Foreign Relations of the United States, 1981–1988, Volume XXXVIII, International Economic Development; International Debt; Foreign Assistance

288. Report Prepared in the Department of State¹

Washington, undated

REPORT ON U.S. ACTIONS TO ENCOURAGE OTHER COUNTRIES TO ESTABLISH FOOD SECURITY RESERVES OR TAKE OTHER MEASURES COMPLEMENTING THE U.S. FOOD SECURITY RESERVE

The United States has taken a number of actions designed to encourage other nations to establish their own food security reserves and to take other measures for complementing our grain reserves. These actions should be viewed in the context of the present and future global food situation and U.S. efforts in the past year to improve world food security in the areas of grain stocking policies, food aid, and agricultural development.

Food Situation

The present and future global food situation is, according to a consensus of international food agencies, relatively good, despite historic concerns and persistent distributional problems in some countries and regions, particularly Sub-Saharan Africa. Because of record production levels, world grain stocks presently meet the United Nations’ Food and Agriculture Organization’s (FAO) estimated requirement of 17–18% of annual consumption, and grain prices on world markets are presently very low. Against this background, it is nevertheless disturbing that a very large percentage of total world grain reserves are held in the United States, a significant financial burden to the United States that is insufficiently shared by other producing and consuming countries. These factors have influenced the efforts of the United States to promote the holding of food reserves by other countries.

Grain Stocking Policies

The U.S. market-oriented system gives foreign and domestic buyers equal access to our grain supplies. Our farmer owned-reserves encourage farmers to hold stocks when prices are low and sell them when prices are high, thus contributing to price and supply stabilization and overall food security. Our four-million ton Food Security Wheat Reserve backs up our food aid commitments. No other nation has such reserves. Major importers generally buy for short-term needs while other major exporters keep in stock only what they cannot sell.

India is one of the few LDCs to hold grain reserves for its food security. This year India is buying, largely from the U.S., at least four million tons of wheat, some of which is for stocks. Given the excellent U.S. transportation facilities and cheap grain prices, most countries prefer not to incur storage and interest charges but rather to let the U.S. hold grain reserves.

During the past year in both bilateral and multilateral discussions, the U.S. has encouraged grain exporting and importing countries to establish grain reserves. We have made the point even more strongly than before that with grain prices at their lowest levels, now is the best time to build up reserves. The following are four recent examples where the U.S. has taken this position:

1) At the semi-annual meeting of the International Wheat Council (IWC),² we have urged member countries, including major exporting countries as well as developed importers, to establish reserves. And at the special consultations of the “Major Wheat Exporters Group” held about once a year, we have urged other members to hold larger stocks rather than to continue to flood the market with exports.

2) At the FAO Intergovernmental Group on Grains in Oct. 1982, participants agreed that being the stockholder of the world is a serious burden on U.S. producers, places great strain on the U.S. and that over the long-term this produces disincentives on U.S. producers and could reduce world food security.

3) At the March 1982 FAO Intergovernmental Group on Vegetable Oils we pointed out the very favorable market opportunities available to purchase commodities for stocks, particularly rice and soya beans.

4) At the November/December 1982 FAO Council and the March/April 1982 FAO Committee on World Food Security the U.S. stressed that we are incurring the major burden of stock holding and urged other countries to implement the FAO Five Point Plan of Action on Grain Stock Policies. Other countries profess support for the Plan, but most have done little to implement its stock holding elements.

The best chance to achieve the build-up of grain stocks by major exporting nations was in the context of a new international agreement, i.e., the now defunct proposal for a new Wheat Trade Convention (WTC). However, this proposal contained certain unacceptable features for the U.S. It did not take sufficient account of market responsive national reserves, other nations were not willing to do their fair share in holding reserves, and it contained unacceptable donor provisions for LDCs. In the absence of a multilateral agreement, the record shows that it has been very difficult to convince other countries to hold stocks.

The international community has, from time to time, endorsed the negotiation of international commodity agreements providing for increased holding and coordination of food grain reserves. Some agreements have provided for regional or subregional reserves; others, such as efforts in the International Wheat Council, have aimed at concluding an agreement providing for multilaterally-held and -coordinated grain reserves in conjunction with a variety of price and other provisions designed to stabilize the grains trade. Notwithstanding continued interest on the part of some countries, efforts to reach agreement on a broad scale agreement have largely been determined to be infeasible and are not being seriously pursued. The United States has determined to formulate a case-by-case position on various proposals to provide for regional or sub-regional reserve holdings. These proposals remain under study in a variety of fora.

Food Aid

The United States is the largest food aid donor. Under our Food for Peace Program (PL 480) we provide about 5 million tons of food aid to needy countries annually either on a grant or concessional loan basis.

The United States recently signed a Protocol extending through June 1983 the Food Aid Convention, which provides a framework for food aid pledges totalling nearly 8 million tons against a 10 million ton target. The U.S. pledge is 4.47 million metric tons. A further extension for three years of the International Wheat Agreement, including both the Food Aid Convention and the existing Wheat Trade Convention is currently being sought by the International Wheat Council.

Agricultural Development

Increasing food production in developing countries is the key to their economic development and to improving world food security. This point has been reaffirmed at the Cancun Summit and other recent international meetings. In order to increase food production, the LDCs must adopt and implement appropriate national policies, including increased incentives for improving agricultural production, and increasing private sector involvement in food storage, distribution, and marketing.

Agricultural development programs are one of the best ways available to help developing countries to address their long-term problems in increasing food production. The U.S. is the largest bilateral donor of agricultural development assistance. In Fiscal Year 1982 we contributed $700 million for agricultural and rural development assistance and nutrition programs in developing countries.

The U.S. and other countries including other major grain exporters have supported the World Food Council’s (WFC) concept of national food strategies, an integrated approach to a country’s food and agricultural problems. Forty-two developing countries are involved in the food strategy approach, including eleven which have completed their food strategy.

The major U.S. response to the Cancun Summit was to implement President Reagan’s proposal there to send agricultural task forces to help developing countries solve their food problems.³ These Presidential Agricultural Development Task Forces raise to the highest decision-making level in the requesting countries the major constraints to increasing food production and accelerating agricultural development, and recommend alternative approaches to alleviating those constraints. They emphasize three interrelated, strategic elements of agricultural development: country policies, science and technology, and the private sector. Task Forces have included American experts from universities, agriculture-related business, cooperatives, farmers and government agencies. So far Task Forces have visited Peru, Thailand, Honduras, Liberia, and Venezuela and other Task Forces are being planned.

The U.S. Caribbean Basin Initiative is a major effort to achieve development in Caribbean countries through trade, private investment, and aid.⁴ Agriculture is a major sector in the economies of these countries. Involvement of the private sector is a key to its success, since government cannot bear the total cost of the development process. The U.S. Department of Agriculture has established the Agribusiness Promotion Council, made up of representatives of the private sector, to promote greater involvement of private business in the development process.

1. Source: Reagan Library, WHORM: Subject File, Commodities, CM003 (Food and Kindred Products), 100000–299999. No classification marking. Reagan transmitted the report to the House of Representatives under a January 12 covering letter to O’Neill and to the Senate under a January 12 covering letter to Percy.
2. The semi-annual meeting of the International Wheat Council took place November 29 to December 1, 1982.
3. See footnote 3, Document 266.
4. See footnote 2, Document 23.