[Senate Hearing 110-717]
[From the U.S. Government Publishing Office]



                                                        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


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                     COMMITTEE ON FOREIGN RELATIONS

                JOSEPH R. BIDEN, Jr., Delaware, Chairman
CHRISTOPHER J. DODD, Connecticut     RICHARD G. LUGAR, Indiana
JOHN F. KERRY, Massachusetts         CHUCK HAGEL, Nebraska
RUSSELL D. FEINGOLD, Wisconsin       NORM COLEMAN, Minnesota
BARBARA BOXER, California            BOB CORKER, Tennessee
BILL NELSON, Florida                 GEORGE V. VOINOVICH, Ohio
BARACK OBAMA, Illinois               LISA MURKOWSKI, Alaska
ROBERT MENENDEZ, New Jersey          JIM DeMINT, South Carolina
BENJAMIN L. CARDIN, Maryland         JOHNNY ISAKSON, Georgia
ROBERT P. CASEY, Jr., Pennsylvania   DAVID VITTER, Louisiana
JIM WEBB, Virginia                   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)


                  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.
    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 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.

 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-to-market 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 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, including 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 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.
    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.
    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 long-term 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 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 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 supply-demand 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.
    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.
    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-
percentage-point 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 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 mid-1970s and other periods have 
experienced high world food-price inflation. But that makes the current 
situation no less difficult.
---------------------------------------------------------------------------
    \1\ Source: International Monetary Fund's International Financial 
Statistics database, food price index.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \2\ Source: USDA, http://www.ers.usda.gov/Data/FarmToConsumer/Data/
marketingbilltable1. htm.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \3\ Source: 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.
    \4\ Source: Federal Reserve Board Staff calculation, IMF, and World 
Bank.
    \5\ Source: The International Food Policy Research Institute 2020 
Discussion Paper No. 43, ``The World's Most Deprived.''
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \6\ Source: U.S. Department of Agriculture, National Agricultural 
Statistics Service database.
---------------------------------------------------------------------------
    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 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.
---------------------------------------------------------------------------
    \7\ Source: International Monetary Fund's Finance and Development 
Magazine, ``Riding a Wave,'' March 2008, Volume 45(1).
---------------------------------------------------------------------------
    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 corn-based 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.
---------------------------------------------------------------------------
    \8\ Source: U.S. Department of Agriculture, ``USDA Agricultural 
Projections to 2017'' Long-term Projections Report OCE-2008-1. February 
2008.
    \9\ Since 2004, the increase in ethanol production in the United 
States has pushed up corn prices by about 20 percent.
---------------------------------------------------------------------------
    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 corn-
based 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 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 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 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. 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 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 
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 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 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, 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 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 anti-Israel 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 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 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.
    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 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 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 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.
    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 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.

  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.
    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.
    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.
    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.
    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 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 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, 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?
    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.
    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 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 $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 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.
                         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 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 stock-to-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 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, one-third 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 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.
    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.

   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 people 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 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,'' 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\
---------------------------------------------------------------------------
    \1\ Paper of the World Bank, ``Rising Food Prices: Policy Options 
and World Bank Response,'' April, 2008.
---------------------------------------------------------------------------
    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 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 long-term 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 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 
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 government-provided 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.
    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 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 long-term 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 themselves 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 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.]
    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 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 trade-distorting 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? 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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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 suspend 
a school feeding program for 450,000 children in Cambodia in May, 
unless additional funding is found.\4\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \5\ World Vision press release: http://www.worldvision.org/
worldvision/pr.nsf/stable/20080428- foodcrisis?open&lid=food-crisis-
release&lpos=day_txt_food-crisis.
    \6\ ``Hunger Stalks Globe as Aid Groups Forced To Cut,'' Missy 
Ryan, Reuters, May 2, 2008.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \7\ ``As Jobs Vanish and Prices Rise, Food Stamp Use Nears 
Record,'' by Erik Eckholm, New York Times, March 31, 2008.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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 percent. Projected across the globe, this is an 
increase of more than 100 million people in poverty.\10\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \11\ Sources: ``Millennium Development Goals Report 2007'' United 
Nations and ``The State of Food Insecurity in the World,'' 2006, U.N. 
Food and Agriculture Organization.
---------------------------------------------------------------------------
         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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
                   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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \17\ USDA, ERS. Accessed at: http://usda.mannlib.cornell.edu/ers/
89002/Table02.xls.
    \18\ Ibid.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \19\ World Economic Outlook, April 2008. International Monetary 
Fund. P. 60. See: http://www.imf.org/external/pubs/ft/weo/2008/01/
index.htm.
---------------------------------------------------------------------------
    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 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\
---------------------------------------------------------------------------
    \20\ ``The World Food Situation: New Driving Forces and Required 
Actions,'' Joachim Von Braun, International Food Policy & Research 
Institute, December 2007.
---------------------------------------------------------------------------
                  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. 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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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 for development assistance (DA) funding. This should 
be separate from MCA funds or food aid programs.
---------------------------------------------------------------------------
    \23\ Thanks to Emmy Simmons' unpublished paper. Source: USAID/EGAT/
AG. No nonemergency food aid funding or Millennium Challenge 
Corporation funding is included.
---------------------------------------------------------------------------
    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 quote-free 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.
    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 long-term 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, 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, 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 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 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.
    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 shoulder 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 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 
        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 long-term 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. 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 stress-tolerant 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 concerns about the food and nutrition situation of poor 
people in developing countries, 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.
    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 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 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\
---------------------------------------------------------------------------
    \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)).
    \2\ Will 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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \4\ For 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).
---------------------------------------------------------------------------
          ii. usaid already has authority for foreign purchase
    Operating under the authority of Sec. 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\
---------------------------------------------------------------------------
    \5\ Pub. L. No. 87-195, 75 Stat. 424.
    \6\ The 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.
---------------------------------------------------------------------------
    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 Sec. 491 authority for overseas food 
aid purchases.\8\
---------------------------------------------------------------------------
    \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 
Sec. 491/OFDA pilot program to study the benefits of overseas food aid 
purchase).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \9\ Will Lynch, ``When to Purchase Food Aid Locally'' (Bread for 
the World, 2006).
    \10\ Id.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
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'') 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.
---------------------------------------------------------------------------
    \12\ WFP has been unable to explain the error in response to query.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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'').
---------------------------------------------------------------------------
    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:


    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:


    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\
---------------------------------------------------------------------------
    \14\ USDA, Agricultural Marketing Service, Transportation Services 
Branch, Frequently Asked Questions, available at http://
www.ams.usda.gov/tmd/TSB/faq.htm.
    \15\ World 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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \16\ 46 U.S.C. Sec. Sec. 55305(b) & 55314(a).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \17\ 46 U.S.C. Sec. 55316(a).
    \18\ 46 U.S.C. Sec. 55316(b).
    \19\ MARAD, Office of Cargo Preference data, November 2006.
---------------------------------------------------------------------------
    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 carriage 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.
---------------------------------------------------------------------------
    \20\ 46 U.S.C. Sec. 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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
    \21\ World 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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \22\ Tonetta Landis, InterAction: American Council for Voluntary 
International Action, ``The Food Aid Debate: What is it All About?'' 
(May 22, 2006).
    \23\ Id.
---------------------------------------------------------------------------
                    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\
---------------------------------------------------------------------------
    \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).
    \25\ 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 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'').
---------------------------------------------------------------------------
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 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\
---------------------------------------------------------------------------
    \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).
    \30\ Will 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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \31\ Slide presentation of Josette Sheeran, World Food Program, 
Before the Peterson Institute (May 6, 2008).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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.''
    \33\ Will 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.
---------------------------------------------------------------------------
    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 
markets. 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.
---------------------------------------------------------------------------
    \36\ David 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).
    \37\ Id.
    \38\ Id.
    \39\ Id. at 13.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \40\ Sonali Wickrema, ``World Food Programme, Food Aid and Untying 
of Aid: Opportunities and Challenges for the Least Developed 
Countries'' at 4 & 6 (2004).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \41\ WFP, Update on WFP Procurement, No. WFP/EB.A/2006/5-1 at 4 
(May 23, 2006).
    \42\ Id.
    \43\ David 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.
---------------------------------------------------------------------------
    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 cross-section 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. 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.

                                  
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