 

countries is providing fair and equitable access to markets. Otherwise there’s no reason to make an investment in agriculture that 

is intended to promote economic development. 

This is part of the situation we face in Haiti. Back when rice was 

not a rare commodity, but in fact plentiful, U.S. policy led to dumping of rice overseas. In countries like Haiti, obviously it was much 

wiser to buy cheap rice from places like the United States than to 

invest in agricultural production. So the capacity to produce rice 

was virtually eliminated since they could buy it cheaply from the 

United States. 

Now that there’s a food crisis and rice is in short supply, Haitians don’t have the capacity to turn around and simply start producing rice again. So we have to be careful about how our policies 

are impacting other countries and how they respond. And I think 

that’s evidence of the fact that we do need to look at tradedistorting subsidies and address this issue. It’s not going to be 

addressed in the farm bill. Yet, it needs to be addressed somewhere, because the Doha Round is critical to helping address the 

needs of developing countries. 

Let me close by saying, Mr. Chairman, that we certainly appreciate your leadership. As Josette mentioned, many countries are 

looking for help. The United States has always been a generous 

country with regard to the aid and the assistance we provide for 

development. How we respond as a nation will speak volumes 

about how we want to be viewed and how other nations view us. 

It simply comes down to leadership, Mr. Chairman. We certainly 

have the resources. The question is, Do we have the will to lead? 

64 

1 ‘‘Agricultural Baseline Projections: Baseline Presentation, 2006–2015,’’ Economic Research 

Service, USDA, updated February 10, 2006. http://www.ers.usda.gov/Briefing/Baseline/present 

2006.htm, last viewed May 5, 2008. 2 U.N. FAO, ‘‘The State of Agricultural Commodity Markets, 2004.’’ See: http://www.fao.org/ 

docrep/007/y5419e/y5419e00.htm. 3 ‘‘Rising Food Prices: What Should Be Done?’’, Joachim von Braun, International Food Policy 

Research Institute, April 2008. http://www.ifpri.org/pubs/bp/bp001.asp#read. 

I know that you do, Mr. Chairman. I know that Senator Lugar 

feels strongly about this. I hope that the Congress will find the will 

to move forward and help a new administration chart a path toward greater sustainability and stability in the world. 

Thank you. 

[The prepared statement of Mr. Lyons follows:] 

PREPARED STATEMENT OF JAMES R. LYONS, VICE PRESIDENT FOR POLICY AND

COMMUNICATIONS, OXFAM AMERICA, WASHINGTON, DC 

Good morning Chairman Biden, Senator Lugar, and members of the committee. 

Thank you for holding this hearing and for inviting me to appear before you this 

morning to discuss Oxfam America’s perspectives on the causes, consequences, and 

solutions to the global food crisis. 

Oxfam America is an affiliate of Oxfam International, a nonprofit humanitarian 

aid and development organization working in more than 120 countries around the 

globe. Oxfam America takes no U.S. Government funding. Our support comes from 

American citizens and organizations that support our mission to end hunger, poverty and social injustice. 

AN OVERVIEW OF THE GLOBAL FOOD CRISIS

The recent spike in food prices has caught the world by surprise. It was not long 

ago when low commodity prices were viewed as the bigger challenge and food prices 

were expected to decline steadily. 

For example, as recently as 2006 the U.S. Department of Agriculture’s Economic 

Research Service (ERS) stated that ‘‘Retail food prices are projected to increase less 

than the general inflation rate,’’ and the ERS projected farm income to decline.1

Likewise, international market observers expected low and even declining agriculture commodity prices. The U.N. Food and Agriculture Organization said, ‘‘Farmers 

and countries that depend on commodity exports have to contend with the long-term 

decline and short-term volatility of real commodity prices on international 

markets.’’ 2

Instead, agricultural commodity prices have risen steadily over 4 years, and accelerated dramatically in the last year. The international food price index increased 

by 9 percent in 2006, but accelerated to a 40-percent increase in 2007.3 Food prices 

have continued this dramatic rise in the first 3 months of 2008. 

Price volatility in agricultural commodities is not uncommon. What is unusual, 

however, is the confluence of the hike in world prices of nearly all major food and 

feed commodities. This means there is no safety valve for consumers seeking 

cheaper alternatives. There are also indications that these high prices may be sustained over time—meaning that the shock of higher commodity prices may not be 

a short-term problem, but a longer term stress that needs a strategic and comprehensive response. 

THE CONSEQUENCES OF HIGH FOOD PRICES

Some of the first warnings about the high food price crisis came not directly from 

people facing food insecurity, but from the humanitarian agencies trying to assist 

them. In January, the U.N. World Food Programme (WFP) put out a special appeal 

for Afghanistan noting that millions of Afghanis could no longer afford to buy the 

wheat that is a staple in that country. Since November 2007, the price of bread in 

Kabul has increased over 90 percent, from $0.11 to $0.21. As a result, 1.4 million 

people in rural areas and 1.1 million in urban areas have been pushed into high 

risk for food insecurity. 

Later, the WFP made an emergency appeal for an additional $755 million, saying 

that high food prices had made it impossible to fulfill its 2008 plan to provide food 

assistance to 73 million people in need. The WFP’s original budget was $2.9 billion. 

Although new pledges have been made, the WFP’s need has not yet been met. As 

an example of the strains being felt, the WFP has recently announced that it will 

65 

4 ‘‘WFP says high food prices a silent tsunami, affecting every continent,’’ World Food Programme, April 22, 2008; http://wfp.org/english/?ModuleID=137&Key=2820, last viewed May 4, 

2008. 5World Vision press release: http://www.worldvision.org/worldvision/pr.nsf/stable/20080428- 

foodcrisis?open&lid=food-crisis-release&lpos=dayltxtlfood-crisis. 6 ‘‘Hunger Stalks Globe as Aid Groups Forced To Cut,’’ Missy Ryan, Reuters, May 2, 2008. 

7 ‘‘As Jobs Vanish and Prices Rise, Food Stamp Use Nears Record,’’ by Erik Eckholm, New 

York Times, March 31, 2008. 8 ‘‘The State of World Food Insecurity in the World: 2006’’ U.N. Food & Agriculture Organization. 9 Runge, Ford C. and Senauer, Benjamin ‘‘How Biofuels Could Starve the Poor’’ Foreign 

Affairs, May/June 2007. 

suspend a school feeding program for 450,000 children in Cambodia in May, unless 

additional funding is found.4

Other humanitarian agencies are experiencing similar strains and making difficult decisions. Last week, World Vision International announced it has discontinued feeding programs for more than 1 million people due to increased food costs 

and lack of funding.5 CARE has cut the size of its rations in Somalia.6

Higher prices are affecting markets across the world, increasing the costs of staples and generating spontaneous protests and civil unrest. Dozens of countries have 

experienced ‘‘food riots’’ in recent months. 

While higher agricultural commodity prices are affecting developed and developing countries, the impact of higher food prices varies greatly in each. Two factors 

tend to moderate the impact of higher agricultural commodity prices on consumers 

in the U.S., and conversely magnify their impact for poor people in developing 

countries. 

First, most American consumers don’t buy agricultural commodities. American 

consumers rarely buy wheat, for example. In fact, most households buy wheat flour 

only occasionally. Instead, we buy bread. And although bread may be made of 

wheat, the value of the raw commodity in the final product is actually quite small; 

perhaps 20 percent. This contrasts with poor consumers in developing countries, 

who often buy food in much less processed forms, as wheat flour or maize kernels. 

For these consumers, commodity price increases are felt more directly in their purchasing power. 

The second factor that tends to moderate the impact of high agricultural commodity prices for American consumers is the fact that, on average, American households spend only about 10 percent of their disposable income on food. Of course, for 

some American households, such as those who are poor or on fixed incomes, food 

purchases can make up as much as 25 or 30 percent of household expenditures. In 

fact, food price inflation in the U.S. is at 5 percent and expected to rise to 8 percent 

this year prompting a record number of Americans to request federal food assistance.7

This is no small matter in the U.S., and the situation is only magnified in most 

other countries where food makes up a larger portion of household incomes. Poor 

people in developing countries may spend 50–80 percent of their income on food. So, 

when commodity prices increase, the capacity of people in developing countries to 

respond is much less. In order to feed their families, they must make extremely difficult choices such as reducing food consumption, switching to a less nutritious diet, 

forgoing medicines or health care, removing their children from school (since they 

are unable to pay school fees), selling important assets—like livestock or land, or 

some combination of these actions. 

These are the awful choices that many poor people are being forced to make today 

as high food prices are impacting their lives, their families, and their livelihoods. 

HIGH FOOD PRICES, HUNGER, AND POVERTY

After a very long and steady decline over the course of decades, the number of 

people facing chronic hunger globally took a disappointing turn upward in the last 

few years.8 By some estimates, 1.2 billion people could be chronically hungry by 

2025; 600 million more than previously predicted.9

It might seem obvious that lack of food is the cause of hunger. And while that’s 

true, it’s actually much more complicated. The truth is that the world does not lack 

food. Globally, we produce more than enough calories and nutritious food to sustain 

humanity. While there are droughts and other circumstances that create acute food 

scarcity, more often hunger is caused by other factors. 

The World Bank recently studied the connection between food prices and poverty 

and reported the recent food price increases will expand absolute poverty by 4.5 perVerDate Nov 24 2008 14:53 Feb 10, 2009 Jkt 000000 PO 00000 Frm 00069 Fmt 6633 Sfmt 6621 H:\DOCS\FOODCRIS BETTY
66 

10 ‘‘Implications of Higher Global Food Prices for Poverty in Low-Income Countries,’’ Maros 

Ivanic & Will Martin, the World Bank Development Research Group, April 2008. 11Sources: ‘‘Millennium Development Goals Report 2007’’ United Nations and ‘‘The State of 

Food Insecurity in the World,’’ 2006, U.N. Food and Agriculture Organization. 12 ‘‘Sovereign Wealth Funds Should Invest in Africa, Zoellick Says Outlines plan to advance 

development in face of market turmoil, high food and energy prices,’’ Press Release No:2008/ 

255/EXC, April 2, 2008. 13 ‘‘XXXX’’ IRIN Asia January 8, 2008. Accessed at: http://www.irinnews.org/Report.aspx? 

ReportId=761 38, IRIN. 14 ‘‘AFGHANISTAN: Bread Price Hike Affects Millions,’’ IRIN Asia, February 28, 2008. 

Accessed at: http://www.irinnews.org/report.aspx?ReportId=76870. 

cent. Projected across the globe, this is an increase of more than 100 million people 

in poverty.10

Approximately 1 billion people—one-eighth of the world’s population—survive on 

an income of less than $1 a day. More than 2.5 billion people scrape by on less than 

$2 a day. Approximately 850 million are malnourished.11 This is a vast pool of vulnerable people, spread out across the world. For these people and their families, 

hunger is a constant worry and a looming possibility. 

FOOD INSECURITY, POVERTY, AND GLOBAL SECURITY CONCERNS

Where incomes are not rising at the same rate as food inflation, high food prices 

seem certain to cause an increase in food insecurity and pose risks of widespread 

food crises in many developing countries. There is a clear connection between social 

unrest and rising food prices in many parts of the world. In April, World Bank 

President Zoellick warned that 33 countries around the world face potential social 

unrest because of the acute hike in food and energy prices. For these countries, 

where food comprises from half to three quarters of consumption, there is no margin 

for survival.12

The United Nation’s Global Information Early Warning System identifies 37 countries ‘‘in crisis’’ and ‘‘requiring external assistance.’’ Twenty-one of these are in 

Africa. Not surprisingly, food riots have erupted in the majority of these countries 

over the past few months. Closest to home, Haiti recently experienced food riots 

leading to the dismissal of Prime Minister Jacques Edouard Alexis. 

To illustrate the importance of addressing this issue, one need only look at the 

impacts of high food prices on a country like Pakistan, a strategically important 

U.S. ally. Of the 56 million people living in urban areas in Pakistan, about 21 million are now deemed food insecure by the WFP.13 In response to the food crisis, 

Pakistan recently banned flour exports to Afghanistan and the government has introduced ration cards for food for the first time since the 1980s. While banning flour 

exports was understandable for Pakistan, it greatly exacerbates neighboring 

Afghanistan’s food insecurity. Shortly thereafter, on January 17th, the WFP made 

an appeal for 89,000 metric tons of food including wheat, beans, cooking oils, and 

table salt to help over 2.5 million Afghans.14

Further amplifying the effects of high food prices (as well as one factor creating 

the rapid increase in food prices) is the dramatic increase in global oil prices. Many 

nations now face the impacts of high energy costs and high food prices, leading to 

further instability and potentially reversing years of progress in many developing 

countries. Keep in mind that all but a few of the world’s poorest countries depend 

on foreign oil imports to drive their economies, and world oil price vulnerability— 

and recent price increases—eat away at limited foreign exchange reserves and national budgets. 

As the price of oil escalates, the gains of a range of antipoverty measures are 

being quickly eroded. Ethiopia, for example, currently spends six times as much on 

oil than it has received in debt relief from the Heavily Indebted Poor Countries Initiative. The International Energy Agency estimates that for every $10 increase in 

the price of a barrel of crude oil, the economy of a sub-Saharan African oil importing 

nation is affected more than 10 times as much as the U.S. economy. As a result, 

rising energy costs are systematically erasing any gains achieved from significant 

debt forgiveness initiatives and commitments to tackle poverty and hunger. Combined with record commodity prices, the effects can be paralyzing for some nations, 

in particular those countries referred to as ‘‘low income food importing developing 

countries.’’ Those countries which are also net energy importers are typically hit the 

hardest. 

67 

15 ‘‘World Agriculture Supply and Demand Estimates,’’ USDA (WASDE–457), April 9, 2008. 16 ‘‘Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in 

Food Commodity Prices,’’ Ron Trostle, USDA Economic Research Service, May 2008, p. 17. 17 USDA, ERS. Accessed at: http://usda.mannlib.cornell.edu/ers/89002/Table02.xls. 18 Ibid. 19World Economic Outlook, April 2008. International Monetary Fund. P. 60. See: http:// 

www.imf.org/external/pubs/ft/weo/2008/01/index.htm. 

THE CAUSES OF FOOD PRICE INCREASES

Many experts have noted that there is a confluence of forces driving food prices 

upward. My copanelist, Ambassador Sheeran has described it as a ‘‘perfect storm.’’ 

I will just mention a few and then briefly address one. 

Factors contributing to high food prices include: 

• Rising demand for higher protein foods in fast-growing developing countries like 

India and China; • Changing weather patterns and production problems for some commodities and 

some regions, notably droughts in wheat-producing regions including Australia, 

North Africa, and Ukraine; • High energy prices that raise food production costs, food transport costs, and 

agriculture; • Input costs (e.g., fertilizer and fuel for mechanized machinery and pumps for 

irrigation); • Possible speculation emerging from a large movement of investor capital out of 

equities and into commodities futures and related instruments; and • Growth in biofuels production and consumption. 

While experts argue about their relative importance, each of these factors appears 

to be having an impact. The biofuels issue is of particular importance since much 

of the growth in biofuels production has been driven by policy decisions in Washington and Brussels. For this reason, I will address it briefly. 

In 2008 the U.S. will convert approximately one-quarter (23.7 percent) of our corn 

production into biofuels. That’s an increase from 20 percent last year and 14 percent 

the year before. In short, we’re rapidly diverting larger portions of our corn supply 

to fuel, leaving less for food. Dedicating 3.1 million bushels of corn for ethanol this 

year will take more than one-tenth of the global corn supply off the market for food 

and feed. 

The U.S. is a massive producer of corn, harvesting more than 40 percent of the 

world’s corn supply.15 The U.S. is also a massive exporter of corn, supplying nearly 

twice as much corn as all the other exporters combined. USDA’s Economic Research 

Service noted that since 2002–03, nearly 30 percent of the global increase in cereals 

demand came from U.S. corn ethanol.16 So, reduced supply and/or higher prices in 

the U.S. corn market can have significant implications for the global corn supply 

and global prices for food and feed. 

Although ethanol mandates and subsidies directly impact corn prices, they also 

have implications for other agricultural commodities. This is because higher corn 

prices encourage farmers to commit more acreage and agricultural inputs to corn 

production. This leaves less acreage and agricultural inputs available for other 

crops, especially soybeans, which are often planted in alternate years with corn. As 

a result, production for other commodities like soybeans is lower and prices are 

higher. In 2007, U.S. soybean plantings decreased by 15.7 percent to about 63.3 million acres from 2006 levels.17 Additional demand for soybeans is also generated 

through U.S. Government encouragement for biodiesel production driving prices up 

40 percent from to $10.80 per bushel from 2006 to 2007.18

Last month, the World Economic Outlook identified increased biofuels consumption as a major driver of food price increases: ‘‘Rising biofuels production in the 

United States and the European Union has boosted demand for corn, rapeseed oil, 

and other grains and edible oils. Although biofuels still account for only 1.5 percent 

of the global liquid fuels supply, they accounted for almost half the increase in the 

consumption of major food crops in 2006–07, mostly because of corn-based ethanol 

produced in the United States. Biofuel demand has propelled the prices not only for 

corn, but also for other grains, meat, poultry, and dairy through cost-push and crop 

and demand substitution effects.’’ 19

Finally, the International Food & Policy Research Institute (IFPRI), one of the 

premier organizations tracking food and hunger issues, estimates that biofuels will 

drive up corn prices by between 27 percent and 72 percent by 2020, depending on 

the scenario analyzed. Other commodities (oil seeds used for biodiesel) would rise 

by 18 percent to 44 percent. IFPRI stated, ‘‘In general, subsidies for biofuels that 

use agricultural production resources are extremely antipoor because they implicitly 

68 

20 ‘‘The World Food Situation: New Driving Forces and Required Actions,’’ Joachim Von 

Braun, International Food Policy & Research Institute, December 2007. 

act as a tax on basic food, which represents a large share of poor people’s consumption expenditures and becomes even more costly as prices increase. . . .’’ 20

SOLUTIONS TO THE GLOBAL FOOD CRISIS

While there are no simple solutions to the global food crisis—just as there are no 

easy answers for dealing with the energy crisis—there are steps that need to be 

taken to deal with the immediate effects of the crisis, to better understand the factors that are creating this crisis, and to begin to make longer term, strategic investments as part of a long-term solution. 

SHORT-TERM, EMERGENCY RESPONSES

Oxfam America suggests three important short-term responses to the global food 

crisis. 

First, the Congress should respond to the request of the World Food Programme 

and that of President Bush by immediately providing the $770 million requested to 

meet essential food aid needs. The President recently communicated to the Congress 

his desire to see the necessary funds provided to meet these emergency needs and 

to avert cutbacks in the World Food Programme’s food aid efforts. This is a critical 

emergency stop gap measure. Likewise, the U.S. Agency for International Development has requested $350 million in supplemental funds for this fiscal year. But that 

request was made months ago. In the meantime, food prices have spiked upward. 

USAID now estimates it will need an additional $260 million just to maintain existing commitments—due to food price increases and the depreciation in the dollar. 

Second, current food aid needs to get to the people who need it much more quickly 

and with much greater efficiency. To achieve this, a change is needed in current aid 

policy to permit U.S. agencies greater flexibility in providing food aid assistance. 

Current law requires that U.S. food aid consist of U.S. commodities that are purchased in the United States and shipped overseas on U.S.-flagged vessels. This constraint on U.S. food assistance results in higher costs for food aid due to the high 

cost of purchasing commodities in the U.S. (in U.S. dollars) and the added cost of 

shipping them overseas. Higher energy prices have amplified transportation costs, 

further exacerbating the problem. In addition, the requirements of current law delay 

the delivery of desperately needed aid. And, it works to the detriment of policies and 

programs designed to promote local agricultural production and greater self-sufficiency on the part of developing countries. 

Many commentators have pointed out the flaw in current law, and some, including President Bush, have requested that a change in current law be made to permit 

as much as 25 percent of U.S. food aid to be purchased locally. Oxfam America believes that this would be a substantial improvement over current policy. This 

change would expedite the delivery of food aid and save as much as 50 percent of 

the food aid budget—funds urgently needed to address rapidly growing needs. In 

short, this fix would make limited food aid go much further than can be achieved 

under current law. 

Finally, as has recently come to light, a program designed to provide nutritional 

assistance to school children in developing countries will be severely impacted by 

proposed cuts in the pending farm bill as recently agreed to by Senate and House 

conferees. This food assistance program named for former Senators McGovern and 

Dole, is another important part of the U.S. food aid safety net and funding for it 

should be restored. An opinion piece in the Washington Post by the two Senators 

raised this issue and included their request to move funds from farm subsidy programs to restore funding for this important program. Again, we would concur in 

that recommendation. 

INTERMEDIATE SOLUTIONS

We have a responsibility to carefully assess the impact of our policies on those 

who face poverty and hunger and to take actions to make the lives of poor people 

less difficult. In living up to this commitment, there should be no reason to pit food 

security against energy security. 

The 2005 Energy Policy Act mandated 7.5 billion gallons of renewable fuels to be 

mixed into gasoline by 2012. Actual ethanol production is at least 4 years ahead of 

that schedule, with expected production of more than 7 billion gallons this year. But 

this is just the beginning of the planned expansion of corn ethanol. The 2007 Energy 

Independence and Security Act, mandates 36 billion gallons of biofuels by 2022. 

69 

21 ‘‘Biofuels at What Cost?: Government Support for Ethanol and Biodiesel in the United 

States, 2007 Update,’’ Global Subsidies Initiative of the International Institute for Sustainable 

Development. 22 Ibid. 23Thanks to Emmy Simmons’ unpublished paper. Source: USAID/EGAT/AG. No nonemergency food aid funding or Millennium Challenge Corporation funding is included. 

While the majority of this amount is meant to be ‘‘advanced biofuels,’’ 15 billion gallons would be corn ethanol. This would double current corn ethanol production and 

implies a much larger diversion of corn from food and feed. 

In addition, the pending farm bill would continue incentives for corn to ethanol 

production. The 2008 Farm Bill Conference Report would lower the blender’s tax 

credit from 51 cents per gallon to 46 cents per gallon to offset a production credit 

for cellulosic ethanol of $1.01 per gallon. The farm bill would also extend the import 

tariff of 54 cents per gallon until 2010. Additional provisions include other tax incentives, supports, and investments in research, production, and cellulosic technology. Despite minor reductions to the blender’s credit, U.S. support to ethanol is 

predicted to approach $100 billion for the 2006 to 2012 period and will likely rise 

if the new Renewable Fuels Standard is met.21 The large majority of this support— 

about 75 percent—will be directed to corn ethanol.22

If the connections between corn ethanol production and increased food prices are 

accurate, then the policies associated with incentives for corn to ethanol production 

need to be reevaluated in light of the global food crisis. Therefore, Oxfam America 

recommends that a blue ribbon panel be established to quickly investigate this issue 

and that the panel bring recommendations back to the Congress by the end of this 

calendar year to guide decisions regarding incentives and subsidies for ethanol production already on the books and those likely to be added should the farm bill become law in its current form. Clearly, an accelerated strategy is needed to do the 

research and development necessary to quickly transition to the so-called ‘‘next generation’’ of cellulosic biofuels. Oxfam believes that the U.S. Congress should promote 

research and development for alternative and renewable sources of fuel that do not 

lead to increased food insecurity in the developing world. 

LONG-TERM SOLUTIONS

The global food crisis cannot be addressed for the long run by simply increasing 

food aid to countries that find themselves in a humanitarian crisis. Food aid is an 

essential part of an emergency response mechanism. However, the ultimate solution 

is to help developing countries improve their capacity to feed themselves, to market 

their agricultural products, and, through these strategies, lift themselves out of 

poverty. 

First, we need to increase aid for agricultural production. More than 70 percent 

of the poorest people live in rural areas and depend on agriculture for their livelihood. Sixty percent of the workforce in Africa works in agriculture. And despite agriculture’s clear importance and close nexus with poverty, it has been a backwater 

for economic development and commercial activity—particularly in developing countries. Aid donors neglected the agriculture sector for decades, with bilateral aid for 

agriculture slipping from 18 percent of foreign assistance in 1980 to about 4 percent 

today. 

Unfortunately, many developing countries and poor farmers have little capacity 

to improve and expand agricultural production because they lack working capital, 

access to information and technology to improve farming practices, access to agricultural inputs like fertilizer and improved seeds, storage facilities, and markets. All 

of these factors require a financial and physical infrastructure that will take time 

and resources to build. Helping developing countries make these investments is a 

very important element in resolving the current crisis posed by high food prices and 

should be a key component of a global response. 

The evidence is building that improving the agriculture sector is key to reducing 

poverty. World Bank’s World Development Report 2008, ‘‘Agriculture for Development,’’ underscored the importance of growth in the agricultural sector for reducing 

global poverty and improving food security, especially in sub-Saharan Africa. The 

World Bank report finds that investments in agriculture have a poverty reduction 

impact 2 to 4 times higher than GDP growth in other sectors. 

Like other aid donors, the U.S. has neglected agriculture in developing countries. U.S. assistance for agricultural development is at an all-time low at about $283 million. Only $91 million of this is for Africa. This is down from $589 million, including 

$172 million for Africa in FY05.23 To begin to rectify this situation, Oxfam America 

recommends that the U.S. Congress set the funding level at a minimum of $600 million for USAID’s agricultural development program, including at least $300 million 

70 

for development assistance (DA) funding. This should be separate from MCA funds 

or food aid programs. 

But if we are to have any hope of actually making progress in improving the 

plight of developing nations, we need to modernize our overall aid system to make 

it more efficient and focused on ending poverty. So our second priority must be to 

undertake a fundamental reform of the laws, strategy, structure, and practice of 

U.S. foreign assistance so it can meet the challenges of the 21st century. The current system is broken: Too many agencies are involved in delivering foreign aid and 

there is a lack of coherent strategy and leadership. 

Oxfam believes foreign aid is most effective when it focuses on long-term poverty 

reduction as its primary mission. In the last few years, we have seen U.S. foreign 

assistance increasingly focus on short-term security and political objectives, rather 

than long-term development goals. U.S. foreign assistance should focus on strengthening responsible and effective states and helping active citizens to foster equitable 

economic growth through their own efforts. Funding should be used strategically to 

strengthen the ability of poor countries and poor people to feed themselves. Our current system is woefully unprepared to take on the challenge of promoting small producers and rural communities, strengthening national and local governments, civil 

society groups, and basic infrastructure. 

Until we modernize the structure, laws, strategy and implementation of our foreign assistance, the U.S. will have a limited ability to promote the self-sufficiency, 

economic growth, and stability that comes with the certainty that there will be food 

on the table, adequate shelter, and the means to obtain health care for one’s family, 

and education for their children, and a sustainable livelihood. 

Third, we need to ensure that farmers in developing countries have access to 

global markets and the opportunity to participate in global trade in a fair and equitable manner. The Doha Round of trade negotiations—explicitly launched to assist 

developing countries benefit from trade—offers a historic opportunity to align trade 

policies with the goal of development and poverty reduction. At the moment, the negotiations are horribly deadlocked, with continued U.S. farm subsidies posing a 

major obstacle to successful negotiations. Reforming and reducing U.S. trade-distorting farm subsidies could offer a double-benefit of helping developing countries 

and unblocking the global trade negotiations. Unfortunately, the farm bill that recently emerged from the conference committee is a major disappointment and would 

actually create new trade-distorting subsidy programs while expanding existing subsidies. 

While the global trade talks have been stalled since December 2006, the U.S. can 

take actions without waiting for a global trade agreement by improving our ‘‘general 

system of preferences’’ and other trade policies. We could, for example, take the example of the European Union which has opened its market to duty-free and quotefree trade for all imports from least-developed countries (except weapons). Least developed countries (LDCs) account for a mere 0.5 percent of U.S. non oil imports. 

Taking this step could offer a significant benefit to poor countries while having very 

marginal economic costs to the U.S. Unfortunately, the current U.S. tariff and quota 

system hits the poorest countries the hardest, and preference programs intended to 

remedy this exclude very poor countries, such as Bangladesh and Cambodia, as well 

as a number of products that are of greatest economic significance to the developing 

world. Even the African Growth and Opportunity Act (AGOA), the most extensive 

U.S. preference program, excludes agricultural products that African countries can 

produce competitively. 

Oxfam recommends that Congress support the Partnership for Development Act 

(NPDA), which would provide duty-free and quota-free access to the U.S. for all 

LDCs, additional benefits for sub-Sahara African countries, and aid for trade to help 

those countries take advantage of these benefits in addition to other trade preference programs set to expire in 2008. 

CONCLUSION

Food price increases have delivered a shock to consumers and governments 

around the world. The impact of these prices is now being felt and is creating significant turmoil, especially in developing countries that depend on food imports and 

have large, vulnerable populations. Not only is the current crisis a humanitarian 

concern, but as evidenced by events over the past several months, it has important 

ramifications for the security and stability of a large number of nation-states. As 

such, it has important national security ramifications for the United States as well. 

How we respond as a nation will speak volumes about how we want to see ourselves and have others view us in a global context. 

71 

In the short term, the U.S. must rapidly respond to appeals for food aid from individual countries and the World Food Programme, and reform current U.S. food aid 

policy to make our food assistance programs more efficient, timely, and cost-effective. 

In the medium term, the U.S. must revisit and revamp, if necessary, ‘‘food to fuel’’ 

mandates and supports, with respect to how these policies affect global commodity 

prices and markets. Further, an accelerated effort to transition from corn-based ethanol production to more advanced cellulosic ethanol is essential to address both domestic energy needs and any inadvertent impacts on world food prices. 

Over the long term, the U.S. must make a greater commitment to investing in 

agricultural productivity in developing countries, reforming U.S. Foreign Assistance 

to be poverty-focused, reaching a prodevelopment conclusion to the Doha round and 

providing better access to the U.S. market for least developed countries. 

The combined effect of rising food and energy prices runs the risk of wiping out 

all progress made in reducing developing country debt in recent years. This would 

be a huge step backward, reversing years of progress in reducing poverty, and increasing global security risks. 

I will close, Mr. Chairman, by suggesting that just as many Americans are concerned about the state of the U.S. economy, the price of gasoline, and the cost of 

food, so, too, are people around the globe. Fortunately, most Americans can ‘‘get by’’ 

by ‘‘cutting back’’; by reducing household expenditures and by tightening their belts. 

That is not the case for the billions around the world who live on less than $2 a 

day. When 60–80 percent of your disposable income is needed to put food on the 

table—if you even have a table—increased food prices can literally be a matter of 

life or death. 

As the world’s most prosperous nation, we have an obligation to lead in helping 

others. Americans would expect the United States to help those in need. In fact, we 

have long been the most generous nation in providing humanitarian and other assistance in times of need. The current crisis is a time for leadership, Mr. Chairman. 

Clearly, the United States has the resources to respond to this crisis. The question 

is, ‘‘Do we have the will to lead?’’ 

The CHAIRMAN. I thank all three of you. I have a couple brief 

questions. 

I know I’m trespassing on your time here, but let me make a 

generic point here. The Congress can do a lot and it’s an indispensable partner in dealing with the immediate crisis and the longterm crisis. But the truth is that we tend to view each of these 

issues in splendid isolation. There will be no solution to the world 

food crisis without a solution to the energy crisis. It will not occur. 

It cannot occur. We can stem the pain, but the idea 15 years from 

now we’re going to be in a situation where somehow we could 

ignore the energy crisis and alternatives and focus on food production is ridiculous. We don’t even think of things that way. 

The idea that we are going to put ourselves in the position—you 

said, Ms. Sheeran, that this is a perfect storm. I view it as a perfect opportunity. But it’s an opportunity that can only be seized by 

an administration. We’re kidding ourselves if we think we’re going 

to be able to put together a policy that puts all the pieces in place, 

that are gigantic pieces, to think that we’re going to get anything 

other than a Band-Aid approach to how we’re going to deal with 

this food crisis as it emerges. 

It’s trade, it’s energy, it’s significant technological advancement, 

significant investment in that technological advancement. So the 

idea—I just view AID, A-I-D, and the significant work you’re doing, 

Ms. Sheeran, at the United Nations as one of the spigots that can 

let loose a flow of services and commodities, if in fact you have an 

overall plan as to how you’re going to deal with all of this. 

I just want to make it clear that this is sort of—this is going to 

sound trite—big think stuff here. Up to now we’ve had people 

who’ve focused on energy, we’ve had people who focused on food, 

72 

we had people who focused on trade. But yet there’s no place you 

can go in any administration, Democrat or Republican, and say: 

What’s the plan, Stan? What’s the deal here? How are you going 

to deal with these factors that are undeniably interrelated now? 

You can’t solve any one of them without all of them being part of 

a long-term solution. 

So I don’t say that to take the Senate Foreign Relations Committee or the Senate or the Congress off the hook. We have to act 

more responsibly in my view. But we have a tendency, as you—I 

don’t know which one of you actually said—to make the immediate 

emergency—it ironically ends up becoming the very thing that forestalls the harder, more difficult, less urgent but harder, more difficult, real serious thinking. 

I’ll conclude before I go to my questions by saying this requires 

essentially what Senator Lugar and I are trying to do, which may 

be beyond our capacity in this committee. We need a new national 

security arrangement. We need a new 1948 act. We need to think 

of this completely differently than we have. 

That’s not an excuse. I can see Dr. McPherson going: Wait a 

minute now; is this a way to get away from the underlying? The 

fact of the matter is it’s not. We’ve got to deal with what’s before 

us. But we need the help of you and we need an administration— 

and it’s not, again, a criticism. What’s happened, what’s past is 

past. But no President’s been required to have to think this way, 

that the next President’s going to have to think. And I might add, 

no President will have had the opportunity, the opportunity. 

Every significant step forward this Nation has made to advance 

human rights and dignity and opportunity has come in the face of 

overcoming a crisis. It hardly ever comes when all things are going 

well. This is a great opportunity. 

Toward that end, I have basically three questions, and in the interest of time I’d like to direct them to each one of you if I may. 

Let me start by asking you, doctor. In terms of this idea which 

you’ve pointed out, the need for additional applied research—fertilizer you gave as a specific example—have you thought through 

the organization, where you would target if you were able to sit 

inside the next administration and allocate resources for applied 

research? Where would you focus? 

The second piece of that is, How much could we change in the 

immediate, the next decade, if we just used the technology we’ve 

acquired with regard to genetics in places that will not allow their 

use? I mean, if we had no change—what would be different, if it 

would be at all, if in fact we had not gotten the pushback internationally and through the Europeans on genetic products, if any? 

Dr. MCPHERSON. First of all, I think your phrasing this as an opportunity is right. Thank you. I don’t think there’s one organization 

that you’d want to put all your research dollars into. I think there’s 

universities here and in other parts of the world—— 

The CHAIRMAN. I’m not asking where, specifically where. What 

areas would you invest, what type of research? In other words, 

would you focus on—have you thought through—for example, if we 

did it in the energy side of the sector here, there’s a lot of talk here 

about actually targeting some research dollars to, for example, battery technology, hydrogen technology. Not who, not what company, 

73 

not what university, but what are the areas where there’s potentially the best bang for the buck, with breakthrough possibilities? 

I went out, for example, and visited Pioneer Seed. They’re going 

through—they believe that they’re going to be able to exponentially 

increase yield, provide farmers the capacity to increase yield per 

acre, that is significant and larger than happened from when you 

were on the farm to today, when Senator Lugar’s father was running the farm versus today. They believe that they can make that 

kind of exponential gain. Now, whether that’s true or not I don’t 

know enough to know. 

So the question I have is, What are those areas? Fertilizer? What 

are they? 

Dr. MCPHERSON. I would think about the following. First of all, 

I think seeds, plant production, is very important. The National 

Science Foundation a couple years ago looked at a Green Revolution for Africa, did some very good work, some reasonable 

prioritization. It’s drought-resistant seeds. In fact, Michigan State’s 

done a bunch of work on this, as a number of the land grant universities have. 

It is seeds that can grow in various kinds of soils and so forth. 

Got to work on the seeds. The private, Monsanto and Pioneer and 

others, will do important work here. 

So, too, in the more basic work will universities and some in the 

centers. I think the fertilizer thing just cries out for it. It is a nexus 

of energy and of agriculture. In fact, a friend, my colleague—I chair 

this board out of Mussel Shoals where much of the early research 

was done. We were over at the World Bank just a few weeks ago 

talking about—and it’s interesting. It’s a commodity industry, 

therefore you can’t get the companies to put the money in like you 

can a Pioneer. 

I’m very interested in the energy work. I think that the cellulose 

area is worth a major—it was mentioned here today, but this is not 

a 2-year project. 

The CHAIRMAN. No. 

Dr. MCPHERSON. And my sense is—you perhaps know Ray 

Orbach, the Under Secretary of the Department of Energy, who has 

proposed a set of centers around the country to look at how you 

would do this. I think Ray’s thoughts are very well developed and 

very interesting. He’s looking at plant—plant energy work. 

But my sense is that we’ve got to put a lot more resources into 

alternative energy research. I don’t see how—and it’s how to make 

coal cleaner. It just seems to me that it makes sense for a new 

President to say, as all the candidates have, we’re just too dependent upon foreign oil. It’s too much of a driver of too many things, 

and we better do it. 

But internationally, it’s feed, it’s plants, it’s fertilizer. Globally, 

it’s energy. 

The CHAIRMAN. Thank you. 

Ms. Sheeran, you wanted to say something? 

Ms. SHEERAN. If I could just jump in quickly. I also want to support your comment that there’s a huge opportunity here. My hope 

would be that maybe the time has come for the African farmer, 

who has long awaited the kind of research and attention and 

74 

investment that is needed to turn around the types of yields that 

we’re seeing there. 

Some of the biggest gaps in ag research seem to be similar to the 

gaps we see in medical research, where it’s not applied to the type 

of soil conditions that we see in Africa. So I think the question is, 

Do we have a match of the kind of research we need to get the 

yields up in areas of the world that have been neglected for the 

kind of investment in research and technology? 

We are seeing some of the traditional knowledge, for example in 

Africa, being threatened by changes in climate patterns. So if the 

planting season is 2 weeks longer, what does that mean for farmers 

and their traditional way of planting? I think we need to get on top 

of the connection between farming and climate very quickly, 

because the patterns are changing very quickly. So it’s just an area 

I would point to that we’re seeing increasing vulnerability out in 

Africa. 

The CHAIRMAN. Let me ask you a very practical question since 

you just came back from Africa. One of the things that has impressed me as I’ve gone around the world, recently to Afghanistan, 

talking about agriculture, Iraq used to be a major producer, a 

major agricultural producer, back in the fifties. Coming from a land 

grant college in a State that most people don’t realize its largest 

industry is agriculture, that I’ve been incredibly impressed. When 

I got here as a 29-year-old kid as a Senator, even though I had 

grown up in the State of Delaware, the State is upstate-downstate. 

It’s like New York City versus Schenectade or something in New 

York or whatever. 

What a critical role the land grant colleges played and the 

Department of Agriculture and ag extension services. What they 

basically do is they provide a capacity for farmers to be able to 

apply whatever technology exists. They’re basically an ongoing tutorial. There’s a place where every farmer in Sussex County, DE, 

or in any county in Michigan can go and get someone to tell them 

what’s best to plant on their soil, how to plant it. 

Now, our farmers are much more sophisticated these days. But 

one of the things I see missing in Africa and everywhere else 

around the world is capacity. I don’t mean just technology, not just 

resources, not just the inability to borrow, because that’s—every 

farmer in America would go bankrupt if he couldn’t borrow against 

the next crop—borrow to plant. 

So talk to me just a moment if you would, Ms. Sheeran, about 

what do we need to be doing dealing with having structures on the 

ground helping those countries build infrastructures that support, 

as much as anything else, sort of the intellectual gravamen of 

teaching farmers, helping them figure out how to make best use of 

their land? 

Ms. SHEERAN. Senator, I have a dream. There’s a report in the 

World Bank called ‘‘Doing Business,’’ and it takes small and medium business economy and breaks it into the 30 or 36 factors that 

are needed to get a small and medium economy going and ranks 

every country on Earth on each of these pillars. So if it takes 2,000 

days of bureaucratic work to register a small business, you’re not 

going to have a functioning small or medium business economy. If 

75 

it takes 70 years of someone’s salary to open a business, you’re not 

going to have one. 

So it analyzes these levers. I find many leaders, like President 

Kufour in Ghana, actually have studied this and know which levers 

they’re working on to get that small and medium economy going. 

There’s nothing that we have called the ‘‘Doing Farming Report.’’ 

If I go to a country in Africa and the leader is determined to bring 

about an agriculture revolution, there will be a thousand opinions 

on what is the most important levers. What intrigues me here is 

my ancestors, half of them are from Ireland. Ireland was suffering 

huge famines for many years, including a huge one just 160 years 

ago. They broke that cycle of famine and poverty, as have others— 

Vietnam is now doing it. Brazil did it. China’s doing it. Europe did 

it. Sweden did it. 

So the world knows how to get these levers right. But I would 

really hope that we could look at something like a ‘‘Doing Farming 

Report.’’ The expense here is not huge, but get the world’s best 

minds together. What 36 elements need to be in place, including 

extension services, knowledge, early warning systems on weather, 

whatever all these pieces are, so we have a base of diagnosis of 

where the challenges are. 

So I think there’s a big gap there. We’re often asked, and we 

partner with FAO and others in helping break the cycle of hunger, 

but it becomes a big challenge to do so. 

I will also say that at least half of hunger has to be an infrastructure problem. WFP now is one of the largest purchasers of 

food in the developing world and so we’re now deep into this infrastructure. But we can do this because we actually have the systems 

to go in there and do that. We just opened 3,000 kilometers of road 

in DRC that were closed and now farming is flourishing along 

those roads. 

So we do think if we could get some kind of systematic analysis 

of where the levers are broken, it would allow us all to be able to 

focus funding more clearly along those levers, in addition to the 

kind of breakthrough research that might be helpful. 

The CHAIRMAN. I appreciate that answer. 

I have one concluding question and I’d like to ask you, Mr. 

Lyons. The idea of, ‘‘buying locally.’’ Is there anyplace to buy locally 

from these days? I’m not being facetious. The change in policy— 

let’s assume we change the policy in the ag bill or independently. 

We change the policy, which I think makes sense in my view. In 

light of what’s going on in the countries that are curtailing, the 

sort of antithesis of Smoot-Hawley, the flip of Smoot-Hawley here, 

is there a—would the policy change be able to yield near-term benefits in light of what’s going on now in terms of markets? 

Does it make any sense? I’m not sure. 

Mr. LYONS. Sure. No, it makes perfect sense. I think the short 

answer is, yes in many places, in some places no. But the advantage is then it creates the capacity to move commodities that would 

have been exported elsewhere or traded elsewhere, to have them 

purchased locally to serve local populations. By building those markets, it also builds an infrastructure, if you will, that encourages 

more local production. So it helps enhance the incentive then for 

additional farming and additional production. 

76 

So if we didn’t face this crisis I would say that buying local 

would be a solution everywhere. It’ll have limited impact, but it 

will have immediate impact in those places where resources are 

available. 

I dare say, Mr. Chairman, there’s food in the world. The question 

is getting it to the people who need it, and that’s what’s hurting 

us right now with regard to current U.S.—— 

The CHAIRMAN. Long-term we’ve got a problem with food in the 

world. 

Mr. LYONS. Yes. 

The CHAIRMAN. That’s the part I don’t want to take our eye off. 

I want to deal, as Senator Menendez said, with the immediate crisis. You know that old expression, in the long run we’ll all be dead. 

You know, the idea of not being able to provide assistance immediately and in the very near term, the next year or 2 or 3, 5 years. 

But one of the things we don’t do, it’s a hard thing for nations 

to do, especially when the crisis isn’t one they are physically feeling 

themselves, is to do what you’ve all said. Every witness today said: 

We’re talking of having the plan 2, 5, 10, 20, 30 years down the 

road. And to solve the problem 30 years down the road, you better 

figure out where to start now. That’s the only generic point that 

I’m trying to make, not that we shouldn’t—there is food now. We 

can increase significantly, based on all your testimony and your 

written statements. We could increase significantly now without 

any change in technology the amount of food being produced by a 

whole range of things you mentioned. We also could increase access 

to that food by different transportation nets and distribution capability, and they should all be worked on. 

I’m just trying to get at this sort of larger sense. I don’t want 

my successor sitting here 20 years from now saying, why the heck 

didn’t anybody back in 2008 sit there and start, knowing this is 

going to be a real long haul, to deal with these problems? Why 

didn’t they do something? 

I want to make it clear: I claim no expertise in here. I come at 

this originally from a foreign policy perspective. I come at this 

originally from the perspective of the interlocking, the perfect 

storm you referenced, of our national security, our physical security, our place in the world, our values, what we say. That’s what 

I come at this from. So I don’t pretend to have an expertise in agriculture in terms of dealing with this larger problem. 

So the only thing I wanted to—and you’ve answered the question. I think it’s a sound policy to change the policy to be able to 

buy locally. I just wondered how much immediate relief that is 

likely to have in what the crisis that is faced at this very moment 

for millions of people around the world. So that’s the reason I 

asked the question. 

One of the things I—let me conclude by giving you an example. 

I’ve done a lot of work in dealing with what’s ‘‘work’’; I spent a lot 

of time trying to deal with what I think has been a gross mismanagement of our efforts in Iraq, from going in in the first place 

to what we’re doing now. I’ve come away from my experience in 

working so closely with the military over the last 2 decades with 

a completely different view than when I got here, when I got here 

in 1972, doctor. I thought everybody with four bars on their shoulVerDate Nov 24 2008 14:53 Feb 10, 2009 Jkt 000000 PO 00000 Frm 00080 Fmt 6633 Sfmt 6602 H:\DOCS\FOODCRIS BETTY
77 

der was Slim Pickens jumping out of a B–52 on the back of an 

atom bomb yelling ‘‘Yippee-kay-ae.’’ 

The smartest guys, most informed women I’ve met in all of government are in the military. I sit with a three-star general in—I 

guess I was with him in Basra, also in Baghdad. His name is General Ciarelli, the First Cavalry. I said: What are you going to do 

about the militia? This was several years ago, because the militia 

were increasing exponentially. 

He said, ‘‘You want me to deal with the militia, give me the 

Department of Agriculture.’’ And he went back and he gave me the 

statistics of what was produced in the breadbasket of the Middle 

East called Iraq in the forties and fifties. And he said, ‘‘You want 

me to fundamentally change our circumstance here, give these people jobs, get their agriculture department functioning, have a functioning agricultural system, begin to build it.’’ And he said, ‘‘I 

promise you, I’ll reduce exponentially the number of people who are 

getting paid to tote guns and kill one another right now.’’ 

Then he gave me an interesting example. You both may know 

what the fungus is or what the pest is that can—it’s like the boll 

weevil for date palm trees, which is the national symbol and fruit. 

I don’t know what it is. He said, ‘‘You know, you’ve got to spray 

these trees every 5 years.’’ And he said, ‘‘Otherwise you run the 

risk of losing them to this particular pest.’’ 

And he said, ‘‘So I picked up the phone and I called the State 

Department,’’ and I said, ‘‘Are you guys going to—what are you 

doing to spray these trees, these date palms?’’ And they said, 

‘‘That’s up to the—you know, that’s local; we’ve given the authority 

to—oversimplifying it—to the Iraqui, quote, ‘department of agriculture.’ ’’ 

So he went to them, and they had no idea. They had never done 

it before. Saddam had been hanging around for the last 3 decades 

and what he’d do, he’d have the military helicopters go out and 

spray the date palms whenever he needed to do it. There was no 

department of agriculture. It didn’t do much. 

So I said, ‘‘What did you do?’’ He said,: ‘‘Damn it, I used my helicopters and I sprayed the damn trees; I saved them.’’ He said, 

‘‘Then I went back, had my guys go back to their department and 

say, ‘Look, this is what you’ve got to do; this is the stuff you’ve got 

to mix; this is how you’ve got to do it; this is where you do it.’ ’’ 

The point I’m making is a generic point. He said, Senator, something to the effect of, ‘‘Smack me if I ever criticize bureaucracy 

again. There are no bureaucracies in these countries that can take 

the aid, assistance, and capacity—they can take some of it—to deal 

with the practical, on the ground, day-to-day implications of putting a crop in the field and harvesting the crop, irrespective of any 

new technology, just the most modern technology that exists right 

now, for a whole range of reasons.’’ 

But part of it is building a sophisticated civilian civil service that 

is able to do these things. That was the essence of my question, 

why I asked it. 

So there’s so much to talk about. We didn’t talk about that at 

all. But I think it’s fair to say there’s an overwhelming consensus, 

even with the administration now, that there is a real crisis at 

hand at this moment that we must deal with in coordination with 

78 

the rest of the world, the United States, and independently. It requires more resources from the United States than are forthcoming 

now, and from the rest of the world that is forthcoming. And we’ve 

got a longer haul, ‘‘management’’ problem here. 

I’d like to ask to be able to continue through my staff and 

directly to work with you all as we try to—again, we are not going 

to be able to do it. I’m not envisioning coming up with some 

megapiece of organizational legislation here for the next President. 

That’s not the way this will happen. But at least what we’re doing 

here is to try to design, to be very blunt about it, is to try to force 

whoever the next administration is, by the hearings we’re having 

on a whole range of subjects, to have to address these problems. 

Your input today is very helpful. I apologize for keeping you so 

long. As you can tell by my interest and curiosity, I could probably 

keep you here the rest of the day, but I’ll refrain from doing that 

and thank you all very, very much for taking the time to be here. 

We’re adjourned. 

[Whereupon, at 12:41 p.m., the hearing was adjourned.] 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

RESPONSES OF USAID ADMINISTRATOR HENRIETTA FORE TO QUESTIONS SUBMITTED

BY SENATOR RUSSELL FEINGOLD

Question. I have heard from several Wisconsin farmers who have forged long-lasting and mutually beneficial relationships with farmers in other nations after participating in farmer-to-farmer exchanges. These types of citizen diplomacy programs 

play an important role in addressing both our short-term humanitarian goals and 

long-term foreign policy priorities. What are your impressions of these programs? Do 

you see a role for these programs in our long-term plans? 

Answer. The John Ogonowski Farmer-to-Farmer (FTF) Program is an effective 

and valued tool in our development assistance program, combining effective voluntary technical assistance and citizen diplomacy. The program currently provides 

assistance to farmers and agricultural organizations in 41 countries. Over the past 

4 years, the program funded 2,705 volunteer assignments, and provided developing 

country host organizations with voluntary technical assistance services with an estimated value of over $21.3 million. 

Volunteers work mainly in technology transfer, market, and enterprise development, and organizational strengthening. The current program has provided technical services to: 475 farmer cooperatives and associations; 373 individual private 

farmers; 663 other private enterprises; 170 NGOs; 110 educational institutions; 68 

rural financial institutions, and 101 public sector agencies (5 percent). Volunteers 

provided direct formal training to 208,631 beneficiaries, 40 percent of whom were 

women. 

The FTF Program goes beyond simply placing volunteers on an individual basis 

and focuses on development of specific market chains for which overall impact can 

be evaluated. Major program areas include: Horticulture and high value crops, income diversification, dairy and livestock, producer organizations, financial services, 

marketing and processing, and natural resources management. Since the program’s 

inception, evaluations have consistently found the farmer-to-farmer voluntary technical assistance to be of high quality and highly appreciated by host organizations. 

Volunteer efforts have benefited approximately 1 million farmer families, representing over 5 million people. 

Wisconsin, which frequently leads all other States in numbers of volunteers sent 

abroad through the FTF program, currently ranks first with 202 volunteers through 

September 30, 2007. Next were Hawaii with 185 volunteers, Florida with 138, and 

Oregon with 125 volunteers. 

Examples of a few Wisconsin volunteers are: 

• Robert Albrecht who traveled to Ethiopia with the Virginia State University 

Farmer-to-Farmer Program to provide hands-on practical training on livestock 

feed formulation to selected input suppliers. The assignment enabled participating suppliers to increase sales of more appropriate feed mixes that increased 

79 

small farmer dairy production and income. One feed dealer, Sanford Legesse, 

increased his sales by 41 percent and net profit by 29 percent in just 6 months, 

increasing his gross income threefold to 1,400 USD per month and enabling him 

to hire three local employees, pay school fees for his two children, and buy a 

television set for his family. • Bill Broske, who has more than 50 years of experience in processing cheeses 

in Wisconsin, went to El Salvador as a Winrock International Farmer-to-Farmer 

volunteer to assist dairy processors improve formulation and processing of various cheeses—colby, mozzarella, cheddar, cream cheese, processed cheese, Monterey jack, and natural yogurt. He worked with three cheese factories that buy 

milk from small farmers. One of them, Luis Merino, plant owner of La Isla, 

said, ‘‘The most important was the experience to interact with Mr. Broske . . . 

He gave us practical advice on cheesemaking. We had a machine to make mozzarella cheese that we did not know how to use. Thanks to him now we can 

work the machine and produce mozzarella cheese. The volunteer also taught us 

how to make a healthy yogurt.’’ 

Beyond facilitating technical assistance, the FTF program furthers U.S. public diplomacy by directly engaging citizens in short-term humanitarian goals and longterm foreign policy priorities. Indeed, by working alongside farmers in developing 

countries, FTF volunteers demonstrate the compassion of the American people. Additionally, by focusing on the effective delivery of much-needed technical assistance, 

FTF volunteers are directly contributing to improvements in local markets throughout the developing world, a key U.S. foreign policy goal. 

Question. Wisconsin has a long history of supporting both farmer-owned and other 

cooperatives. Do you see farmer cooperatives as beneficial in countries where we are 

providing agricultural development assistance? If so, is there a need to further encourage cooperative development? 

Answer. Cooperatives and other less formal farmer associations have important 

potential for increasing small-farmer productivity and income. USAID promotes cooperatives and producer association development in many of its programs. Cooperative group action provides economies of scale in marketing and delivery of services 

and can give small farmers a voice in policy formulation, government programs, and 

market negotiations. Still, cooperatives in developing countries and emerging democracies must generally overcome a legacy of distrust due to past government control 

and manipulation of cooperatives that lacked a democratic base and market orientation. Cooperatives in developing countries, as in the U.S., must face competitive 

pressures and survive or die based on their ability to meet needs of their members 

and respond to market demands. 

The USAID Cooperative Development Program is strengthening cooperative systems in developing countries and emerging democracies utilizing the expertise and 

resources of long-established U.S. cooperative organizations, their members, and volunteers. Current focus is on credit, housing, agribusiness, technology transfer, 

democratic institutions, rural telecommunications and electrification, private enterprise development, and insurance protection sectors. The program has helped developing countries overcome obstacles in starting and operating successful cooperatives, 

by finding workable solutions to impediments, ranging from restrictive cooperative 

law and regulation to practical implementation practices (e.g., raising member 

equity participation as a major element in self-reliance). 

Farmer-to-Farmer Program volunteers frequently work with a range of organizations, involving rural cooperatives and producer organizations, to build local institutions and linkages to resolve local problems. Organizational development assignments tap the knowledge and expertise of U.S. volunteers to establish market 

linkages, democratic management systems, and educate members in cooperative 

principles. Volunteer introduction of productive new technologies and market 

linkages frequently work through cooperatives and producer associations to produce 

measurable impact on incomes and productivity. Two examples are: 

• Citizens Network for Foreign Affairs (CNFA) Farmer-to-Farmer volunteer Bruce 

Williams introduced growing seedless watermelons to the ‘‘AgroAccess’’ Vegetable Marketing Cooperative in Northern Moldova. Williams helped the cooperative confirm a market demand for this promising new product and then trained 

15 cooperative members in appropriate soil mixes, tray preparation, seeding, 

and greenhouse conditions for growing of healthy seedlings. Williams provided 

1,250 seedless watermelon seeds, donated by the Rotary Club in Wilmington, 

NC, and by the ‘‘Seminis’’ seed company and ‘‘AgroAccess’’ produced a first crop 

in 2007. It also plans to plant 15,000 seedless watermelon seedlings in 2008. 

• In Nepal, the Women’s Panchakanaya Agricultural Cooperative Ltd. was formed 

in 2004 due to community concerns about food safety and family health. 

80 

Winrock International Farmer-to-Farmer Program volunteer Arbindra Rimal 

helped the cooperative plan for organic farming and for obtaining organic certification. Volunteer Nathan McClintock later provided training on organic production techniques. This small group of 25 village women has establish a market for sale of organic vegetables that gives about a 25-percent price advantage 

and increases members incomes by almost 40 percent. 

Question. The administration has been a supporter of local purchase of food aid. 

I understand that there are potential benefits from this and I supported the pilot 

program that Chairman Harkin proposed in the Senate farm bill. Do you have any 

information on what portion of locally purchased food would also be locally produced? It seems that there is limited benefit to the local farmers if we are just substituting European, Brazilian, or even privately imported U.S. grain. 

Answer. We expect food would be purchased from developing countries. The focus 

of our local procurement will be on locally grown commodities. It will only be done 

in developing countries where the prevailing conditions indicate that such purchases 

would not place an extraordinary pressure on local prices. If food aid is not available 

for local or regional purchase under appropriate market conditions in developing 

countries, the food aid will be purchased in the U.S. We are completely committed 

to taking the necessary measures to ensure that local procurement is done appropriately. For example, guidance would include instructing our partners to take into 

account data on local crop harvests, market behavior, and stock levels. It is important to note also that the World Food Program presence as a competitive buyer in 

the food markets has had positive impacts on market development in many countries, promoting competitive behavior, raising business standards and improving the 

quality of food supplied by traders. 

Question. When some people talk about agricultural development assistance, they 

seem to be more concerned with opening markets for multinational corporations to 

sell the items required to establish industrial-scale agriculture. As a recent New 

York Times article on the resurgence of traditional farming practices in Mexico 

highlighted, there often are local and cultural conditions that technology transfer 

alone misses. What steps should we take to make sure that the desire to open new 

markets for multinational corporations is not driving policy in this area? 

Answer. USAID’s agricultural strategy focuses on small-holder farm families, providing them with the technologies, policies, and market opportunities they need to 

be competitive in the local, regional, and global marketplace. Our investments concentrate on meeting their needs and helping them, in turn, meet the agricultural 

and economic growth opportunities of their countries. 

There is a strong and growing body of evidence that suggests that small-holder 

farmers can and do respond to market signals and to the chance to invest in ways 

that raise their productivity and their incomes. These are truly win-win solutions 

for the poor—with producers earning a better living by providing a larger and more 

affordable supply of food for consumers. Low-income groups, urban and rural, benefit greatly because they spend so much of their limited incomes on food. 

USAID is committed to working with our partners, many of them from the private 

sector, to help developing countries benefit from higher yielding and more stresstolerant seeds, ready access to input and output markets, and policies that sustain 

a virtuous cycle of trade and investment and in which all can and do benefit. 

When private sector partners, with their expertise in marketing, value addition, 

biotechnology and other areas, can help advance our efforts the most, we work with 

them to help deliver the benefit of their expertise to the needs of small-holder producers. Thus crops like cassava and cowpea, grown by poorer farmers in Africa, 

Asia, and Latin America, can benefit from scientific investment that provides higher 

yielding and hardier varieties. In this way, we help ensure that needs of low-income 

farm families are not bypassed by science, and that they have the choices they want 

in meeting the challenges of food security, environmental sustainability, and climate 

change in the years and decades to come. 

PREPARED STATEMENT FROM JOACHIM VON BRAUN, DIRECTOR GENERAL, RAJUL

PANDYA-LORCH, HEAD 2020 VISION INITIATIVE AND CHIEF OF STAFF, INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE, WASHINGTON, DC 

MEETING THE CHALLENGES OF RISING FOOD PRICES

Background 

The sharp increase in food prices over the past couple of years has raised serious 

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tries, about inflation, and even about civil unrest. Both developing and developed 

country governments have roles to play in bringing prices under control and in 

helping poor people cope with higher food bills. A two-track strategy of social protection and of agricultural growth promotion is called for, accompanied by a more open 

trade regime and new grain reserves policies that should be coordinated at a regional level. 

Since 2000—a year of low prices—the wheat price in the international market has 

almost quadrupled and maize prices almost tripled. The price of rice jumped to unprecedented levels in April 2008. Dairy products, meat, poultry, palm oil, and cassava have also experienced price hikes—the prices of butter and milk have tripled 

and the price of poultry meat has almost doubled. When adjusted for inflation and 

the dollar’s decline (by reporting in euros, for example), food price increases are 

smaller but still dramatic, with often serious consequences for the purchasing power 

of the poor. 

National governments and international actors are taking various steps to try to 

minimize the effects of higher international prices for domestic prices and to mitigate impacts on particular groups. Some of these actions are likely to help stabilize 

and reduce food prices, whereas others may help certain groups at the expense of 

others or actually make food prices more volatile in the long run and seriously distort trade. What is needed is more effective and coherent action to help the most 

vulnerable populations cope with the drastic and immediate hikes in their food bills 

and to help farmers meet the rising demand for agricultural products and to translate the price crisis into opportunities for the rural poor. 

The Sources of Current Price Increases 

The combination of new and ongoing forces is driving the world food situation 

and, in turn, the prices of food commodities. Income growth, globalization, urbanization, and subsidized biofuel production are major forces on the demand side altering 

the food equation. The growing world population is demanding more and different 

kinds of food. Rapid economic growth in many developing countries has pushed up 

consumers’ purchasing power, generated rising demand for food, and shifted food demand away from traditional staples and toward higher value foods like meat, milk, 

vegetables, and fruits. This dietary shift is leading to increased demand for grains 

used to feed livestock. 

A key factor behind rising food prices is the high price of energy. Energy and agricultural prices have become increasingly intertwined. With oil prices at an all-time 

high of more than US$120 a barrel in May 2008 and the U.S. Government subsidizing farmers to grow crops for energy, U.S. farmers have massively shifted their 

cultivation toward biofuel feedstocks, especially maize, often at the expense of soybean and wheat cultivation. About one-third of U.S. maize production will go into 

ethanol in 2008 rather than into world food and feed markets. Biofuel production 

is estimated to have contributed to 30 percent of the increase in grain prices from 

2000 to 2007. High energy prices have also made agricultural production more expensive by raising the cost of mechanical cultivation, inputs like fertilizers and pesticides, and transportation of inputs and outputs. 

On the supply side, land and water constraints, climate change, and underinvestment in agriculture innovation are impairing productivity growth and the needed 

production response. Poor weather, for example, severe drought in Australia, has 

cut into global production. Even though production is expected to pick up in 2008, 

productivity growth will not match the rising demand. Speculative capital, rising expectations and hoarding are also playing a role in the rise of food prices. Grain reserves could mitigate the impact of speculation, but stocks have been at their lowest 

levels since early 1980s. 

The Impacts of High Food Prices 

Higher food prices have radically different effects across countries and population 

groups. At the country level, countries that are net food exporters will benefit from 

improved terms of trade, although some of them are missing out on this opportunity 

by banning exports to protect consumers. Net food importers, however, will struggle 

to meet domestic food demand. Given that many developing countries are net importers of cereals, they will be hard hit by rising prices. At the household level, 

surging and volatile food prices hit those who can afford it the least—the poor and 

food insecure. The few poor households that are net sellers of food will benefit from 

higher prices, but households that are net buyers of food—which represent the large 

majority of the world’s poor—will be harmed. Adjustments in wages, employment, 

and capital flows to the rural economy, which can create new income opportunities, 

will take time to reach the poor, but opportunities exist to transform the challenges 

into gains for the poor. 

82 

The nutrition of the poor is also at risk when they are not shielded from the price 

rises. Higher food prices lead poor people to limit their food consumption and shift 

to even less-balanced diets, with harmful effects on health in the short and long run. 

At the household level, the poor spend about 60 percent of their overall budget on 

food. For a five-person household living on US$1 per person per day, a 50-percent 

increase in food prices removes up to US$1.50 from their US$5 budget, and growing 

energy costs also add to their adjustment burden. 

Making the world more peaceful is directly linked to making the world more food 

secure and affluent. It has long been recognized that social conflict increases food 

insecurity, but food insecurity can be a key source of conflict. Some of the trigger 

conditions of violence can be directly related to change in the prices of food. In times 

of price increases, the poorest usually suffer silently for a while, but the middle 

class typically has the ability to organize, protest, and lobby early on. Since early 

2007, social unrest related to high food prices occurred in at least 30 countries. 

Policy Responses to Date 

Many countries are taking steps to try to minimize the effects of higher prices 

on their populations. Argentina, Bolivia, Cambodia, China, Egypt, Ethiopia, India, 

Indonesia, Kazakhstan, Mexico, Morocco, Russia, Thailand, Ukraine, Venezuela, and 

Vietnam are among those that have taken the easy option of restricting food exports, setting limits on food prices, or both. For example, China has banned rice and 

maize exports; India has banned milk powder exports; Bolivia has banned the export of soy oil to Chile, Colombia, Cuba, Ecuador, Peru, and Venezuela; and Ethiopia has banned exports of major cereals. Other nations, however, have contributed 

to the expansion of the global food market. Some net-food importing developing 

countries, for example, have reduced import barriers—in principle a welcome move 

toward more open trade. 

Price controls and changes in import and export policies may begin to address the 

problems of poor consumers who find that they can no longer afford an adequate 

diet for a healthy life. But some of these policies are likely to backfire by making 

the international market smaller and more volatile. Price controls reduce the price 

that farmers receive for their agricultural products and thus reduce farmers’ incentives to produce more food. Any long-term strategy to stabilize food prices will need 

to include increased agricultural production, but price controls fail to send farmers 

a message that encourages them to produce more. In addition, by benefiting all consumers, even those who can afford higher food prices, price controls divert resources 

away from those who need them most. Export restrictions have harmful effects on 

trading partners dependent on imports and also give incorrect incentives to farmers 

by reducing their potential market size. These national agricultural trade policies 

undermine the benefits of global integration, as the rich countries’ longstanding 

trade distortions with regard to developing countries are joined by developing countries’ interventions against each other. 

Sound Policy Actions for the Short and Long Term 

The increases in food prices have a dominant role in increasing inflation in many 

countries now. It would be inappropriate to address these specific inflation causes 

with general macroeconomic instruments. Rather, specific policies are needed to 

deal with the causes and consequences of high food prices. Although the current situation poses policy challenges on several fronts, there are effective and coherent actions that can be taken to help the most vulnerable people in the short term while 

working to stabilize food prices by increasing agricultural production in the long 

term. 

First, in the short run, developing-country governments should expand social protection programs (that is, safety net programs like food or income transfers and nutrition programs focused on school feeding and early childhood) for the poorest people. Higher prices could mean serious hardship for millions of poor urban consumers 

and poor rural residents who are net-food buyers. These people need direct assistance. Some countries, such as India and South Africa, already have social protection 

programs in place that they can expand to meet new and emerging needs. Countries 

that do not have such programs in place will not be able to create them rapidly 

enough to make a difference in the current food price situation. They may feel forced 

to rely on crude measures like export bans. Aid donors should expand food-related 

development aid, including social protection, child nutrition programs, and food aid, 

where needed. 

Second, developed countries should eliminate domestic biofuel subsidies and open 

their markets to biofuel exporters like Brazil. Biofuel subsidies in the United States 

and ethanol and biodiesel subsidies in Europe have proven to be inappropriate policies that have distorted world food markets. Subsidies on biofuel crops also act as 

83 

an implicit tax on staple foods, on which the poor depend the most. Developed-country farmers should make decisions about what to cultivate based not on subsidies, 

but on world market prices for various commodities. 

Third, the developed countries should also take this opportunity to eliminate agricultural trade barriers. Although some progress has been made in reducing agricultural subsidies and other trade-distorting policies in developed countries, many remain, and poor countries cannot match them. This issue has been politically difficult 

for developed-country policymakers to address, but the political risks may now be 

lower than in the past. A level playing field for developing-country farmers will 

make it more profitable for them to ramp up production in response to higher prices. 

Fourth, to achieve long-term agricultural growth, developing-country governments 

should increase their medium- and long-term investments in agricultural research 

and extension, rural infrastructure, and market access for small farmers. Rural investments have been sorely neglected in recent decades, and now is the time to reverse this trend. Farmers in many developing countries are operating in an environment of inadequate infrastructure like roads, electricity, and communications; poor 

soils; lack of storage and processing capacity; and little or no access to agricultural 

technologies that could increase their profits and improve their livelihoods. Recent 

unrest over food prices in a number of countries may tempt policymakers to put the 

interests of urban consumers over those of rural people, including farmers, but this 

approach would be shortsighted and counterproductive. Given the scale of investment needed, aid donors should also expand development assistance to agriculture, 

rural services, and science and technology. 

Facing the Challenges 

World agriculture is facing new challenges that, along with existing forces, pose 

risks for poor people’s livelihoods and food security. This new situation calls an 

international pact to achieve food security with actions in three areas, all of which 

have short- and long-term dimensions and need sequencing: 

1. Comprehensive social protection and food and nutrition initiatives to meet 

the short- and medium-term needs of the poor; 

2. Investment in agriculture, particularly in agricultural science and technology and for improved market access for small farmers, at a national and 

global scale, to address the long-term problem of boosting supply; and 

3. Agricultural trade and energy policy reforms, in which developed countries 

would revise their grain-based biofuel policies and agricultural trade policies; 

and developing countries would stop the new trade-distorting policies. 

The global agricultural imbalances pose a serious problem for the poor, but they 

also give an opportunity to overcome the undervaluing of natural resources and the 

labor engaged in food production. In the face of rising food prices, diverse actors— 

governments and international organizations as well as the private sector, civil society, and foundations—have a role to play in creating a world where all people have 

enough food for a healthy and productive life. The time to act is now. 

PREPARED STATEMENT OF BRYANT E. GARDNER ON BEHALF OF THE MARITIME FOOD

AID COALITION

America Cargo Transport Corp. ◆ American Maritime Congress ◆ American Maritime Officers ◆ American Maritime Officer’s Service ◆ International Organization 

of Masters, Mates & Pilots ◆ Liberty Maritime Corp. ◆ Maersk Line, Limited ◆ 

Marine Engineers’ Beneficial Association ◆ Maritime Institute for Research and Industrial Development ◆ Sailor’s Union of the Pacific ◆ Seafarers International 

Union ◆ Sealift, Inc. ◆ Tosi Maritime Consultants, LLC ◆ Transportation Institute 

◆ United Maritime Group, LLC 

MAY 13, 2008. 

Senator JOSEPH R. BIDEN, Jr., 

Chairman, Senate Committee on Foreign Relations, 

Dirksen Senate Office Building, Washington, DC. 

DEAR MR. CHAIRMAN: Mr. Chairman, this statement is respectfully submitted on 

behalf of the ad hoc maritime food aid coalition composed of the organizations listed 

above. 

The coalition supports the continued vitality of our nation’s food aid programs, 

and respectfully provides the following points in connection with proposals to cut 

U.S. food assistance programs in favor of new initiatives under which cash, not food, 

would be sent to areas in need under the sometimes misnomer ‘‘local and regional 

purchases.’’ We are concerned that the debate on this point has not been informed 

84 

1 Edward J. Clay, ‘‘European Food Aid: Untying and Budgetary Flexibility’’ at 3 (Dec. 16, 

2004) (citing Council Regulation (EC) no. 1292/96 of June 27, 1996, on Food Aid Policy and Food 

Aid Management and Special Operations in Support of Food Security, Official Journal L 166. 

Brussels (July 5, 1996)). 2Will Lynch, InterAction: American Council for Voluntary International Action, ‘‘Making Food 

Aid Work’’ (May 22, 2006). See also James Lutzweiler, World Vision Food Security and Food 

Programming Advisor, ‘‘Much Ado About Food Aid: Misdirection in the Midst of Plenty’’ (Jan. 

19, 2006) (delivered at Overseas Development Institute Conference ‘‘Cash and Emergency Response’’) (‘‘The EU has already demonstrated a cut in aid to any type of food aid program. Since 

shifting to a cash-based concept of food security, the EU’s contribution to global food aid has 

decreased by 40 percent. Is there a correlation between cash-based aid and a reduction in food 

aid? The volume of food aid worldwide has plummeted from 15 million metric tons in 1999 to 

7.5 million metric tons last year, and the portion of aid dedicated to agricultural development 

has dropped sharply from 12 percent in the early 1980s to roughly 4 percent today. Ironically, 

this has happened despite a dramatic increase in Overseas Development Assistance to nearly 

$80 billion annually.’’). 3 Andrew S. Natsios, USAID Administrator & Karan Bhatia, Deputy U.S. Trade Representative, Press Briefing at the World Trade Organization, Hong Kong Ministerial Negotiations (Dec. 

14, 2005) (Mr. Natsios speaking). 4For a broad discussion advocating the use of cash aid to establish a world welfare program, 

see Paul Harvey, et al., Cash Transfers—Mere ‘‘Gadafi Syndrome,’’ or Serious Potential for 

Rural Rehabilitation and Development, 97 Natural Resource Perspectives (Overseas Development Institute, March 2005). 5Pub. L. No. 87–195, 75 Stat. 424. 

6The President’s FY 2007 budget explains that OFDA distributes ‘‘supplementary food’’ along 

with other emergency relief and the OFDA 2002 Annual Report indicates that OFDA locally 

purchased 350,000 bags of wheat flour for airlift to Afghanistan. 

by a balanced view of the risks and benefits of local purchase versus in-kind food 

aid and, therefore, submit this statement toward that end. 

I. FOREIGN PURCHASE MAY UNDERCUT SUPPORT FOR P.L. 480 AND RESULT IN A DECLINE

IN OVERALL ASSISTANCE LEVELS

Saving lives for over 50 years, the P.L. 480 Food for Peace program is the workhorse of humanitarian assistance the world over. The program has endured for 

many reasons. Sharing their abundance with those in need overseas appeals to the 

generosity of the American people. Shipped from the Heartland to ports overseas in 

vessels flying the American flag, donated American commodities stamped ‘‘Gift from 

the American people’’ act as ambassadors, spreading goodwill toward our country 

and helping to address some of the root causes of international terrorism. 

P.L. 480’s longevity is also due in large part to the broad-based support from the 

many sectors of the economy it stimulates. Americans working on farms, in food 

processing, domestic inland transportation, ports, and the U.S. Merchant Marine, as 

well as many Americans in the broader U.S. economy, benefit from the direct and 

economic ripple effects of the program, and have helped ensure its sustained political support. Foreign purchase would cut the link between the American people, 

their economy, and P.L. 480, eliminating crucial support at a time when competition 

for budget dollars is already acute. 

Experience shows that foreign purchase drains support for food aid programs and 

results in an overall drop in aid levels. In 1996, the European Union (‘‘EU’’) passed 

a law leading to local food aid purchases.1 The result has been a decrease in EU 

donations. The overall food security budget line decreased from approximately a half 

billion euros in 1997–98 to 412 million in 2005. Andrew Natsios, former AID Administrator and the President’s Special Envoy for Sudan, cautioned against relying too 

heavily on cash transfers for foreign purchases: ‘‘Relying on cash food aid will not 

work,’’ he said. ‘‘Look at the numbers from Europe: After the Commission and Member States began moving to cash, their contributions fell by 40 percent.’’ 2 He has 

also noted that their food aid has ‘‘declined really significantly from 4 million tons 

a year to 1.4 million tons a year’’—a 60-percent decrease.3

The broad appeal of donating American commodities has allowed Food for Peace 

to thrive over the last 50 years. Converting this uniquely successful program into 

a pure welfare program, whereby American taxpayers are asked to commit to a direct wealth transfer with no corresponding benefit for the American economy, may 

very well undercut its support just as it undercut support in Europe.4

II. USAID ALREADY HAS AUTHORITY FOR FOREIGN PURCHASE

Operating under the authority of § 491 of the Foreign Assistance Act of 1961,5

USAID’s Office of Foreign Disaster Assistance (‘‘OFDA’’) responds to humanitarian 

emergencies overseas. OFDA uses this authority to purchase commodities locally 

and distribute them in emergencies when appropriate.6

85 

7 Notably, OFDA enjoys annual budget carryovers. See, e.g., OFDA, Annual Report 2006 ($45 

million budgetcarry over to FY 2007). Additionally, the USAID Budget Appendix for FY 2008 

shows a $65 million balance carried forward at the end of FY 2007. 8 H. Rept. 110–197 at 65 (2007) (appropriating $20 million for a § 491/OFDA pilot program 

to study the benefits of overseas food aid purchase). 9Will Lynch, ‘‘When to Purchase Food Aid Locally’’ (Bread for the World, 2006). 

10 Id. 11 Joel J. Toppen, ‘‘Should the U.S. End In-Kind Food Aid? Assessing the Case for Cash’’ at 

7 (Oct. 2006) (quoting Gregory Barrow). 

There is no need for new legislation to provide authority or funding for foreign 

purchases inside the P.L. 480 program.7 Indeed, the Foreign Operations appropriations bill in 2007 provided new funding and explicitly directed the use of § 491 authority for overseas food aid purchases.8

The administration and a minority of private interest groups have strenuously advocated a new foreign purchase program for emergency response inside Food for 

Peace. However, there is no need to upend Food for Peace when there is already 

a government office dedicated to disaster emergency response that undertakes foreign purchases of commodities when necessary. 

Lastly, the recent farm bill compromise includes a pilot program designed to study 

local purchases, which pilot program we understand is designed to be independent 

and not to compromise Food for Peace. We are pleased to see initiatives that would 

lead to an informed exploration of limited local purchase operations where necessary 

to save lives, rather than a gutting of our essential food aid programs. 

III. THE BENEFITS OF FOREIGN PURCHASE ARE NOT AS SURE AS HAS BEEN

REPRESENTED

A. Is foreign purchase really faster? 

Foreign purchase advocates have argued that P.L. 480 commodities funding must 

be converted to cash for foreign purchases in order to assure timely delivery of commodities. However, numerous options exist for expediting the delivery of food aid 

provided under P.L. 480. 

Every day of the year, food aid is moving through the pipeline and out across the 

world. Rapid response has been achieved in the past by diverting aid flows from less 

urgent projects. For example, this was done following the January 25, 2001, earthquake in Gujarat, India,9 as well as during the floods of 2003 in West Bengal.10 Following the Indian Ocean tsunami in late 2004, the United States was able to divert 

quickly an entire shipload of its food aid to needy survivors. In 2006, a shipment 

was diverted to Lebanon before it had physically left port in the United States, and 

was available to unload only 17 days later. 

Time savings are also achievable through prepositioning. USAID established a 

sizeable commodities prepositioning site at the Al Rashid terminal in Dubai, and 

has plans for another in Djibouti, East Africa. Ensuring reliable, secure storage of 

high-quality U.S.-donated commodities at the place of need offers significantly more 

promise than the abandonment of the Food for Peace program. 

Cash is not necessarily faster than in-kind food aid. United Nations World Food 

Programme (‘‘WFP’’) senior public affairs officer Gregory Barrow explained that ‘‘in 

an ideal world,’’ WFP would prefer the flexibility of cash donations. ‘‘The practical 

world,’’ however, ‘‘is somewhat different. We have found in the past that even when 

there is a division in terms of donors—with those who give food aid in kind and 

those who give in cash—food aid has been quicker to arrive than cash,’’ citing to 

the 2005 Darfur emergency when U.S. aid arrived ahead of European cash donations.11

B. Purported cost savings of foreign purchase are dubious 

Various academic commentators, other observers, and the administration in its 

foreign purchase budget proposals have maintained that converting food aid to cash 

aid will result in dramatic cost savings, freeing up funding for more aid, and saving 

more lives. Even assuming that aid funding would be the same for cash as it is for 

U.S.-grown commodities, the purported savings are not so clear. 

In its April 2007 report, ‘‘Foreign Assistance: Various Challenges Impede the 

Eficiency and Efectiveness of Food Aid,’’ GAO presented WFP’s program as a more 

efficient model and suggested that WFP transports food aid at an average of $100 

per metric ton (‘‘MT’’), representing slightly more than 20 percent of procurement 

costs. In support of its $100/MT number, GAO cited WFP’s ‘‘WFP in Statistics’’ published July 2006, which shows at Table 13 that ocean transportation costs per MT 

are $97. In comparison, GAO analyzed Kansas City Commodity Office (‘‘KCCO’’) 

86 

12WFP has been unable to explain the error in response to query. 13 James Lutzweiler, World Vision Food Security and Food Programming Advisor, ‘‘Much Ado 

About Food Aid: Misdirection in the Midst of Plenty’’ (Jan. 19, 2006) (delivered at Overseas Development Institute Conference titled ‘‘Cash and Emergency Response’’). 

data regarding shipments of U.S. food aid and concluded that U.S. food aid administrative and freight costs are much higher. 

First, Table 13 is internally inconsistent and, on its face, not reliable in that it 

reflects both bulk and liner (bagged, containerized) shipments with $97/MT freight 

rates.12 Bulk and liner shipping are two entirely different systems of ocean transportation and cannot realistically have the same average cost per metric ton. 

Second, GAO’s comparison is really one of apples to oranges. WFP data cited at 

Table 13 of ‘‘WFP in Statistics’’ segregate overland transport costs from ocean 

freight, whereas the KCCO data upon which GAO relies for its U.S. food aid numbers include inland costs. Thus, the KCCO data numbers reflecting U.S. food aid 

shipments include significant additional costs that do not burden the WFP Table 13 

freight rates of $97/MT. James Lutzweiler, World Vision’s Food Security and Food 

Programming Advisor, explained: ‘‘Whether commodities are purchased locally or 

shipped internationally, transport is a significant cost of the overall program. Inland 

transport and storage can, at times, account for up to 35–40 percent of the overall 

program budget. When comparing a dollar-for-dollar exchange between international 

food aid and local purchase, the additional costs are not always included in the analysis. For appropriate program implementation, proper storage and handling of the 

commodity are essential for success.’’ 13

Third, WFP commodity shipment costs cannot be clearly compared to U.S. food 

aid costs because they overlap substantially. That is, many WFP food aid shipments 

overseas are U.S. food aid donations shipped by KCCO using the same facilities 

available to the other humanitarian relief organizations through which USAID/ 

KCCO distribute commodities, i.e., private voluntary organizations (‘‘PVOs’’). Thus, 

it is not surprising that WFP and PVO shipment costs for KCCO donated commodities track one another closely: 

87 

Finally, if one looks strictly at the apples-to-apples KCCO shipment data, which 

are qualitatively consistent and do not labor under the same methodological infirmities as the Table 13 rates, PVOs paid an average of $125/MT whereas WFP paid 

an average of $127/MT. 

GAO also stated in its report that rising transportation and ‘‘business’’ costs have 

contributed to a 52-percent decline in average tonnage delivered over the last 5 

years because ocean transportation has been accounting for a larger share of procurement costs. Specifically, GAO stated that by 2006, U.S. food aid shipment costs 

rose to $171/MT, such that noncommodity expenditures rose to 65 percent of program costs. 

The KCCO data do not appear to support freight costs anywhere near $171/MT, 

and GAO did not explain to what extent the alleged increases in transportation and 

‘‘business’’ costs have contributed to a decrease in commodities shipped. However, 

there does not appear to be clear correlation between food and freight costs and tons 

of food aid shipped. For example, total tons shipped increased from 3.4 million in 

2004 to 4 million (17 percent) in 2005, even though freight rates increased from 

$133/MT to $141/MT (6 percent) over the same period: 


mfac1.eps
88 

14 USDA, Agricultural Marketing Service, Transportation Services Branch, Frequently Asked 

Questions, available at http://www.ams.usda.gov/tmd/TSB/faq.htm. 15World Food Programme, Annual Accounts (2006): Part I, No. WFP/EB.A/2007/6–F/1/1 at 6 

(Apr. 27, 2007). If one excludes ‘‘programme support and administration,’’ the percentage of costs 

for noncommodities is still 63 percent, virtually indistinguishable from the GAO number of 65 

percent for U.S. food aid. 16 46 U.S.C. §§ 55305(b) & 55314(a). 17 46 U.S.C. § 55316(a). 18 46 U.S.C. § 55316(b). 19MARAD, Office of Cargo Preference data, November 2006. 

Furthermore, it is not at all uncommon for transportation costs alone to absorb 

as much as 50 percent of the cost of a shipment—even in a commercial transaction.14 And as for WFP, its noncommodity costs were 66 percent for 2006, which 

is even greater than the noncommodity costs incurred by U.S. food aid shipments.15

Some advocates of foreign purchase have unfairly targeted cargo preference law, 

suggesting that it makes in-kind food aid more expensive, and that its elimination 

through foreign purchase programs would make more funding available for commodities. These criticisms reflect a misunderstanding of the role of cargo preference and 

its impact upon food aid. 

Cargo preference requires that 75 percent of food aid cargoes be shipped on U.S.- 

flag ships that tend to be more costly because of taxes, health and safety laws, and 

other U.S. regulations not imposed upon foreign-flag ships.16

Provisions of the Merchant Marine Act, 1936, prevent the additional cost of using 

U.S.-flag vessels, i.e., ‘‘Ocean Freight Differential’’ or ‘‘OFD,’’ from draining funding 

for commodities from aid budgets. First, the law requires that the U.S. Maritime 

Administration (‘‘MARAD’’) reimburse USDA for that portion of OFD corresponding 

to the final third of preference shipments, from 50 percent to 75 percent of cargoes 

shipped U.S. flag (‘‘incremental OFD’’).17 Second, MARAD reimburses USDA to the 

extent that ocean freight (U.S. and foreign flag) and the incremental OFD noted 

above exceed 20 percent of the total cost of commodities, ocean freight, and OFD.18

The cost of OFD and this cost as a percentage of program total commodity and 

transportation costs have declined substantially from FY 2000 to FY 2005, due to 

changing market conditions.19 For example, foreign-flag rates have risen, driven by 

growth in demand generated in substantial measure by the expanding Chinese and 

Indian economies, which growth has not been met by the relatively inelastic supply 

of large oceangoing cargo vessels. U.S.-flag rates have not increased apace. 

The same legislation that authorizes cargo preference also caps the rates that may 

be charged. U.S.-flag vessels are subject to ‘‘fair and reasonable rates’’ for the carVerDate Nov 24 2008 14:53 Feb 10, 2009 Jkt 000000 PO 00000 Frm 00092 Fmt 6633 Sfmt 6621 H:\DOCS\FOODCRIS BETTY

mfac2.eps
89 

20 46 U.S.C. § 55305(b). The U.S. Maritime Administration enforces this requirement by, inter 

alia, reference to the average profits derived from Fortune’s top 50 U.S. transportation companies. 21World Food Programme, Audited Biennial Accounts (2002–2003): Section I, No. WFP/EB.A/ 

2004/6–B/1/1; World Food Programme, Audited Biennial Accounts (2004–2005): Section I, No. 

WFP/EB.A/2006/6–A/1/1. The remaining income, approximately 7 percent, comes from sources 

such as investment income. 22Tonetta Landis, InterAction: American Council for Voluntary International Action, ‘‘The 

Food Aid Debate: What is it All About?’’ (May 22, 2006). 23 Id. 24 Ethiopia Ministry of Economic Development and Cooperation, Grain Market Research 

Project, Market Analysis Note #4 at 4 (Mar. 1997); Ministry of Economic Development and Cooperation, Addis Ababa, Grain Market Research Project, Meeting Food Aid and Price Stabilization Objectives Through Local Grain Purchase: A Review of the 1996 Experience (May 1997). 25Ministry of Economic Development and Cooperation, Addis Ababa, Grain Market Research 

Project, Meeting Food Aid and Price Stabilization Objectives Through Local Grain Purchase: A 

Review of the 1996 Experience at ii (May 1997). 26 Id., Executive Summary. 27 James Lutzweiler, World Vision Food Security and Food Programming Advisor, ‘‘Much Ado 

About Food Aid: Misdirection in the Midst of Plenty’’ (Jan. 19, 2006) (delivered at Overseas Development Institute Conference ‘‘Cash and Emergency Response’’). 

riage of preference cargoes, as defined by the United States Government.20 Therefore, just as U.S. maritime operators are protected from the bottom of the market 

by cargo preference, they are also prevented from scoring windfall profits. We have 

seen this in the recent market, during which U.S. food aid rates for bulk ocean carriage were half of the rates available on the international commercial market. 

C. Food aid provides needed donor flexibility 

There is already global balance among donors of cash versus commodities, if not 

an imbalance tipping toward cash donations. The EU gives cash aid, and Canada 

has now converted to cash aid. Indeed, even before Canada switched from 50 percent to 100 percent cash, WFP’s income was approximately 80 percent cash, 13 percent commodities.21

The United States is one of the few remaining donors that provides food. If the 

United States moved away from food and toward cash for local purchase, WFP 

would lose flexibility overall.22 Indeed, many food aid managers and PVOs are quick 

to question why even more aid must be given as cash when the majority of aid is 

already given in that form.23 Recent food crises, aggravated by export restrictions 

imposed by Argentina and others, have only served to underscore the need for reliable U.S. food donations. 

IV. DANGERS OF FOREIGN PURCHASE

A. Corruption and market manipulation 

Proponents of foreign purchase promise great things but little is said about its 

risks. Sending USAID into a developing country with millions of dollars to spend 

raises the specter of corruption and market manipulation. Aid agencies already experience a certain degree of ‘‘shrinkage’’ in the commodities they distribute. Consider the panoply of purchase fees, taxes, duties, and import licenses imposed upon 

rich donor countries when they arrive, lining the pockets of politicians, bureaucrats, 

and businessmen while cutting into the purported cost savings of foreign purchase. 

Market manipulation is another serious problem. WFP routinely pays over market, both because its massive demand spikes prices in smaller local/regional markets, and because traders know they can take advantage. Following the European 

move to local purchase in 1996, a study by the Ethiopian Ministry of Economic Development and Cooperation found that the aid agencies were charged 12 percent 

over prevailing market purchases.24 The Ministry concluded that the likely result 

was windfall profits to grain traders without passing on any benefits to farmers, and 

the expenditure of scarce resources that could have been used to create other benefits.25 In the end, the Ministry found that the cost of local commodities was only 

‘‘slightly below the landed imported cost of comparable quality grain.’’ 26 Similarly, 

a recent review of WFP’s local purchase program in Uganda revealed that a small 

group of bidders conspired to rig bids and manipulated prices for aid commodities. 

This was made easier by the tight oligarchical nature of traders having the wherewithal to meet tenders locally—even in a relatively developed market with a decade 

of local purchase history such as Uganda.27

B. Unreliable suppliers 

WFP has also found local supply to be unreliable. Without functioning contractual 

enforcement and regulation, traders can and do simply walk away from contracts 

90 

28 Ugo Gentilini, World Food Programme, Cash and Food Transfers: A Primer at 9 (2007) 

(‘‘Traders maximize profits. In some cases, it may be more lucrative for them to delay food deliveries to certain localities as part of a normal strategy based on price fluctuations over seasons. 

When crises hit it may therefore be risky from a humanitarian perspective to rely on markets. 

. . . In Ethiopia, a United Nations mission report warned that ‘traders delivered [food] either 

too late or in the majority of cases not at all, putting their financial interest over the interest 

of the needy population.’ ’’). 29 Id.; Will Lynch, ‘‘When to Purchase Food Aid Locally’’ (Bread for the World 2006). 30Will Lynch, ‘‘When to Purchase Food Aid Locally’’ (Bread for the World 2006); See also John 

Rivera & Conn Hallinan, ‘‘Food Aid or Band-Aid?’’, Foreign Policy in Focus (Aug. 30, 2006) (relating problem of quality control with unregulated third-world traders, including presence of 

stones in grain sacks to increase weight and volume). 31Slide presentation of Josette Sheeran, World Food Program, Before the Peterson Institute 

(May 6, 2008). 32 Christopher B. Barrett, Food Aid and Commercial International Food Trade at 1 (2002) 

(‘‘food aid clearly displaces commercial sales of food contemporaneously in recipient countries’’); 

Will Lynch, ‘‘When to Purchase Food Aid Locally’’ (Bread for the World 2006); John Rivera & 

Conn Hallinan, ‘‘Food Aid or Band-Aid?’’, Foreign Policy in Focus (Aug. 30, 2006) (‘‘The local 

purchase of commodities for emergency food aid may drive up the local price. It may force people 

who were not food insecure to either cut their consumption due to price increase or to become 

recipients of food aid themselves.’’ 33Will Lynch, ‘‘When to Purchase Food Aid Locally’’ (Bread for the World 2006). Lynch also 

reported that in the Sahel in 2005, local commodity traders anticipated that relief agencies 

would be buying locally available cereals to meet emergency feeding needs in Niger. From May 

through August, traders bid up the price of grain in the warehouses. This speculation had the 

double-edged effect of raising prices for the urban consumer and forcing aid agencies to reduce 

local purchases to avoid further market disruption, thereby limiting the commodities immediately available for the truly food insecure. 34 Josette Sheeran, Speech Before the Center for Strategic and International Studies (Apr. 18, 

2008). 35 Id. 36David J. Walker, et al., Policy implications arising from the development impact of local and 

regional procurement of food aid at 12 (Natural Resources Institute, Dec. 2005). 

to take advantage of better opportunities.28 Perhaps more disturbing, they have 

been found to withhold available grain while people starve in order to take advantage of expected increases in price as the food emergency festers.29 Lastly, there 

have been numerous accounts of sellers adding stones and other foreign matter into 

grain sold to WFP by weight. To counter these risks, purchasing agents must institute costly quality checking and supplier evaluation programs, further eroding any 

local purchase price advantage with an unwieldy administration to recreate the U.S. 

regulatory environment that is already bundled into safe, reliable, high-quality 

American commodities donated through Food for Peace.30

The potential unreliability of supplies for local purchase initiatives has come to 

the forefront because of the recent global runup in food prices. Numerous nations 

more proximate to humanitarian operations than the U.S. have imposed food export 

restrictions, disrupting emergency relief efforts dependent upon local purchase. Furthermore, nations imposing export restrictions have included not only importers 

such as Egypt, Mali, Niger, Burkina Faso, Sudan, Ethiopia, and Tanzania, but also 

traditional exporters such as Kazakhstan, Russia, China, India, Pakistan, Vietnam, 

Pakistan, Bolivia, Vietnam, and Argentina.31 All of this serves to underscore the importance of a reliable, in-kind food donation program such as Food for Peace acting 

as the guaranteed safety net that it has been for the last 50 years. 

C. Market disruption 

There is no disagreement that large-scale aid efforts cannot be undertaken locally 

without disrupting local markets.32 Will Lynch, a 20-year veteran in international 

relief and development in Africa, Asia, and Europe, has explained: ‘‘It is simple economics that the local purchase of thousands of tons of commodities for emergency 

food aid will drive up the local price. Higher prices will force people who were not 

food insecure to either cut their consumption due to the price increase or become 

recipients of food aid themselves.’’ 33 Indeed, the disruptive effect has recently 

driven Ethiopia to call on WFP to cease local purchases in that country.34 Moreover, 

WFP has recently explained that ‘‘there isn’t a whole lot more room to purchase a 

whole lot more in most of these [lesser developed] countries.’’ 35 Even the most ardent supporters of local purchase do not deny the potential for disastrous effects 

upon local food markets. 

Conversely, there is little to suggest that local purchase actually helps local markets. There has been no evidence that local procurement is having a positive effect 

on interannual price stability in the supplying countries.36 Local suppliers do not 

store and allocate their commodities across harvests and, emergencies being what 

they are, aid agencies do not time their purchases to soften the impact on local marVerDate Nov 24 2008 14:53 Feb 10, 2009 Jkt 000000 PO 00000 Frm 00094 Fmt 6633 Sfmt 6621 H:\DOCS\FOODCRIS BETTY
91 

37 Id. 38 Id. 39 Id. at 13. 40Sonali Wickrema, ‘‘World Food Programme, Food Aid and Untying of Aid: Opportunities and 

Challenges for the Least Developed Countries’’ at 4 & 6 (2004). 41WFP, Update on WFP Procurement, No. WFP/EB.A/2006/5–1 at 4 (May 23, 2006). 42 Id. 43David Tschirley, ‘‘Local and Regional Food Aid Procurement: An Assessment of Experience 

in Africa and Elements of Good Donor Practice’’ at iv (2007); WFP, Update on WFP Procurement, No. WFP/EB.A/2006/5–1 at 6 (May 23, 2006). See also Update on WFP Procurement at 

9 (The top two recipients of WFP procurement dollars were South Africa and Canada, respectively, in the first quarter of 2006). These countries, like Saudi Arabia, are in the ‘‘upper middle 

income’’ category on the DAC List of ODA Recipients. 

kets. Indeed, local purchases in Ethiopia were found to be the highest in 2003 when 

estimated market surplus was lowest.37 Uganda experienced a major maize price 

crash in 2001, resulting from the combined effect of a bumper crop in Kenya and 

minimal WFP purchase for much of the year. In contrast, heavy WFP intervention 

in 2003 caused severe price rises in Kampala in the April-August period.38 Ten 

years after the Europeans commenced their local purchase program in earnest, the 

problem persists, with local purchases peaking in the lean season or amidst drought 

and famine.39 The result is that foreign traders benefit at the expense of farmers, 

food processors, transportation companies, ports, and taxpayers in America and 

other donor countries. 

And what of the future? It may be that USAID will forever spend hundreds of 

millions of tax dollars in overseas commodities markets. If not, there will be significant market shock when donors do cease cash purchases locally. In this situation, 

farmers who have committed the investment to raise production and meet the artificial demand from overseas aid will suddenly find the bottom dropping out of the 

market, leading to widespread economic malaise. Of course, this effect is tempered 

if, as has often been the case, aid dollars marked for so-called ‘‘local purchase’’ are 

actually spent in agriculture-exporting nations that compete with our farmers. 

The major food-exporting countries are in the best position to capture the benefits 

of untied U.S. food aid. This is because they are still subsidized and enjoy numerous 

economies of scale and technological efficiencies not found in lesser developed countries. Most ‘‘local’’ purchases are not even purchased in the aid recipient country, 

but are triangular purchases from third countries and WFP reports that ‘‘over the 

past 5 years there has not been a significant increase in purchasing from LDCs, despite cash being available. Instead, purchases have increased in other developing 

countries—mainly large food exporters like Turkey and South Africa—who are better placed in terms of location and capacity to respond to the large and sudden demands of food aid that are typical of emergency situations.’’ 40

According to WFP’s 2006 update, it procured only a third of its ‘‘local purchase’’ 

food in both least-developed countries and low-income countries, combined.41 WFP 

procures the next 40 percent in lower and upper middle-income countries, and approximately a quarter of its food in developed countries.42 Even putting aside developed countries, upper middle-income countries such as Turkey and South Africa 

(which supplies nearly 60 percent of the cross-border food aid in Africa as ‘‘WFP’s 

most important source of maize’’) 43 are agricultural competitors, not appropriate 

targets of humanitarian aid dollars in the same category as aid recipient countries. 

Spending hundreds of millions of U.S. tax dollars with our agriculture competitors 

is not only bad policy, but bad politics. 

V. CONCLUSION

Our coalition believes that the debate regarding foreign or ‘‘local’’ purchase proposals has not been informed by a balanced view of their potential risks. Their basic 

premises of increased efficiency, effectiveness, and speed of delivery remain 

unproven. There are also serious potential problems with corruption, accountability, 

profiteering, quality, reliability, safety, market disruption, and loss of a visible symbol of American generosity when our Nation’s foreign policy and national security 

already face daunting global challenges. 

Above all, these proposals represent a risk to the entire U.S. food aid program 

and thus to recipients in need around the globe. There is no substitute for the current U.S. food aid program. We provide one-half of the world’s food aid, 60 percent 

of WFP’s total food resources, and three times the level of all EU food aid. 

American food aid programs have endured because they appeal to a wide crosssection of interests. In-kind food aid provides jobs and stimulates economic activity 

at home while feeding the hungry overseas, and the domestic constituency has been 

an invaluable ally in the efforts of the Congress to sustain and increase food aid. 

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When the EU discontinued in-kind food aid, donations dropped dramatically, proving that there is no constituency for sending cash welfare payments overseas. Today 

our Nation’s vital security requirements and other pressing domestic priorities demand every dollar in the available budget. We are concerned that cash aid, with 

no constituency to fight for it and competing with other pressing national priorities, 

would simply melt away, leading to an overall decline in much-needed international 

humanitarian assistance. 

Respectfully submitted, 

BRYANT E. GARDNER, 

On behalf of the 

Maritime Food Aid Coalition. 

Æ