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For Immediate Release
Office of the Press Secretary
May 1, 2008
Press Briefing on Food Aid by OMB Deputy Director Steve McMillin, CEA Chairman Ed Lazear, and Deputy National Security Adviser for International Economic Affairs Dan Price
Via Conference Call
4:03 P.M. EDT
MR. STANZEL: Thank you all for joining us today. This is Scott Stanzel, Deputy White House Press Secretary. And I have joining me today Deputy Director of the Office of Management and Budget Steve McMillin; Chairman of the Council of Economic Advisers Ed Lazear; and Deputy National Security Advisor for International Economic Affairs Dan Price.
And we'll turn it over to each one of them for some brief comments to start off, and then we will get to your questions. So with that, Steve McMillin.
MR. McMILLIN: Thank you. This is Steve McMillin. Just wanted to give you a little bit of the budgetary overview as background for the President's announcement today. The President announced a request for the Congress to appropriate an additional $770 million to deal with the global food crisis. He also discussed a $200 million release from the Bill Emerson Humanitarian Trust, which is another mechanism we have for addressing global food issues.
With these actions and requests, total federal funding for international food aid and food security would be approximately $2.3 billion in 2008, and we project $2.657 billion in 2009. This is a substantial sum, both when compared to other countries around the world and to deal with the problems that we see overseas.
Obviously food prices affect not just people in the developing world but here at home as well. And just for background, I want to share a couple of other numbers. Through primarily USDA and the Food and Nutrition Service, we have a robust annual budget for domestic nutrition assistance. In 2008, those amounts are estimated to be about $62.5 billion, and for 2009, about $66.6 billion. So just to put the domestic effort in perspective, as compared to the international effort.
MR. STANZEL: Thank you, Stephen. Now we'll turn it over to Ed Lazear from the Council of Economic Advisors to talk a little bit about the -- our view on food prices globally.
CHAIRMAN LAZEAR: Good afternoon, thanks. Just wanted to give you a little bit of background on some of the numbers, to put things in the context of where we are and what are some of the causes of food price increases. Global food prices are up 43 percent since last year. Some commodities have seen very sharp increases. Wheat, for example, is up 146 percent; corn, 41 percent; and rice, about 29 percent.
There are a number of drivers of food price increases. Increasing demand in emerging markets accounts for about 18 percent of the rise. Also, increasing energy costs, which add to the cost of producing food, is another component. Very important this year were adverse weather-related events in Australia, China and many Eastern European countries that produced low crop yields, and that also implied very sharp increases in food prices.
And then finally, increased ethanol production, which has received a lot of attention, and I want to just spend a minute on that, because it has received so much attention. That had clearly put upward pressure on food prices, but the pressure is limited. Let me give you a sense of that.
The bottom line is that we think that ethanol accounts for somewhere between 2 and 3 percent of the overall increase in global food prices. And the reason for that is that ethanol works primarily on corn. It has increased corn prices substantially by about 33 percent. But corn is only 30 percent of all grain, and grain is only 20 percent of all food. So when you multiply those together and take that into account, you end up with about 2 to 3 percent.
Put differently, in the United States this year food price inflation was pretty significant -- 4.5 percent. Had we not had an ethanol program, the food prices -- sorry, not an ethanol program -- had it not been for ethanol, food prices would have gone up by 4.25 percent as opposed to 4.5 percent. So we would have had about a quarter of a percent lower price inflation; so 4.25 versus 4.5 is the relevant number there.
The other point that I'd like to make, just before opening it up to -- giving it to Dan and then opening it up for questions, is that the cost of additional grain prices is much more significant for developing countries than it is for the United States. And the reason for that is that they consume a significant share of their budgets in the form of food, and they also consume relatively more grain. We eat a lot of processed foods, we eat a lot of food out, and so our increase in food prices is only 4.5 percent, even though world food prices went up by 45 percent. So that's the difference there -- 43 percent. So that's the difference.
Let me stop there.
MR. STANZEL: With that we'll turn it over to Dan Price from the National Security Council, and he'll talk a little bit about our efforts internationally.
MR. PRICE: On the international side, there were really two principal components -- the President's announcement today. One was to deal with emergency food aid -- that is, getting food to the hungry. The second was a development piece, which is funding our development programs, which are aimed principally in three areas: one, increasing agricultural productivity; two, alleviating transportation distribution and supply-chain bottlenecks; and three, providing technical assistance in coordination with the World Bank and other organizations to promote sound, market-based policies.
I'll be pleased to respond to questions about those programs, but let me say in addition to those programs the President highlighted a number of things which underscore the fundamental point that policies matter. One, he urged countries that have instituted restrictions on agricultural exports to lift these restrictions so that food can get to where it is needed. And in this regard we welcome the recent announcement by the government of Ukraine to ease its export restrictions on grain. But countries need to do more.
Second, he urged countries to remove barriers to advance crops developed through biotechnology, noting that the crops are safe, they are resistant to drought and disease, and they hold the promise of producing more food for more people. The President also indicated we want to work with our G8 colleagues to secure their commitment not only for additional food aid, but for food development aid. And importantly, the President highlighted the tremendous significance of a successful conclusion of a Doha Round agreement, which would reduce and eliminate tariffs and other barriers and market-distorting subsidies for agricultural goods.
With that, why don't I stop and we can open it up for questions.
Q Yes, quick question on the $62.5 billion of '08 domestic food aid. Is that primarily food stamps, or does that include farm subsidies?
CHAIRMAN LAZEAR: It does not include farm subsidies. The largest program in that total is food stamps -- a little under $40 billion of the total. WIC, child nutrition are the next two largest programs in that crosscut.
Q And finally, with respect to the ethanol as a factor, albeit a small one in the increase in food prices, the President earlier this week said that growing crops for ethanol was a national security issue, that farmers should be growing energy for us. Is that in any way at odds with what you're finding in terms of the impact on food prices?
CHAIRMAN LAZEAR: No, I think -- what I gave you --
Q I'm sorry, who's talking?
CHAIRMAN LAZEAR: Oh, I'm sorry, this is -- yes, good point -- this is Ed Lazear speaking. What I gave you was just essentially an accounting method. I just gave you the facts based on what the numbers would imply, given the size of the ethanol crop and the size of that demand and how that would affect prices. So there really isn't any policy implication of that. It's just a straight number.
MR. PRICE: This is Dan Price. Could I also add that biofuels are critical to our energy security. And if you look at the renewable-fuels mandate of 36 billion gallons, you will note that the amount of that biofuels or renewables that can come from corn-based ethanol is limited to under 50 percent, or 15 billion gallons. Significantly, we think that the impact of biofuels on food prices will diminish over time.
We are working rapidly to invest in the next generation of biofuels, like cellulosic ethanol, that can be produced from switchgrass and wood chips instead of crops. And through 2009 the administration has dedicated nearly a billion to research development and demonstration of that cellulosic ethanol technology.
Q And Dan, was the 36 million gallons, is that a target -- 36 million gallons a day a target at some point?
MR. PRICE: No, that's 36 billion gallons through --
MR. McMILLIN: It was 2017; 20 in 10.
MR. STANZEL: Well, the energy bill that the President signed into law, that was '22, I believe. And if I'm wrong on that, we'll put an asterisk in the transcript. But the President had originally proposed a mandate for 2017. Congress did not go as far or as fast as the President, and the energy bill that he signed into law in December had that 36 billion gallon mandate.
Q Per year.
MR. PRICE: Not per year.
CHAIRMAN LAZEAR: By 2022.
MR. McMILLIN: In that year, that's the annual figure.
MR. STANZEL: Correct, per year, in that year.
Q Hi, gentlemen. I'm wondering, I'm assuming -- correct me if I'm wrong -- that you're looking for this money as part of the supplemental. And if so, how do you justify that, when you are telling Congress that it can't have any non-military priorities in the -- added into the supplemental?
MR. McMILLIN: This is Steve McMillin. That is actually not what we have told the Congress about what is appropriate to include in this supplemental. If you look back at the GWOT war security supplementals that have been considered a year ago, spring, the year before that, et cetera, it's actually quite typical for food aid to be a component of the international security piece of that supplemental request.
So we view this -- there are a variety of good reasons for the American government to spend its taxpayer dollars on these activities. Among them is the fact that spending this money in this way contributes to stabilizing unstable regimes in the developing world, and contributes to our national security. And that's why we've traditionally requested some of this funding through those supplementals, and the Congress has responded and then acted in those supplementals.
Q Okay, thank you. And given the minimal impact that ethanol has on food prices, that Chairman Lazear, I believe it was, outlined, would the administration oppose any efforts to alter the ethanol subsidies, as is being undertaken with the farm bill?
CHAIRMAN LAZEAR: Well, we've thought about subsidies. As you know, the President has -- is a free trader. He believes that we should have neither taxes nor subsidies that distort the economy, as we move into the long run. But it's always the case that when you make changes, you create some conditions that affect businesses, and so you have to take those transition conditions into account. And I think the President will be thinking about those in the near future.
Q I don't understand. You mean he will think about changes, or he will consider changes to the ethanol subsidies?
CHAIRMAN LAZEAR: I think he's always willing to consider changes and any good ideas. But he has not made a decision yet on whether he wants to do anything on the ethanol tax or subsidy situation right now -- tariff or subsidy situation, sorry.
MR. STANZEL: Chairman, maybe if you could talk about for a moment the impact of high oil prices on the demand for biofuels or ethanol.
CHAIRMAN LAZEAR: Sure. Most of what we're seeing right now is the fact that gasoline is so high justifies significant ethanol production, even in the absence of mandates and ethanol subsidies. So we would be seeing ethanol, even in the absence of ethanol subsidies.
The mandate that we have right now is not a binding mandate. I think that's an important point to make. So if you looked at the actual numbers, and you said, how much are we producing right now, we are producing 9.15 billion gallons of ethanol, estimated, in 2008, and that's how much we would produce based on the current prices of gasoline. So the fact that gasoline is so expensive makes it cost-competitive to produce ethanol. The mandate right now is only 9 billion gallons, so we would be above that without the mandate right now.
I hope that's helpful. Sorry to --
MR. McMILLIN: This is Steve McMillin. Just as a factual point, the ethanol tariff, in current law, would expire at the end of '08; the credit would expire at the end of 2010. And in the President's budget he sent up in February, he did not propose any renewal or extension of either of those.
Q Okay. That's -- I hadn't realized that. Interesting. Just lastly, on the calculation of the impact of ethanol on food prices, did you consider also the farmers moving to plant corn, and the impact that would have on other commodities? Or is that just not a significant factor?
CHAIRMAN LAZEAR: Yes, we did consider it. I wouldn't say it's not significant, but it's much smaller than the direct effect on corn. So if you get a direct effect of something like 2 percent, the indirect effect might be another 1 percent. And so that's the 2 to 3 percent range that we talked about.
Q Okay, thank you.
Q Hi. Will any of the money be apportioned for aid to North Korea, given the reports of famine? And would any of that aid be linked in any way to progress in the six-party talks?
MR. PRICE: No.
CHAIRMAN LAZEAR: That was Dan Price. (Laughter.)
MR. PRICE: Sorry.
CHAIRMAN LAZEAR: We're still getting used to identifying ourselves.
MR. PRICE: No.
MR. STANZEL: No is the answer. Next question.
Q Hi there. A question for Dan, if I may. Could you go into more detail on the role of GM foods in this issue -- genetically modified foods? How big a role could GM foods play in increasing global food supply? And have the barriers to genetically modified foods in Europe and elsewhere contributed to the current crisis?
MR. PRICE: Well, we think they are a challenge, and in two ways. First, biotech crops lead to higher yields, and bans on GMOs or biotechs discourage the planting of biotech crops in the developing world. That has two effects. It deprives them of the higher yields domestically, and it deprives them of export markets.
Q So these could be very significant in increasing food supplies.
MR. PRICE: We think so. Biotechnology and crops developed through biotechnolgy really have done wonderful things in terms of crop yield, drought resistance and insect resistance.
Q And just to make clear what the President is doing on this, he's -- will he press Europe on this issue in the forthcoming EU summit and at the G8 summit?
MR. PRICE: We will be -- as the President said, we will be urging all countries who have these barriers or restrictions in place to remove them.
Q Thank you.
Q Hi there. I'm just hoping for a couple more details on the actual announcement of the $770 million, and I actually missed -- couldn't hear very well at the very beginning, so Steve, you said that it was $770 million and then the $200 million was what you were referring to with the Bill Emerson Trust, I assume. Can you detail when these funds would be available? And if this is for FY '09, is this also in the Iraq war supplemental, and, you know, is this going to be available quickly enough? Aid groups are predicting that they're going to have to cut off more and more people even in May, June, July.
MR. McMILLIN: Well, the new announcement is a combination -- the Emerson Trust is a release that is happening and is available now. The $770 million is fiscal year 2009 money, which would be available October 1st. But we also have pending up there our previous request of $350 million for emergency food aid through P.L. 480 that would be available immediately upon enactment by the Congress.
But I don't want to minimize the importance of getting early announcement of and early action on that '09 money that would be available on October 1st. We've got -- you know, it's a complex system to get the food from where it's grown to where it's needed. And the pipeline, so to speak, with the variety of international organizations that help distribute this food aid, they need the certainty and they need to know that the pipeline is not going to go dry somewhere along the way.
Q Okay, so does the $770 million include the $200 million from the trust --
MR. McMILLIN: No.
Q -- or is that something separate? And is that -- I'm sorry, I just didn't understand -- will that be part of the bridge money that's also in the -- that's, like, parceled together with the FY '08 supplemental?
MR. McMILLIN: Just to break out the numbers, the $350 million that I mentioned, which was actually requested by the administration back in October, that is part of the $108 billion pending supplemental; it's been there for a while. The $200 million through the Emerson Trust, that's an administrative authority, a permanent administrative authority that doesn't require congressional action. The $770 million would be part of the '09 bridge supplemental that we understand the Congress seems likely to pair with the pending $108 billion supplemental.
Q Okay. But it wouldn't be able to be spent October?
MR. McMILLIN: That's correct, but again I want to emphasize there is great value to having early knowledge and early enactment of that funding so that these agencies can plan their programs knowing that the money is going to be there on October 1st and that we will be able to support those programs through the transition in the new fiscal year without interruption.
And that's especially important when you look at recent appropriations history over the past couple years. The regular appropriations bills for USAID and USDA tend to come very late, often weeks or months into the beginning of the fiscal year. As I noted before, our request for $350 million of food aid for this fiscal year has been before the Congress since October 22nd of last year. So we think it's a great opportunity to make sure that the program is on a sound footing if this funding can get enacted early so people can plan appropriately and be ready to put that money to use on October 1st.
Q To go over the numbers a little more, how does it break down -- there's talk of the nearly $5 billion in '08 and '09 is the total -- and I think, Mr. McMillin, you broke it down as $2.3 billion in '08 and $2.657 billion in '09 -- that's total U.S. overseas food aid, basically.
MR. McMILLIN: Food aid and food security initially --
Q And food security. What I'm wondering is how does the $770 million change those numbers? In other words, what were they before? And is the $350 million included in there?
MR. McMILLIN: The $350 million is included in the '08 total, the $770 million is included in the '09 total.
Q And that's just the simple math of it, that gets you to where it would be otherwise.
MR. McMILLIN: Yes.
Q Yes, I mean, there's no other -- I just wanted to make clear on that. And does the -- and how does the $770 million break down? You talk about how it's -- is it slightly different than the $350 million in that the $350 million is pure food aid, whereas this includes development money?
MR. McMILLIN: It is. The $770 million has -- the way we've broken it down is, about $395 million -- that is comparable to the $350 million; P.L. 480 Title II, emergency food aid. But we're also --
Q Three ninety-five?
MR. McMILLIN: Yes. But we're also looking to use a couple of additional tools. First of all, the USAID Disaster Assistance account -- that is going to be used in part to allow for some more efficient use of those food aid dollars. With the Disaster Assistance account, we can make some of those purchases locally and get food to the places they're needed more quickly. We can also use that to purchase other things that are not direct food aid, including vouchers for purchase of food, cash, seeds for small farmers, things of that nature.
So that's $225 million for the Disaster Assistance account, and then, third, $150 million for development assistance. This is getting at the longer-term, multi-year effort that's going to be required to improve the ability of the developing world to feed itself. And we think that is every bit as important a thing to focus on as the simple immediate act of putting food on people's plates.
Q Did you have -- I'm sorry -- do you have any -- and somebody can get back to me about it -- but I was just curious on the further back historical numbers, on what that total food aid number is each year, how it's varied -- it's going to be 2.3 --
MR. McMILLIN: Right. Just let me give you '06 through '09, down to the million -- and then if you need further breakdown, maybe you can contact our press office after -- $1.750 billion in 2006; $2.129 billion in 2007; $2.341 billion in 2008; and $2.657 billion in 2009.
Q Hi, guys. Two quick questions. One would be, can you run down the breakdown of the $770 million real quickly again? I apologize for making you repeat that. And then second, is there any concentration around the world, any areas where a lot of this food aid and development assistance is going to be concentrated?
MR. STANZEL: Well, it will be in the transcript, Jon, in terms of the $770 million. We can give you those numbers real quick again, Steve and me. The numbers on the $770 million, real quickly, were --
MR. McMILLIN: Three-ninety-five million for P.L. 480 Title II emergency food aid, $225 million for Disaster Assistance for USAID, and then $150 million for Development Assistance also through USAID.
Q Okay, thanks. And then as far as concentrations around the world areas?
MR. PRICE: Yes, this is Dan Price. The majority of the assistance will be going to Africa. And USAID would probably have the most up-to-date information of countries of greatest concern. As you know, they have developed a Famine Early Warning System that helps to assess the level of hunger and risk of emergency needs.
Q And when you said the majority of the assistance, is that the emergency food aid, primarily, or all three categories?
MR. PRICE: All three.
Q Okay, thanks.
Q With next year's food aid jumping up to $2.657 billion over this year's $2.3 billion, a) how does that compare with last year, and b) what is your expectation for next year's global food inflation? If it went up 43 percent last year, a 10 percent gain for next year could be less than the rate of actual global food price gains.
MR. McMILLIN: This is Steve McMillin; I'll take the first one. The '07 comparable number was $2.129 billion. And I'll turn to Ed for the other question -- Ed Lazear.
CHAIRMAN LAZEAR: On the food inflation, we don't expect food inflation to be as high as it was last year. The main reason is that while levels will stay high, we don't expect the same kind of change that we saw last year. The reason is that much of that was weather-related, and you don't expect the same kinds of adverse weather shocks to be repeated this year. As a result of weather -- bad weather this year, storage capacity -- storage has been reduced, and so prices, the level of prices, will remain high, but we don't expect prices to increase. In fact, there might be even a slight decrease over the next year or two.
Q Hi, just to clarify one number from the beginning of the call, you said that global food prices were up 43 percent since last year. Are you talking about 43 percent in the first few months of 2008, or are you talking about what happened during 2007?
CHAIRMAN LAZEAR: March through March.
Q March through March. That's helpful, thanks.
MR. STANZEL: All right, thank you all very much for joining us. I appreciate it. And like I said, this call will be transcribed and available at whitehouse.gov. Additionally, you should be getting a fact sheet that you can refer to as well. And the President's remarks are also available at whitehouse.gov. Thank you for your time.
END 4:35 P.M. EDT