Summary of Program Activity: FY 2005

The Farm Security and Rural Investment Act of 2002 was signed on May 13, 2002, as Public Law 107-171. The 2002 Farm Act reauthorized, revised, or otherwise addressed such longstanding programs as Public Law 480 (P.L. 480), Food for Progress, Section 416(b), the Farmer-to-Farmer Program, export credit guarantees, the Supplier Credit Guarantee Program, the Facility Guarantee Program, the Export Enhancement Program, the Dairy Export Incentive Program, the Market Access Program, and the Foreign Market Development Program.

The 2002 Farm Act also authorized new market development and food aid programs, including Technical Assistance for Specialty Crops and the McGovern–Dole International Food for Education and Child Nutrition Program.

The U.S. Department of Agriculture (USDA) administers most of these trade-related programs. The exceptions are Titles II and III of P.L. 480, and the Farmer-to-Farmer Program, which are administered by the U.S. Agency for International Development (USAID). Within USDA, the Foreign Agricultural Service (FAS) has the lead responsibility for developing and managing food aid, export assistance, and export market development programs.

Food Aid Programs

The 2002 Farm Act extended one of the oldest U.S. food aid programs—P.L. 480, also known as Food for Peace. Each title of P.L. 480 has been extended through 2007. Fiscal year (FY) 2005 commodity programming for food aid under P.L. 480 is estimated at $733 million, including $78 million for Title I (including Title I-funded Food for Progress) and $655 million for Title II (including Title II/World Food Program). The $733 million in P.L. 480 food assistance supported the shipment of 3.05 million metric tons of U.S. commodities.

P.L. 480, Title I, provides for U.S. government financing of sales of U.S. agricultural commodities to developing countries and private entities. Financing is provided on concessional terms, with credit terms up to 30 years and a grace period of up to five years. In FY 2005, allocations totaling about 126,000 metric tons of commodities valued at around $30 million went to two countries under Title I.

P.L. 480, Title II, is a donation program used for both emergency and developmental assistance. The 2002 Farm Act increased the minimum annual tonnage provided under Title II to 2.5 million metric tons from 2.025 million tons (all on a grain-equivalent basis). Title II programs may be carried out by a variety of entities, including private voluntary organizations (PVOs) and intergovernmental organizations such as the World Food Program. Government-to-government programs are authorized only for emergencies. For FY 2005, donations of about 2.7 million metric tons of commodities valued at an estimated $655 million were programmed under Title II, including Title II donations through the World Food Program.

The P.L. 480, Title III, Food for Development program provides government-to-government food assistance grants to least-developed countries to support development. Local sales proceeds can be used to support a variety of economic development and related activities in recipient countries. In FY 2005, no donations were programmed under Title III, and this program is likely to remain inactive.

The Food for Progress program is carried out using funds available to the Commodity Credit Corporation (CCC), or funds appropriated under P.L. 480, Title I. This program provides commodities to needy countries as an incentive or a reward for undertaking economic or agricultural reform. The 2002 Farm Act reauthorized the Food for Progress program through 2007 and set the minimum annual commodity tonnage at 400,000 metric tons. The legislation also increased the annual CCC funding cap for administrative costs to $15 million (from $10 million) and the annual cap for transportation and other noncommodity costs to $40 million (from $30 million). In FY 2005, Food for Progress donations totaling about 340,000 metric tons valued at around $97 million were programmed for 20 countries using CCC funds. In addition, Food for Progress donations using Title I funds were programmed for 13 countries, totaling 204,000 metric tons of commodities valued at about $ 49 million.

The Farmer-to-Farmer Program, managed by USAID, uses volunteer U.S. farmers and other U.S. agriculturalists to assists farmers, farm groups, and agribusinesses in developing, middle income, emerging market, Sub-Saharan African, and Caribbean Basin countries. The volunteers work directly with the recipients, passing on their expertise and technical skills in production and distribution. The 2002 Farm Act increased the minimum percentage of P.L. 480 funding for this program from 0.4 to 0.5 percent, while placing special emphasis on Sub-Saharan African and Caribbean Basin countries.

Section 416(b) of the Agricultural Act of 1949 provides for the donation to needy countries of eligible commodities held by the CCC. In FY 2005, Section 416(b) donations were programmed to 10 countries, totaling approximately 37,000 metric tons of nonfat dry milk valued at $68 million.

The McGovern–Dole International Food for Education and Child Nutrition Program (FFE program), authorized by the 2002 Farm Act, replaced the pilot Global Food for Education initiative. This program is now a fourth USDA international food aid authority, in addition to P.L. 480, Section 416(b), and Food for Progress. It is designed to encourage education and deliver food to improve nutrition for preschoolers, school children, mothers, and infants in impoverished regions. The 2002 Farm Act authorized the FFE program from FY 2003 through FY 2007, providing for $100 million in CCC funding for FY 2003, with funding in subsequent years authorized through Congressional appropriations. Under FY 2005 programming, FFE donations were announced for 15 countries, totaling 104,000 metric tons of commodities valued at $40 million.

In FY 2005, U.S. foreign food assistance allocated under the programs administered by USDA (P.L. 480, Title I; the Food for Progress program; the Section 416(b) program; and the McGovern–Dole program) totaled over 800,000 metric tons valued at $283 million.

The Bill Emerson Humanitarian Trust is another important tool in helping the U.S. government meet emergency food needs. A food reserve (rather than a food program), the Emerson Trust can be used to hold up to 4 million metric tons of U.S. wheat, corn, sorghum and rice. The Secretary of Agriculture is authorized to release these commodities to provide food aid that cannot otherwise be done through P.L. 480. In FY 2005, the Emerson Trust release of up to 500,000 metric tons was authorized for use in P.L. 480, Title II, to relieve suffering and avert famine in Africa, especially Ethiopia and Eritrea. In addition, the Emerson Trust was drawn down by 200,000 million metric tons to provide commodities to Darfur, Sudan. The total value of the commodities and transportation costs was $377 million.

The reserve was originally authorized by the Agricultural Trade Act of 1980 as the Food Security Wheat Reserve. Subsequent legislation broadened the number of commodities that can be held in the reserve and, in 1998, it was renamed the Bill Emerson Humanitarian Trust. Most recently, the Farm Security and Rural Investment Act of 2002 reauthorized the Emerson Trust through 2007.

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Commercial Export Credit Guarantee Programs

The 2002 Farm Act mandates a minimum annual program level of $5 billion for the Export Credit Guarantee Program (GSM-102) and the Intermediate Export Credit Guarantee Program (GSM-103). The GSM-102 program guarantees repayments of short-term credits (90 days to 3 years) extended by U.S. exporters (or financial institutions that may take assignment of an exporter’s rights) to foreign banks that issue irrevocable letters of credit in connection with an export sale.

In FY 2005, GSM-102 allocations of about $4.546 billion were announced to 14 countries and 12 regions, including the Baltic, Caribbean, Central America, Central Europe, East Africa, Middle East, South America, Southeast Asia, Southeast Balkans, Southeast Europe, Southern Africa, and West Africa regions. Under this availability, FY 2005 GSM-102 registrations totaled $2.17 billion for exports to eight countries and six regions.

Beginning July 1, 2005, the CCC no longer accepts applications for payment guarantees under the GSM-103 program, which extended guarantees for 3 to 10 years, in response to the decision by the World Trade Organization that export credit programs must be risk-based. Any remaining country and regional amounts from the $19 million originally allocated for GSM-103 in FY 2005 were reallocated to the GSM-102 program for that country or region. No sales were registered under GSM-103 in FY 2005.

The Supplier Credit Guarantee Program (SCGP) is designed to encourage U.S. exporters to expand, maintain, or develop markets for U.S. agricultural products in areas where commercial financing may not be available without a CCC payment guarantee. This program can help U.S. exporters who wish to provide short-term credit directly to their foreign buyers. The 2002 Farm Act increased the maximum credit terms under the program to 360 days, subject to Congressional appropriation of funds to cover the additional costs of the portion of any guarantee beyond 180 days. This program currently provides coverage for up to 180 days.

In FY 2005, SCGP allocations totaling more than $1.37 billion in coverage were made available for sales to 16 countries and 11 regions, including the Baltic, Caribbean, Central America, Central Europe, East Africa, Middle East, South America, Southeast Asia, Southeast Europe, West African and Western Europe regions. Under the announced availability, registrations totaled $454.7 million to 10 countries and eight regions.

The Facility Guarantee Program (FGP) extends credit guarantees for export sales of U.S. capital goods and services to improve agriculture-related facilities in emerging markets. In FY 2005, $185 million in coverage was announced for sales to five countries and seven regions. No sales were registered under the FGP in FY 2005.

Export Enhancement and Dairy Export Incentive Programs

The Export Enhancement Program (EEP), announced by USDA on May 15, 1985, operates under the authority of the Agricultural Trade Act of 1978, as amended. The EEP permits USDA to provide bonuses to make U.S. commodities more competitive in the world marketplace and to offset the adverse effects of unfair trade practices or subsidies. The 2002 Farm Act extended EEP through 2007 at the current funding authorization level of $478 million per year. It also expanded the definition of unfair trade practices to include trade-distorting subsidies, trade barriers such as labeling that restrict new technologies, unjustified sanitary and phytosanitary restrictions, and monopolistic state trading enterprises implementing noncommercial pricing practices.

The EEP has been inactive in recent years, and no allocations were announced for FY 2005.

The 2002 Farm Act extended the Dairy Export Incentive Program (DEIP) through FY 2007. The DEIP focuses on market development, providing full authority and funding to reach the volume or spending limits consistent with U.S. obligations as a member of the World Trade Organization. The DEIP operates on a bid bonus system similar to the EEP, with cash bonus payments. The DEIP program helps exporters of U.S. dairy products meet prevailing world prices and helps develop foreign markets for the targeted products.

No allocations under the DEIP were announced for FY 2005.

Market Development Programs

The Market Access Program (MAP) was authorized by Section 203 of the Agricultural Trade Act of 1978, as amended. This program is designed to encourage the development, maintenance, and expansion of foreign markets for U.S. agricultural, fishery, and forestry products. The MAP fosters a public-private sector cooperative arrangement to share the costs of eligible overseas marketing and promotional activities. This program links small U.S. businesses, U.S. agricultural cooperatives, nonprofit state-regional trade groups, nonprofit U.S. agricultural trade associations, and USDA. Activities eligible for USDA funding include consumer promotions, market research, trade shows, and trade servicing.

Under the 2002 Farm Act, the MAP funding rises progressively each year to reach $200 million in 2006, up from $90 million a year under the previous farm act. For FY 2005, the legislation authorized $140 million in funding. On June 21, 2005, USDA announced $140 million in MAP allocations to 68 U.S. trade organizations for export promotion activities.

The Foreign Market Development Program was authorized by the Agricultural Trade Act of 1978. Like the MAP, this program provides cost-share assistance to eligible nonprofit agricultural trade organizations to conduct approved international market development activities. USDA enters into agreements with nonprofit U.S. trade organizations that have the broadest producer representation of the commodity being promoted. Priority is given to those organizations that are nationwide in membership and scope. Activities conducted under this program generally address long-term foreign import constraints and are designed to create, maintain, and expand long-term growth in demand for U.S. agricultural, fishery, and forestry products.

The 2002 Farm Act specified that $34.5 million in funding shall be made available for this program each fiscal year, up from $27.5 million previously. Announced program levels may vary from authorized funding levels because of the carryover of unused funds from prior years.

Under the FY 2005 program, a budget of $34.5 million was allocated among 22 U.S. trade organizations.

The Quality Samples Program (QSP) was established in 1999 to help U.S. agricultural trade organizations provide samples of U.S. agricultural products to potential importers in foreign markets. Focusing on industry and manufacturing uses, this program stimulates interest in U.S. products by giving potential customers the opportunity to test the products and discover U.S. quality. The QSP is used to fund projects that broadly benefit agricultural industries rather than individual exporters.

Under the program, participants export samples of U.S. agricultural products to foreign buyers and provide technical demonstrations on how to properly use or further process the products. When the project is completed, USDA reimburses the allowable costs of procuring and exporting the samples. For FY 2005, USDA allocated nearly $ 2.3 million to 21 participants.

The Technical Assistance for Specialty Crops (TASC) program was established by the 2002 Farm Act to address unique barriers that prohibit or threaten exports of U.S. fruits, vegetables, and other specialty crops. The legislation calls for $2 million in Commodity Credit Corporation resources to be provided each fiscal year through 2007 to assist organizations in removing, resolving, or mitigating phytosanitary or related technical barriers to U.S. specialty crops. These crops include all cultivated plants and their products produced in the United States, except wheat, feed grains, oilseeds, cotton, rice, peanuts, sugar and tobacco.

USDA allocated $ 2 million in funding to 24 organizations under the FY 2005 TASC program for projects to help address current or potential barriers that hinder trade in specialty crops.

The Emerging Markets Program was authorized by the Food, Agriculture, Conservation, and Trade Act of 1990, as amended. The legislation calls for $10 million in funding per year to assist public and private organizations in providing technical assistance to promote market development, improve market access, or assist in the development of emerging market economies. The goal is to foster growth in U.S. agricultural exports to low- and middle-income countries that offer viable growth markets. The program supports sector assessments, trade missions, nontariff trade dispute resolution, and research on new markets. It can also sponsor training and trade capacity building projects so potential buyers in emerging economies can use U.S. products profitably.

On July 18, 2005, USDA announced $10 million in funding under the FY 2005 Emerging Markets Program for 71 projects in Asia, Africa, Europe, the Middle East, and Latin America.

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