Food and Commodities: Federal Purchases and Major Regulations That
Potentially Affect Prices Paid (Correspondence, 06/15/2000,
GAO/RCED-00-173R).

Pursuant to a congressional request, GAO provided information on the
federal government's food and commodity purchases, focusing on: (1)
details about federal agencies' purchases of food and agricultural
commodities from fiscal year (FY) 1997 through FY 1999; and (2)
information on major regulations that may affect the prices paid by
these agencies for these products.

GAO noted that: (1) five agencies--the Departments of Agriculture,
Defense, Justice, Labor, and Veterans Affairs--made large direct
purchases of food and commodities from FY 1997 through FY 1999; (2) for
example, purchases by these agencies totalled about $4.5 billion in FY
1999 for items ranging from bulk, unprocessed commodities such as grain
and soybean meal to ready-to-eat cereal, canned goods, fruits and
vegetables, dairy products, and military field rations; (3) these
purchases were made for agency programs or for basic mission-related
objectives; (4) for example, Agriculture purchased food to feed children
under the National School Lunch Program, and Veterans Affairs purchased
food for the patients in its 172 medical facilities; (5) in addition,
some of these agencies made food or commodity purchases on behalf of
other agencies; (6) for example, Agriculture made purchases on behalf of
the Department of State's Agency for International Development and
Defense made purchases on behalf of over 20 other agencies; (7) of the
23 major regulations GAO identified as potentially related to food or
agriculture, 11 had impacts on food and commodity prices, according to
the required cost-benefit analyses; (8) Agriculture issued all 11 of
these regulations; (9) the anticipated price effects of these
regulations vary depending on the regulation and the food or commodity
involved; (10) in most cases, the effects identified in the analyses
were on prices that producers or processors could expect to pay or
receive for food or commodities before the products are sold at the
retail level; (11) the 12 regulations and related cost-benefit analyses
that did not provide information on food or commodity price impacts were
issued by Agriculture, the Environmental Protection Agency, or the Food
and Drug Administration; (12) in general, each of the 23 major
regulations GAO reviewed were issued by agencies to accomplish purposes
and programs mandated by Congress in order to benefit the nation; (13)
for example, a 1996 rule on hazard analysis and critical control point
systems issued by the Food Safety and Inspection Service establishes
requirements for slaughterhouses to reduce the numbers of pathogenic
microorganisms on meat and poultry products; and (14) as a result of
this regulation, the economy is expected to receive benefits estimated
at $7.1 to $26.6 billion over 20 years due to a reduction in foodborne
illnesses.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-00-173R
     TITLE:  Food and Commodities: Federal Purchases and Major
	     Regulations That Potentially Affect Prices Paid
      DATE:  06/15/2000
   SUBJECT:  Food supply
	     Agricultural products
	     Federal regulations
	     Federal procurement
	     Prices and pricing
	     Cost effectiveness analysis
IDENTIFIER:  National School Lunch Program
	     USDA Conservation Reserve Program

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Testimony.                                               **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************

GAO/RCED-00-173R

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices United States General
Accounting Office

Washington, DC 20548 Resources, Community, and

Economic Development Division

B- 285338 June 15, 2000 The Honorable John R. Kasich Chairman, Committee on
the Budget House of Representatives

Subject: Food and Commodities: Federal Purchases and Major Regulations That
Potentially Affect Prices Paid

Dear Mr. Chairman: Each year the federal government purchases a large volume
of food and commodities for its domestic, international, and military
programs. These purchases are made for diverse purposes, such as supporting
commodity prices in domestic markets, providing nutritious meals for
children, supplying humanitarian food aid, and feeding U. S. military
personnel worldwide. Federal agencies make purchases through various means
and at various levels in the marketplace. Bulk commodities, such as
unprocessed grain, are procured directly from producers or processors
through competitive bidding and commodity support programs. Food, such as
ground beef, fruit products, and infant formula, may be purchased directly
for specific items or, as is often the case, under contracts with vendors
for broad categories of items that a program or facility may need. The
prices federal agencies pay for these purchases are influenced by general
market conditions that are also applicable to other consumers of food and
commodities. Among the many conditions affecting the prices at each level of
the food distribution chain- from the farm gate to the dinner table- are
federal regulations. The regulations are issued for a variety of purposes,
such as implementing agricultural programs, regulating agricultural
production, ensuring food safety, and protecting the environment.

Concerned about the impact of federal regulations on the prices of food and
commodities that the federal government purchases, you requested that we
provide (1) details about federal agencies' purchases of food and/ or
agricultural commodities from fiscal year 1997 through fiscal year 1999 and
(2) information on major regulations that may affect the prices paid by
these agencies for these products. To respond to the first objective, as
agreed with your office, we identified federal agencies that individually
purchased at least $50 million in food and/ or commodities annually. To
address the second objective, we agreed to review the cost- benefit analyses
for major regulations issued during the last 4 years- March 29, 1996 through
March 31, 2000- that relate to food or agriculture. These analyses are
required by Executive Order 12866. 1 Under this order, an agency must
conduct an economic analysis of a regulation determined to be economically
significant. 2 The analysis should estimate the costs and benefits of the
proposed regulation to consumers and/ or

1 Regulatory Planning and Review, Sept. 30, 1993. 2 In general, an
economically significant or major regulation is one estimated to have an
annual effect on the economy of $100 million or

more.

B- 285338

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices 2 other sectors of
the economy. While the Office of Management and Budget's (OMB) guidance on

economic analysis indicates that estimates of costs and benefits in terms of
dollars are preferred, OMB recognizes such estimates may not always be
possible. Estimates of the impact of proposed regulations on prices may or
may not be presented in the economic analyses because the focus of the
executive order is on presenting the overall costs and benefits of the
regulations.

In summary, we found the following:

ï¿½ Five agencies- the departments of Agriculture, Defense, Justice, Labor,
and Veterans Affairs- made large direct purchases of food and/ or
commodities from fiscal year 1997 through fiscal year 1999, as indicated in
figure 1. For example, purchases by these agencies totaled about $4.5
billion in fiscal year 1999 for items ranging from bulk, unprocessed
commodities such as grain and soybean meal to ready- to- eat cereal, canned
goods, fruits and vegetables, dairy products, and military field rations.
These purchases were made for agency programs or for basic missionrelated
objectives. For example, Agriculture purchased food to feed children under
the National School Lunch Program, and Veterans Affairs purchased food for
the patients in its 172 medical facilities. In addition, some of these
agencies made food or commodity purchases on behalf of other agencies. For
example, Agriculture made purchases on behalf of the Department of State's
Agency for International Development and Defense made purchases on behalf of
over 20 other agencies. Enclosure I provides further details on these
purchases.

B- 285338

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices 3

Figure 1: Federal Agency Purchases of Food and/ or Commodities, Fiscal Years
1997- 99

Agriculture Defense Justice Labor Veterans Affairs 0

500 1000

1500 2000

2500 3000

3500 U. S. dollars in millions

FY 1997 FY 1998 FY 1999

Note: Agriculture officials said that their food purchases increased
significantly from 1998 to 1999, primarily because of the Farm Service
Agency's procurement of surplus domestic commodities such as bulgur, corn,
cornmeal, dried milk, flour, and wheat under the Section 416( b) program for
the Foreign Agricultural Service to donate overseas.

Source: GAO's analysis of agencies' data.

ï¿½ Of the 23 major regulations we identified as potentially related to food
or agriculture, 11 had impacts on food and/ or commodity prices, according
to the required cost- benefit analyses. The Department of Agriculture issued
all 11 of these regulations. The anticipated price effects of these
regulations vary depending on the regulation and the food or commodity
involved. For example, of the 11 analyses, 4 expect price increases, 1
expects both an increase and a decrease, 2 expect prices to be unchanged,
and 4 expect prices to decrease. In most cases, the effects identified in
the analyses were on prices that producers or processors could expect to pay
or receive for food or commodities before the products are sold at the
retail level. For instance, a regulation setting long- term policy for
Agriculture's Conservation Reserve Program was expected to increase
processors' per- bushel prices of barley, corn, oats, sorghum, soybeans, and
wheat. However, in some cases, the analyses discussed effects on the retail
prices of food or commodities. For example, a regulation on importing fresh
pork products from Mexico was expected to decrease the retail price of those
products by 7 to 16 cents per pound. Enclosure II provides further details
on the anticipated price impacts of these 11 regulations.

ï¿½ The 12 regulations and related cost- benefit analyses that did not provide
information on food or commodity price impacts were issued by Agriculture,
the Environmental Protection Agency, or the Food and Drug Administration.
Enclosure III provides a list of these regulations.

B- 285338

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices 4

ï¿½ In general, each of the 23 major regulations we reviewed was issued by
agencies to accomplish purposes and programs mandated by the Congress in
order to benefit the nation. For example, a 1996 rule on hazard analysis and
critical control point systems issued by Agriculture's Food Safety and
Inspection Service establishes requirements for slaughterhouses to reduce
the numbers of pathogenic microorganisms on meat and poultry products. As a
result of this regulation, the economy is expected to receive benefits
estimated at $7.1 to $26.6 billion over 20 years due to a reduction in
foodborne illnesses. 3

Agency Comments

We provided a draft of this report to the departments of Agriculture,
Defense, Justice, Labor and Veterans Affairs for review and comment. The
agencies generally agreed with the facts presented in the report. Four of
the agencies- Agriculture, Justice, Labor, and Veterans Affairs- provided
minor technical suggestions, which we incorporated into the report as
appropriate.

Scope and Methodology

To provide details about federal agencies' purchases of food and/ or
commodities, we first identified agencies with at least $50 million in food
and/ or commodity purchases in fiscal year 1999. We did this by reviewing
available reports and documents; interviewing Department of Agriculture
officials, including food procurement experts and Economic Research Service
staff; and asking officials in each agency we contacted to identify other
agencies that purchase food and/ or commodities. We then asked the agencies
identified to provide detailed information on the amounts, types, purposes,
and beneficiaries of their food and/ or commodity purchases, including
outlays made for these purchases from fiscal year 1997 through fiscal year
1999. We instructed these agencies to exclude programs, such as Food Stamps,
that provide resources to clients to make their own food purchases. We also
asked these agencies to exclude food purchases intended for retail sale in
cafeterias or commissaries.

To identify major federal regulations that affect the prices paid by federal
agencies for food and/ or commodities, we considered 241 major regulations
issued during the period from March 1996 through March 2000 that were
submitted to GAO's Office of General Counsel for review in accordance with
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996. 4 Of these, we determined that 23 potentially relate to food or
agriculture. For each of these 23 regulations, we then performed a detailed
review of the regulation and the related cost- benefit analysis to determine
what, if any, food and/ or commodity price impacts were identified. Our
analysis was limited to the information published in the regulations and
associated analyses. Although the cost- benefit analyses for a number of
these regulations do not address food and/ or commodity price effects, this
does not necessarily mean that the regulations have no effect on these
prices. Rather, these effects were not among those analyzed by the agencies
responsible for preparing the analyses.

We conducted our review from December 1999 through June 2000 in accordance
with generally accepted government auditing standards. We did not
independently verify the data provided by the

3 This range of benefits results from uncertainty in the estimates of the
number of cases of foodborne illness and death attributable to pathogens
that enter the meat and poultry supply at slaughterhouses.

4 P. L. 104- 121, Mar. 29,1996. Under this act, GAO's role is to provide the
Congress with a quick review of all “major” rules submitted to
determine if the promulgating agencies have complied with the procedural
steps governing the regulatory process. GAO must provide its report within
15 calendar days. See GAO's testimony before the Subcommittee on Commercial
and Administrative Law, House Committee on the Judiciary, ( Congressional
Review ActGAO/ T- OGC- 97- 29, Mar. 6, 1997) for further explanation.

B- 285338

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices 5 agencies on their
food and/ or commodity purchases. Similarly, we did not independently verify
the

data contained in the cost- benefit analyses we reviewed, nor did we assess
the appropriateness of the variables or assumptions used in these analyses.

----

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days after
the date of this letter. At that time, we will provide copies to the
appropriate congressional committees; interested Members of Congress; the
Honorable Dan Glickman, Secretary of Agriculture; the Honorable William S.
Cohen, Secretary of Defense; the Honorable Janet Reno, Attorney General; the
Honorable Alexis M. Herman, Secretary of Labor; the Honorable Togo D. West,
Jr., Secretary of Veterans Affairs; the Honorable Jacob J. Lew, Director,
Office of Management and Budget; and other interested parties.

If you have any questions about this report, please contact Jim Jones,
Assistant Director, or me at (202) 512- 5138. Other key contributors to this
report were Triana Bash, Carol Bray, John Scott, and Sheldon Wood.

Sincerely yours, Lawrence J. Dyckman Director, Food and

Agriculture Issues

ENCLOSURE I ENCLOSURE I

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

6

Five Federal Agencies That Directly Purchase Food or Commodities

Dollars in millions

Purchasing agency

5

Administering agency Program Description Type of food

FY 1997 purchases

FY 1998 purchases

FY 1999 purchases

Department of Agriculture, Farm

Service Agency (FSA)

6

Food and Nutrition

Service National

School Lunch Program/

National School Lunch

Act of 1946 Food and Nutrition Service coordinates the

distribution of commodity foods to over 94,000 public and private nonprofit
schools

providing meals to students. FSA's commodity purchases represent about 15 to

20 percent of the market value of the food that schools serve in their lunch
and

breakfast programs. Dairy products, corn, cereal,

pasta, peanuts, rice, flour, vegetable oil

$159.8 $149.9 $188.2 Food and

Nutrition Service

The Emergency

Food Assistance

Program/ The Emergency

Food Assistance

Act of 1983 Commodities are available to nonprofit

organizations, such as soup kitchens and shelters, for preparing meals for
the needy.

Other nonprofit organizations, such as food banks, distribute commodities to
the needy

for household use. Each state establishes eligibility criteria for
determining

participation in the program. Dairy products, corn, cereal,

pasta, peanuts, rice, vegetable oil

39.5 33.0 55.9 Food and

Nutrition Service

Child Care and Adult

Care Food Program

Commodities are available to approved day care centers serving meals and
snacks to

children and adults, and to family and group day care homes for children.
These centers

and homes have the option of receiving cash in lieu of commodities, since
the

commodity pack sizes are too large for most of them.

Dairy products, cereal, pasta, peanuts, rice, flour,

vegetable oil 1.1 1. 1 1.1

5 The five federal departments listed in this column purchased at least $50
million in food or commodities in fiscal year 1999.

6 The Farm Service Agency makes some of its purchases on behalf of the
Commodity Credit Corporation (CCC), which is a government- owned and
-operated entity created to

stabilize, support, and protect farm income and prices.

ENCLOSURE I ENCLOSURE I

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

7

Purchasing agency

5

Administering agency Program Description Type of food

FY 1997 purchases

FY 1998 purchases

FY 1999 purchases

Food and Nutrition

Service Commodity

Supplemental Food

Program Food packages are distributed monthly to

supplement the nutritional needs of low income pregnant, postpartum, and
breast

feeding women; infants; children up to age 6; and persons at least 60 years
old

residing in the service areas. A variety of commodities are provided in
household- size

containers. Women, infants, and children must be eligible for benefits under
an

existing federal, state, or local health or welfare program for low- income
persons.

Elderly persons must have incomes at or below 130 percent of federal poverty

income guidelines. Dairy products, corn, cereal,

pasta, peanuts, rice 36.3 34.0 16.1

Food and Nutrition

Service Summer

Food Service Program

Commodities are made available to sites serving needy children during summer

vacations from school. These sites include schools, colleges, and
universities

participating in the National Youth Sports Program, nonprofit summer camps
for

migrant children, and centers for homeless children. All children receive
meals free,

and the Department reimburses local sponsoring organizations for a portion
of the

meals served. Dairy products, cereal, pasta,

peanuts, rice, flour, vegetable oil

0.5 0. 6 0.4 Food and

Nutrition Service

Food Distribution

Program on Indian

Reservations Program is an alternative to the Food

Stamp Program for meeting the nutritional needs of households living on or
near an

Indian reservation or in designated service areas in Oklahoma. Households
qualify for

the program on the basis of their income and resources. Participants receive
a

monthly food package that contains a variety of commodities to help them

maintain a balanced diet. Dairy products, corn, cereal,

pasta, peanuts, rice, flour, vegetable oil

22.4 24.4 19.5

ENCLOSURE I ENCLOSURE I

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

8

Purchasing agency

5

Administering agency Program Description Type of food

FY 1997 purchases

FY 1998 purchases

FY 1999 purchases

Food and Nutrition

Service Nutrition

Program for the

Elderly/ Area Agencies on

Aging Program provides nutritious meals for older

adults, either in congregate meal settings or through home delivery. The
Department

provides cash and commodities to state agencies on aging and tribal
organizations.

Dairy products, cereal, pasta, peanuts, rice, flour,

vegetable oil 0.2 0. 0 0.1

Food and Nutrition

Service Disaster

Feeding Food and Nutrition Service makes

commodities available for distribution to disaster relief agencies, such as
the Red

Cross, when the President declares a disaster, as well as in other
situations of

distress. The commodities are provided to disaster victims through
congregate meal

services and direct distributions to households.

Dairy products, corn, cereal, pasta, peanuts, rice, flour,

vegetable oil 0.2 0. 0 0.7

Foreign Agriculture

Service Sec. 416( b)/

Agricultural Act of 1949

Program provides for overseas donations of surplus commodities acquired by
the CCC.

Donations may not reduce the amounts of commodities that are donated
traditionally

to domestic feeding programs or agencies and may not disrupt normal
commercial

sales. All- purpose and bread flour,

bulgur, corn, cornmeal, varieties of wheat, dried milk

0.0 0. 0 1,155.5 7

U. S. Agency for

International Development

Title II, P. L. 480-

Emergency and Private

Assistance Program provides for the donation of U. S.

agricultural commodities to meet emergency and nonemergency food needs.

Agricultural commodities donated by the U. S. government for emergency needs
may

be provided under government- to government agreements; through public

and private agencies, including intergovernmental organizations; and

through other multilateral organizations. Nonemergency assistance may also
be

provided through private voluntary organizations, cooperatives, and

intergovernmental organizations. Feed grains, rice, vegetable

oil, wheat $721.5 8

$825.4 9

$893.3 10

7 Includes $361.8 million for freight costs, which are contracted for
separately.

8 Includes $308.4 million for freight costs.

ENCLOSURE I ENCLOSURE I

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

9

Purchasing agency

5

Administering agency Program Description Type of food

FY 1997 purchases

FY 1998 purchases

FY 1999 purchases

U. S. Agency for

International Development

Title III, P. L. 480-- Food for

Development Program provides for government- to government grants to support
long- term

growth in the least developed countries. Donated commodities are sold in the

recipient country, and the revenue generated is used to support economic

development programs. Wheat 40.5 11

32.5 12

21.3 13

Foreign Agriculture

Service Food for

Progress (Title I, P. L.

480)/ Food for Progress

Act of 1985 Program provides commodities to support

countries that have made commitments to expand free enterprise in their
agricultural

economies. Wheat, wheat flour, soybean

meal, soybeans, vegetable oil

40.1 14

63.7 15

264.2 16

Foreign Agriculture

Service Food for

Progress (CCC

funded)/ Food for

Progress Act of 1985

Program provides commodities to support countries that have made commitments
to

expand free enterprise in their agricultural economies.

Tallow, flour, rice, varieties of seeds, varieties of corn

products, varieties of oils, varieties of wheat, beans,

peas, dried milk, pink salmon, varieties of pork

products, soybean meal 76.0 17

108.6 18

93.3 19

Subtotal-- FSA $1,138.2 $1,273.2 $2,709.6

9 Includes $357.6 million for freight costs.

10 Includes $412.2 million for freight costs.

11 Includes $12.4 million for freight costs.

12 Includes $11.2 million for freight costs.

13 Includes $7.6 million for freight costs.

14 Includes $25.4 million for freight costs.

15 Includes $22.8 million for freight costs.

16 Includes $28.9 million for freight costs.

17 Includes $11.7 million for freight costs.

18 Includes $24.7 million for freight costs.

19 Includes $22.2 million for freight costs.

ENCLOSURE I ENCLOSURE I

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

10

Purchasing agency

5

Administering agency Program Description Type of food

FY 1997 purchases

FY 1998 purchases

FY 1999 purchases

Department of Agriculture,

Agricultural Marketing Service

(AMS)

Agricultural Marketing

Service Purchases

for the National

School Lunch Program

under section 32 of the act

of August 24, 1935

These expenditures are part of a permanent appropriation that sets aside a
share of the

tariff duties collected by the U. S. Customs Service. These funds are used
to

encourage domestic consumption of agricultural commodities and fulfill the

entitlement mandate of section 6 of the National School Lunch Act.

Frozen and bulk fruit juice; fresh, frozen, and canned

fruit; fresh, frozen, canned, dehydrated, and dried

vegetables; fresh and frozen chicken; fresh, frozen, and

dried egg products; canned poultry; fresh and frozen

turkey; frozen beef; frozen pork; canned fish; and

canned meat. 399.0 398.0 396.0

Agricultural Marketing

Service Contingency

purchases under section

32 of the act of August 24,

1935 The contingency purchases support the

removal of surplus commodities from the market. Such removal is in the form
of one

time emergency purchases to relieve short term or rapidly developing market

surpluses. Section 32 contingency purchases also support Food Assistance for

Disaster Relief, a program that (1) takes foods from other programs for
states and

disaster assistance organizations to give to disaster victims and (2)
reimburses the

other programs with section 32 funds. Frozen and canned fruit

juice; fresh, frozen, canned, and dried fruit; frozen,

canned, dehydrated, and dried vegetables; nuts; fresh

and frozen chicken; canned poultry; fresh and frozen

turkey; frozen beef; frozen pork; frozen and canned fish;

canned meat; and frozen bison and frozen lamb.

96.0 193.0 135.0 Food and

Nutrition Service

National School Lunch

Program/ Section 6 of

the National School Lunch

Act of 1946 Section 6 of the National School Lunch Act

provides funds for agricultural commodities to be made available to states
and schools

for child nutrition programs, including commodity foods for child and adult
day

care centers. Section 6 prescribes a level of support (by formula) that is
to be

provided to states in commodities as entitlement.

Fresh, frozen, and canned fruit; fresh, frozen, canned,

dehydrated, and dried vegetables; fresh and frozen

chicken; fresh and frozen egg products; fresh and

frozen turkey; frozen beef; and frozen pork.

58.0 59.0 51.0

ENCLOSURE I ENCLOSURE I

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

11

Purchasing agency

5

Administering agency Program Description Type of food

FY 1997 purchases

FY 1998 purchases

FY 1999 purchases

Food and Nutrition

Service The Food

Distribution Programs on

Indian Reservations/

Section 4a of the

Agriculture and

Consumer Protection

Act of 1973. Program distributes food packages to

households on Indian reservations when they elect to receive commodities in
lieu of

food stamps. Canned fruit juice; canned

and dried fruit; fresh, canned, dehydrated, and dried

vegetables; syrup; fresh and frozen chicken; fresh, frozen

and dried egg products; canned poultry; frozen beef;

canned fish; and canned meat.

28.0 31.0 30.0 Food and

Nutrition Service

Nutrition Program for

the Elderly/ Section 311

of the Older Americans

Act of 1965. Program provides commodity support to

senior citizen meal sites. Frozen fruit juice; fresh,

frozen, and canned fruit; fresh, frozen, and canned

vegetables; fresh and frozen chicken; fresh, frozen, and

dried egg products; canned poultry; fresh and frozen

turkey; frozen beef; frozen pork; and canned meat.

4.0 3. 0 3.0 Food and

Nutrition Service

Commodity Supplemental

Food Program/

Section 17 of the Child

Nutrition Act of 1966

Program provides food packages to pregnant and postpartum women and

children who are at nutritional risk. Canned fruit juice; canned

fruit; fresh, canned, dehydrated, and dried

vegetables; dried egg products; canned poultry;

canned fish; and canned meat.

35.0 32.0 34.0 Food and

Nutrition Service

The Emergency

Food Assistance

Program/ The Emergency

Food Assistance

Act of 1983 Program provides food to the homeless and

other needy individuals through food banks and soup kitchens.

Canned fruit juice; fresh, canned, and dried fruit; fresh,

canned, dehydrated, and dried vegetables; syrup;

fresh and frozen chicken; dried egg products; canned

poultry; fresh and frozen turkey; frozen beef; frozen

pork; canned fish; and canned meat.

84.0 69.0 59.0

ENCLOSURE I ENCLOSURE I

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

12

Purchasing agency

5

Administering agency Program Description Type of food

FY 1997 purchases

FY 1998 purchases

FY 1999 purchases

Subtotal- AMS

$704.0 $785.0 $708.0

Subtotal- Agriculture (FSA + AMS)

$1842.2 $2,058.3 $3,417.6 Department of

Justice, Bureau of Prisons

96 federal correctional

institutions Subsistence

program to support basic

mission of the

institutions Program purchases food for prisons on

primarily a local, and sometimes a regional, basis depending on item
involved. Some

institutions purchase eggs, dairy, and bread products through Department of
Defense

contracts. During fiscal year 1999, 546,554 staff and inmates were served
meals in

Bureau of Prisons institutions. Subsistence items such as

canned foods, spices, and jellies; meats, dairy, eggs,

and bread products 87.2 86.9 $94.8

Subtotal- Justice

$87.2 $86.9 $94.8

ENCLOSURE I ENCLOSURE I

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

13

Purchasing agency

5

Administering agency Program Description Type of food

FY 1997 purchases

FY 1998 purchases

FY 1999 purchases

Department of Defense, Defense

Supply Center Philadelphia

The military services

Program purchases

food to support the

U. S. military worldwide.

The food is used by military services in dining halls and aboard ships for
peacetime

feeding and is used by the services for field feeding during exercises, for
contingencies

and/ or in support of humanitarian efforts. Dairy, breads and bakery

items, coffee, tea, soda, meats, fresh fruits and

vegetables, juices, meals ready to eat (MREs), and

other operational rations. 676.6 731.7 801.3

Various federal agencies

Program makes food

purchases for other

agencies through its

existing programs

and contracts.

The other agencies taking part in the Defense food program include
Agriculture's

School Lunch and Native American Support programs; Department of Commerce;

Department of the Interior; Department of Justice/ Bureau of Prisons;
Department of

Labor/ Job Corps; Department of State; Department of the Treasury;
Department of

Veterans Affairs; General Services Administration; Federal Emergency

Management Agency; Department of Health and Human Services; National
Aeronautics

and Space Administration; U. S. Soldiers' Home; District of Columbia Public
Schools;

U. S. Information Agency; Agency for International Development; U. S.
Congress

and miscellaneous organizations; U. S. Postal Service; Federal Aviation
Agency;

Department of Energy. Mostly fresh fruit and

vegetables, but some agencies order rations and

prime vendor products 3.8 20

5.2 9. 8

Subtotal- Defense $680.4 $736.9 $811.1 Department of

Veterans Affairs Office of

Acquisition and Materiel

Management

Program purchases

food for 172 Veterans

Affairs facilities

The food is purchased primarily through the Subsistence Prime Vendor program
and

used by all Veterans Affairs medical centers and other facilities. Other
purchases are

made through local vendors. All types of food available

through prime vendors, and other items including fresh

and dried milk and other dairy products, fresh and

frozen bread, produce, and dietary supplements

70.3 75.5 70.9 20

Defense's purchases for other agencies in fiscal year 1997 and subsequent
years have been adjusted to eliminate duplication of purchases for
Agriculture, Justice, Labor and Veterans Affairs that are reported elsewhere
in this table.

ENCLOSURE I ENCLOSURE I

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

14

Purchasing agency

5

Administering agency Program Description Type of food

FY 1997 purchases

FY 1998 purchases

FY 1999 purchases

Other government

activities 50 other government facilities have joined

the Veterans Affairs prime vendor contract to purchase food for their
operations: state

veteran homes, Indian health facilities, and Defense health care facilities.

All types of food available through the vendors,

including fresh and dried milk, other dairy products,

fresh and frozen bread, produce, and dietary

supplements 0.0 5. 9 11.5

Veterans Affairs- Subtotal $70.3 $81.4 $82.4 Department of

Labor

Employment and Training

Administration/ Job Corps

Job Corps Centers

provide employment

and training for severely

disadvantag ed youths

The 118 centers provide youths with a comprehensive array of services,
generally

in a residential setting. The services include basic education, vocational
skills

training, social skill instruction, counseling, health care, room and board,
and

recreation. While private and nonprofit contractors operate the majority of
the

centers, the departments of the Interior and Agriculture operate 28 as
Civilian

Conservation Corps programs. About 66,000 youths participate in the program

each year in 48 states and the District of Columbia and Puerto Rico. Program

operators make purchases through prime vendor programs of Defense and
Veterans

Affairs and through other vendors. Proteins, vegetables and

fruits, grain products, and dairy products

48.9 21

50.1 22

51.0 23

Subtotal- Labor $48.9 $50.1 $51.0 Total $2,728.9 $3,013.6 $4,456.9

21 Purchases listed are for the Job Corps' program year ending June 30,1997.

22 Purchases listed are for the Job Corps' program year ending June 30,1998.

23 Purchases listed are for the Job Corps' program year ending June 30,1999.

ENCLOSURE I ENCLOSURE I

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

15

Source: GAO's compilation of agencies' data on programs and purchases.

ENCLOSURE II ENCLOSURE II

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

16

Eleven Major Federal Regulations With Information on Their Effect on Food
and Commodity Prices

Rule title/ agency/ date/ Federal Register citation

Purpose and statutory authorization of the rule as published in the Federal
Register

Food or commodity

Existing price

(baseline) Projected

price Quantitative and/ or qualitative

conclusion about price change

Pathogen Reduction: Hazard Analysis and Critical Control

Point (HACCP) Systems/ Food Safety and Inspection

Service, Department of Agriculture/ July 25, 1996/ 61

Fed. Reg. 38805 Sets requirements for meat and poultry slaughter

establishments designed to reduce the occurrence and numbers of pathogenic
microorganisms on meat

and poultry products and reduce the incidence of food borne illness
associated with the consumption of those

products. The rule provided a new framework for modernizing the current
system of meat and poultry

inspection. 21 U. S. C. 451- 470, and 601- 695 and 7 U. S. C. 1901- 1906

Meat and poultry

Not provided Not provided 4- year implementation of the rule would increase
prices $0.0011 per to $0.0013 per

pound at retail level. The annual recurring price increase would be $0.0015
to

$0.0018 per pound based on 1993 production.

Dairy Tariff- Rate Import Quota Licensing/ Department

of Agriculture/ Oct. 9, 1996/ 61 Fed. Reg. 53001

Revises regulations governing the administration of the import licensing
system for certain dairy products

that are eligible for in- quota tariff rates. The rule incorporates Uruguay
Round Agreement commitments

relating to increased market access for dairy articles. The United States
agreed to end quantitative

restrictions, replacing them with tariff- rate quotas under which a limited
level of imports are permitted at

a low tariff rate and any imports beyond that level are assessed a tariff at
a higher rate. 19 U. S. C. 1202,

3513 and 3601 Imported

cheese and licensed dairy

products Import license

cost of $0.00138 per

pound of imported

cheese in 1995

Import license cost of

$0.0016 to $0.0017 per

pound of imported

cheese in 1998

Increased cost of import license fees is about $0.0003 per pound and
basically

would have no impact on prices. The rule is not expected to affect prices
and market

share for the U. S. dairy industry as a whole because access to the U. S.
market is

limited by the tariff- rate quota system.

ENCLOSURE II ENCLOSURE II

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

17

Rule title/ agency/ date/ Federal Register citation

Purpose and statutory authorization of the rule as published in the Federal
Register

Food or commodity

Existing price

(baseline) Projected

price Quantitative and/ or qualitative

conclusion about price change

Barley $2.57 per bushel in

1997 $2.63 per

bushel Increase of $0.06 per

bushel Corn 2.81 per

bushel in 1997

$2.88 per bushel

Increase of $0.07 per bushel

Oats $1.66 per bushel

$1.75 per bushel

Increase of $0.09 per bushel

Sorghum $2.57 per bushel

$2.63 per bushel

Increase of $0.06 per bushel

Wheat $4.18 per bushel

$4.43 per bushel

Increase of $0.25 per bushel

Conservation Reserve Program- Long- Term Policy/

Farm Service Agency and Commodity Credit Corp.,

Department of Agriculture/ Feb. 19, 1997/ 62 Fed. Reg.

7601 Amends the Conservation Reserve Program to cost effectively target it
to more environmentally sensitive

acreage. Revises the terms and conditions for enrolling acreage, updating
other program eligibility

requirements, and consolidating and reorganizing the program's regulations.
16 U. S. C. 3801- 3847

Soybeans $6.57 per bushel

$6.73 per bushel

Increase of $0.16 per bushel

Overall, the price increases are due

to an increase of program acreage

from 28 to 36.4 million acres.

Continued enrollment of

environmentally sensitive cropland

in the program results in reduced

production, higher prices, increased

producer incomes, and higher prices

to processors. Projected changes

in consumer prices were not provided.

ENCLOSURE II ENCLOSURE II

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

18

Rule title/ agency/ date/ Federal Register citation

Purpose and statutory authorization of the rule as published in the Federal
Register

Food or commodity

Existing price

(baseline) Projected

price Quantitative and/ or qualitative

conclusion about price change

Karnal Bunt Disease: Domestic Plant- Related

Quarantine, Final Rule; and Karnal Bunt: Compensation

for the 1995- 96 Crop Season, Final Rule/ Department of

Agriculture, Animal and Plant Health Inspection Service/

Oct. 4, 1996 and May 6, 1997/ 61 Fed. Reg. 52190

and 62 Fed. Reg. 24746 The final rule establishes criteria for levels of
risk for

areas with regard to Karnal bunt, a fungal disease of wheat, and for the
movement of regulated articles

based on those risk areas. It provides for compensation for certain growers
and handlers,

owners of grain storage facilities, and flour millers to mitigate losses
because of Karnal bunt in the 1995- 96

crop season. 7 U. S. C. 150bb, 150dd, 150ee, 150ff, 161, 162, and 164- 167

Wheat $3.85 per bushel

The most likely price

would be $3.63 per

bushel if quarantine

was not implemented

The most likely decrease of 10 percent in exports due to Karnal bunt would
cause a

$0.22- per- bushel drop in wheat prices. The losses estimated nationwide
would have

been $500 million. Under the quarantine, the loss to affected wheat
producers was

estimated at $44 million. Amendment to the Peanut

Poundage Quota Regulations/ Farm Service

Agency, Department of Agriculture/ May 9, 1997/ 62

Fed. Reg. 25433 The amendments to the final rule involve (1)

eliminating the national poundage quota floor; (2) eliminating the
undermarketing carryover provisions;

(3) establishing temporary seed quota allocations; (4) establishing the
ineligibility of certain farms for quota

allocations; (5) authorizing the intercounty transfer of farm poundage
quotas in all states, subject to certain

limitations in some states; (6) eliminating the special allocations of
increased quotas for certain Texas

counties; (7) establishing new provisions for “considered
produced” credit with respect to a farm

whose quota has been transferred; and (8) other minor clarifying and
technical changes. 7 U. S. C. 1301, 1357

et seq. 1372, 1373, 1375 and 7271 Peanuts and

peanut products

$0.30 per pound for

crop year 1996- 97 to

$0.3264 for crop year

2002- 03 $0.27 per

pound for crop year

1996- 97 to $0.2763 for

crop year 2002- 03

$0.03- 0.05 per- pound decrease in the price of peanuts to farmers over the
period. The

agency projects that consumers would save about $75 million on peanut
products

annually.

ENCLOSURE II ENCLOSURE II

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

19

Rule title/ agency/ date/ Federal Register citation

Purpose and statutory authorization of the rule as published in the Federal
Register

Food or commodity

Existing price

(baseline) Projected

price Quantitative and/ or qualitative

conclusion about price change

Importation of Pork from Sonora, Mexico/ Department

of Agriculture, Animal and Plant Health Inspection

Service/ May 9, 1997/ 62 Fed. Reg. 25439

Amendment of regulations on importation of animal products to allow, under
certain conditions, the

importation of fresh, chilled, or frozen pork from the state of Sonora,
Mexico. 7 U. S. C. 147a, 150ee, 161,

162 and 450; 19 U. S. C. 1306; 21 U. S. C. 111, 114a, 134a, 134b, 134c,
134f, 136, and 136a; 31 U. S. C.

9701; 42 U. S. C. 4331 and 4332. Fresh pork

products Not provided $0.07 to

$0.16 less per pound

retail Increased supplies of Mexican fresh pork

would lead to lower prices, and consumer savings could range from $10.7
million to

$24.5 million, depending on the volume of Mexican imports and the
sensitivity of U. S.

supply and demand. Importation of Beef from

Argentina/ Department of Agriculture, Animal and Plant

Health Inspection Service/ June 26, 1997/ 62 Fed. Reg.

34385 Amended the regulations on the importation of animal

products in order to prevent the introduction of foot and- mouth disease and
to allow under certain

conditions the importation of fresh, chilled, or frozen beef from Argentina.
This change is in keeping with

provision of trade agreements entered into by the United States by removing
unnecessary restrictions on

these imports. 7 U. S. C. 147a, 150ee, 161,162, and 450; 19 U. S. C. 1306;
21 U. S. C. 111,114a, 134a, 134b,

134c, 134f, 136 and 136a; 31 U. S. C. 9701; 42 U. S. C. 4331 and 4332

Beef products in U. S. market

Wholesale price of

$4,402.17 per metric ton

24 of

carcass weight

equivalent in 1995

Wholesale price of

$4,393.90 per metric ton of

carcass weight

equivalent Wholesale price decline of $8.27 per metric

ton of carcass weight equivalent. Due to the increased imports of beef from

Argentina, consumer savings would be about $89.2 million annually for beef

products if 20,000 metric tons were imported.

Pseudorabies in Swine; Payment of Indemnity, Interim

Rule / Department of Agriculture, Animal and Plant

Health Inspection Service/ Jan. 15, 1999/ 64 Fed. Reg.

2545 Interim rule establishes the animal health regulations

to provide for the payment of indemnity for the voluntary depopulation of
herds of swine (hogs) known

to be infected with pseudorabies and, therefore, will reduce the risk of
other swine becoming infected with

the disease. 21 U. S. C. 111- 113, 114, 114a, 114a- 1, 120, 121, 125 and
134b

Pork products Not provided Not provided By reducing the number of hogs, the
rule will result in increased prices to hog

producers. The agency had insufficient information to estimate the effect on
market

prices. Milk in the New England and

Other Marketing Areas; Order Amending the Orders/

Department of Agriculture, Agricultural Marketing

Service/ Sept. 1, 1999/ 64 Fed. Reg. 47898

To consolidate the number of federal milk marketing orders from 31 to 11 and
add some counties into the

new marketing order areas. 7 U. S. C. 601- 674 and 7253

Fluid milk (Class I)

On average $16.22 per

hundred weight

$0.06 more to $0.09 less

per gallon on avg. for all

areas On average $0.02 less per gallon for all

areas over 6 years. Overall, consumers will save $80.4 million on fluid milk
prices

annually. The price decrease is expected because of an increase in the
quantity of

milk to be made available for fluid uses. 24

2204.62 pounds

ENCLOSURE II ENCLOSURE II

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

20

Rule title/ agency/ date/ Federal Register citation

Purpose and statutory authorization of the rule as published in the Federal
Register

Food or commodity

Existing price

(baseline) Projected

price Quantitative and/ or qualitative

conclusion about price change

Milk for soft manufactured

products (Class II)

On average, $13.95 per

hundred weight

On average, $0.50 more

per hundred weight

Overall, the increase in the price of these manufactured products will cost
consumers

$77.6 million more annually. The price increase is due to a decrease in the

quantity of milk available for soft manufactured products.

Milk for cream and other

cheeses (Class III)

On average, $13.65 per

hundred weight

On average, $0.01 more

per hundred weight

On average, prices may be virtually unchanged over the 6- year period.

Milk for butter and milk

powders (Class IV)

On average, $13.76 per

hundred weight

On average, the price

would be unchanged

On average, prices may be virtually unchanged over the 6- year period.

Irradiation of Meat Food Products/ Food Safety and

Inspection Service, Department of Agriculture/

Dec. 23, 1999/ 64 Fed. Reg. 72150

To amend regulations to permit the use of ionizing radiation for treating
refrigerated or frozen, uncooked

meat, meat byproducts and certain other meat food products to reduce the
level of food- borne pathogens

and to extend shelf life. Federal Meat Inspection Act and Poultry Inspection
Act. 7 U. S. C. 138f, 450; 21

U. S. C. 451- 470 Ground beef Not provided $0.02 to

$0.06 more per pound

The annual cost of meat irradiation is estimated to range from $35 million
to $105

million (1995 dollars). Nonfat dried

milk Not provided No change With this program, domestic prices would

not change because the program's purchase price provides a floor under the

current market price. If the program were not extended, prices would be
expected to

fall $0.10 per pound. 1999 Crop and Marketing

Loss Assistance/ Farm Service Agency, Department

of Agriculture/ Feb. 16, 2000/ 65 Fed. Reg. 7942

Implement requirements of the 2000 appropriations acts related to crop and
market loss assistance for

agricultural producers and other provisions related to crop or market loss
provisions. 15 U. S. C. 714b and

714c Honey Not provided No change The analysis does not expect the program

to have an effect on domestic prices.

ENCLOSURE II ENCLOSURE II

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices

21

Rule title/ agency/ date/ Federal Register citation

Purpose and statutory authorization of the rule as published in the Federal
Register

Food or commodity

Existing price

(baseline) Projected

price Quantitative and/ or qualitative

conclusion about price change

Livestock Not provided No change No measurable effect on market prices is
expected because the program helps

disaster- affected producers to feed livestock rather than send them to

slaughter. Peanuts Not provided No change No measurable effect for consumers
is

expected because the program supports peanut producer incomes rather than

market prices. Source: Text of major regulations as published in the Federal
Register and supporting regulatory impact analyses as submitted to GAO under
the Small Business

Regulatory Enforcement Fairness Act of 1996.

ENCLOSURE III ENCLOSURE III

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices 22

Twelve Major Federal Regulations Without Information on Their Effect, If
Any, on Food and Commodity Prices

Twelve of the 23 major regulations and associated cost- benefit analyses we
reviewed did not provide information on food and/ or commodity price
impacts. However, this does not necessarily mean that the regulations have
no effect on these prices. Rather, these effects were not among those
analyzed by the agencies responsible for preparing the cost- benefit
analyses.

List of the 12 Regulations

“Catastrophic Risk Protection Endorsement,” Final Rule,
Department of Agriculture, Federal Crop Insurance Corporation, Aug. 20,
1996, 61 Fed. Reg. 42979.

“Environmental Quality Incentives Program,” Final Rule,
Department of Agriculture, Natural Resources Conservation Service, May 22,
1997, 62 Fed. Reg. 28258.

“Substances Prohibited From Use in Animal Food or Feed; Animal
Proteins Prohibited in Ruminant Feed,” Final Rule, Department of
Health and Human Services, Food and Drug Administration, June 5, 1997, 62
Fed. Reg. 30936.

“General Administrative Regulations, Subpart U; and Catastrophic Risk
Protection Endorsement; Regulations for the 1999 and Subsequent Reinsurance
Years and General Administrative Regulations, Subpart T- Federal Crop
Insurance Reform, Insurance Implementation; Regulations for the 1999 and
Subsequent Reinsurance Years; and the Common Crop Insurance Regulations;
Basic Provisions; and Various Crop Insurance Provisions,” Interim
Rules, Department of Agriculture, Federal Crop Insurance Corp., July 30,
1998, 63 Fed. Reg. 40630 and 40632.

“Solid Wood Packing Material From China,” Interim Rule,
Department of Agriculture, Animal and Plan Health Inspection Service, Sept.
18, 1998, 63 Fed. Reg. 50100.

“National Primary Drinking Water Regulations: Disinfectants and
Disinfection By- products,” Final Rule, Environmental Protection
Agency, Dec. 16, 1998, 63 Fed. Reg. 69390.

“National Primary Drinking Water Regulations: Interim Enhanced Surface
Water Treatment,” Final Rule, Environmental Protection Agency, Dec.
16, 1998, 63 Fed. Reg. 69478.

“Livestock Assistance Program,” Final Rule, Department of
Agriculture, Commodity Credit Corp., Mar. 19, 1999, 64 Fed. Reg. 13497.

ENCLOSURE III ENCLOSURE III

GAO/ RCED- 00- 173R Regulations' Effect on Food Prices 23 “Phase 2
Emission Standards for New Non- road Spark- Ignition Non- handheld Engines
at or

Below 19 Kilowatts,” Final Rule, Environmental Protection Agency, Mar.
30, 1999, 64 Fed. Reg. 15208.

“1998 Single- Year and Multi- Year Crop Loss Disaster Assistance
Program,” Final Rule, Department of Agriculture, Farm Service Agency,
Apr. 15, 1999, 64 Fed. Reg. 18553.

“Persistent Bioaccumulative Toxic (PBT) Chemicals; Lowering of
Reporting Thresholds for Certain PBT Chemicals; Addition of Certain PBT
Chemicals; Community Right- to- Know Toxic Chemical Reporting,” Final
Rule, Environmental Protection Agency, Oct. 29, 1999, 64 Fed. Reg. 58666.

“National Pollutant Discharge Elimination System- Regulations for
Revision of the Water Pollution Control Program Addressing Storm Water
Discharges,” Final Rule, Environmental Protection Agency, Dec. 8,
1999, 64 Fed. Reg. 68722.

(150164)
*** End of document. ***