Farm and Food Support Under USDA's Section 32 Program

Prepared for Members and Committees of Congress

“Section 32” is a permanent appropriation that since 1935 has earmarked the equivalent of 30%
of annual customs receipts to support the farm sector through a variety of activities. Today, most
of this annual appropriation is transferred to the U.S. Department of Agriculture (USDA) account
that funds child nutrition programs (i.e., $5.7 billion transferred of approximately $7 billion total).
However, the Secretary of Agriculture has long had broad discretion in how to spend the non-
transferred (unobligated and carry-over) money, which now amounts to approximately $1.5
billion annually. The Secretary historically has chosen to use much of this non-transferred money
to purchase non-price-supported commodities like meats, poultry, fruits, vegetables, and fish,
which are diverted to school lunch and other domestic food programs; and to fund farm economic
and disaster relief activities, among other things.
The 110th Congress in May 2008 passed a new omnibus farm bill (P.L. 110-234). Provisions in
this new law now spell out more explicitly how the Secretary is to use the annual Section 32
appropriation. One section of P.L. 110-234 requires new higher minimum levels of fruit,
vegetable, and nut purchases (in fresh, frozen, canned, or dried forms) to support domestic
nutrition programs. A separate section requires the Department to use Section 32 to fund a fresh
fruit and vegetable program for participating elementary schools, with spending to grow from
$105 million in FY2009 to $150 million by FY2012. Another part of the new law delineates how
the Secretary is to allocate the annual Section 32 appropriation—in order to cover the cost of the
fresh fruit and vegetable purchases.
Separately, USDA’s FY2008 appropriation (part of the Consolidated Appropriations Act, 2008,
P.L. 110-161) also appears to limit somewhat the availability of Section 32 monies. It rescinds a
total of $684 million, including $184 million that otherwise was projected to be available in
FY2008 for surplus purchases (called “Estimated Future Needs” in AMS budget parlance) and
$500 million in prior unobligated balances.
These congressional actions may be expected, in effect, to limit the wide discretion that
policymakers have long exercised with regard to program spending under this account.
Meanwhile, various Members of Congress and their constituents still want to ensure that a portion
of the Section 32 fund will continue to be available—and be used, when necessary—to help
producers recover at least a portion of their losses when natural disasters or unanticipated
economic setbacks arise and to help domestic nutrition programs through surplus purchases.

What Is Section 32?.........................................................................................................................1
How the Account Has Operated................................................................................................1
Uses of Section 32 Funds................................................................................................................3
Commodity Purchases...............................................................................................................3
Entitlement Purchases.........................................................................................................3
Contingency Fund Purchases..............................................................................................4
Donations of Contingency Purchases.................................................................................5
Disaster Assistance....................................................................................................................5
Other Section 32 Uses...............................................................................................................6
Provisions of the 2007-2008 Farm Bill.....................................................................................6
Administration Proposal.....................................................................................................6
Farm Bill Language............................................................................................................7
FY2008 Appropriations Action.................................................................................................8
Table 1. Total Annual Contingency Purchases................................................................................4
Table 2. Section 32 Contingency Fund (Bonus) Purchases, by Commodity,
FY1995-FY2007 .......................................................................................................................... 4
Table A-1. Section 32 Funding, FY1992-FY1999..........................................................................9
Table A-2. Section 32 Funding, FY2000-FY2007.........................................................................11
Appendix. Section 32 Funding, FY1992-FY2007...........................................................................9
Author Contact Information..........................................................................................................18

Section 32 of the act of August 24, 1935 (P.L. 74-320 as amended; 7 U.S.C. 612c) authorizes a
permanent appropriation equal to 30% of annual U.S. customs receipts. The appropriation was
first created to assist Depression-era producers of non-price-supported commodities. The law
specifies that Section 32 funds are to be used only for (1) encouraging the export of farm products
through producer payments or other means; (2) encouraging the domestic consumption of farm
products by diverting surpluses from normal channels or increasing their use by low-income
groups; and (3) reestablishing farmers’ purchasing power.
The Secretary of Agriculture has always had considerable discretion in deciding how to achieve
these broad objectives. Unused amounts of up to $500 million a year may be carried into the next
fiscal year. Some believe this discretion is too broad, essentially providing the Secretary with a
“blank check” to spend money without enough guidance from Congress. Others believe such
flexibility is desirable if the Secretary is to respond to problems in unpredictable agricultural
markets or the needs in domestic nutrition programs.
Most of the annual Section 32 appropriation (for example in FY2007, more than $5.7 billion of
approximately $7 billion) is simply transferred by annual appropriation laws to the U.S.
Department of Agriculture (USDA) account that funds child nutrition programs. However, the
Secretary of Agriculture, acting through the Department’s Agricultural Marketing Service (AMS),
has chosen to use a smaller but still significant portion of Section 32 funds—the portion not
transferred—to purchase non-price-supported commodities like meats, poultry, fruits, vegetables,
and fish, which are then used in school lunch and other domestic food programs. These purchases
are intended both to fulfill requirements (under other federal laws) that such commodities be
provided, and also to support farm prices. In addition, the Secretary has chosen to use other non-
transferred funds to provide direct or diversion payments to producers for disaster or economic
losses, and to provide food commodities to victims of natural disasters, among other activities.
The 2008 farm law (P.L. 110-234), which Congress approved in May 2008, spells out more
explicitly how the Secretary is to use the annual Section 32 appropriation. This is expected, in
effect, to limit the wide discretion that policymakers previously exercised with regard to program
spending under this account.
An accounting of a completed fiscal year (FY2007) provides a snapshot of how money has 1
traditionally been collected and spent. The program’s permanent appropriation was $7.029
billion, representing 30% of prior calendar-year customs receipts. This figure was reduced by:
• $38 million, a rescission mandated by Congress for budgetary savings.
• $5.731 billion, transferred to the child nutrition program cash account, to help
pay for federal child nutrition programs budgeted at about $13.345 billion in

1 Primary sources: USDA Budget Explanatory Notes for Committee on Appropriations, FY2007 and FY2008; and
unpublished January 2008 data from the AMS budget office. All figures are rounded to the nearest million dollars.

FY2007. (The difference, $7.614 billion, was provided directly to the child
nutrition programs through the annual, i.e., FY2007, USDA appropriation.)
• $83 million (the equivalent of 30% of customs revenue from fish product
imports), transferred to the Commerce Department for fisheries activities.
This left $1.778 billion, to which was added $147 million in unobligated FY2006 money that
was carried into FY2007. A further upward adjustment was made to account for the recovery of
$139 million in money that was committed earlier but not spent, bringing the amount available
for obligation to $1.464 billion. From this:
• $465 million was designated for planned AMS commodity purchases to partially
fill the commodity assistance entitlement set by the school lunch act. (This law
mandates USDA commodity support for each meal served—in FY2007, an
average of more than 17 cents—for a total of $919 million. To buy these
commodities, $454 million, provided from USDA’s FY2007 child nutrition
appropriation, was added to the $465 million set aside from Section 32 funds.)
• $200 million in additional commodities were purchased to fulfill another school
lunch act requirement that at least 12% of assistance be provided to schools in the
form of commodities.
• $102 million was made available by USDA in direct payments mainly to
compensate Florida crop producers for hurricane and disease losses, and some for
livestock payments.
• $11 million went for disaster relief foods (e.g., for Hurricane Katrina).
• $47 million was used for AMS administrative expenses for direct food
purchasing (including the cost of setting up a new Web-based supply
management system), and for oversight of federal marketing orders.
• $2 million was used for the removal of defective commodities (primarily canned
beef stew contaminated by E. coli bacteria);
• $57 million was used for “emergency removals” of surplus commodities
throughout the fiscal year ($55 million for various fruit and vegetable products; 2
$1 million for lamb, and nearly $1 million for geese).
Subtracting the above spending, AMS had a potential “carryout,” or unobligated balance, of $581
million at the end of the year. However, the Section 32 law permits no more than $500 million to
carried into the subsequent fiscal year. So, AMS returned the excess, or $81 million, to the U.S.
The Appendix to this report contains tables that provides a more detailed accounting of Section
32 spending by type of activity for each year from FY1992 through FY2007, followed by a
narrative explanation of each activity.

2 As noted earlier, such emergency purchases are provided as abonus” to schools (over and above their “entitled”
amounts) and to other designated domestic food assistance programs.

Commodity purchases are perhaps the best-known use of Section 32 funds. They began shortly
after passage of the 1935 law and continue today. USDA seeks outlets for these purchases that do
not disrupt private markets. More specifically, Section 32 pays for direct purchases of
commodities that are not covered by agricultural price support through USDA’s Commodity
Credit Corporation (CCC). Unlike CCC price-supported commodities (e.g., milk, grains and
oilseeds, cotton, sugar), Section 32 does not specify which commodities must be assisted, at what
levels, or how (except within the three broad purposes described on page 1). Such decisions are
left to the Secretary of Agriculture.
Early in the program, USDA began donating Section 32 purchases to low-income families and
schools, on the premise that the donations would supplement, not displace, normal food purchases
by these recipients. Distribution of Section 32 commodities is credited with stimulating growth of
the national school lunch program.
Actually, school lunch and other domestic nutrition programs have been benefitting in two ways
from Section 32 funds. First, as noted, much of the Section 32 permanent appropriation simply is
transferred into USDA’s Food and Nutrition Service (FNS) child nutrition account (how much to
transfer is determined by congressional appropriators based on USDA’s recommendations). This
transfer is supplemented by a separate direct appropriation provided through the annual USDA
appropriation law. The commingled funds are then used to provide cash and commodity subsidies
to schools and other eligible program sponsors for meals served to children.
Second, a smaller—but still significant—amount of Section 32 money is used to purchase non-
price-supported commodities directly and provide them to schools and to other domestic feeding
programs. These purchases are made for FNS through USDA’s Agricultural Marketing Service
(AMS). Some of these commodities ($650 million worth in FY2007) are mandated; for example,
Sections 6, 13, and 14 of the Richard B. Russell National School Lunch Act (P.L. 79-396)
“entitle” schools and other child nutrition program sponsors to commodities worth specific dollar
Other commodities are provided as a “bonus” to schools and other domestic food programs; these
commodities are obtained separately when AMS makes “emergency” commodity purchases to
relieve farm surpluses that occur throughout the year (bonus purchases were valued at $57 million
in FY2007, the lowest level of such purchases since FY1996).
In planning the mandated, or entitlement, commodity purchases, USDA agencies consult with
major commodity organizations and devise, by early spring, a tentative purchase plan for the next
school year (purchases may begin in May). The plan is based on prior year purchases, likely
school needs, expectations of available funds, and any anticipated surplus or other market
conditions in the coming year, among other things. AMS issues the bid specifications for
purchasing the products, generally in processed form, for delivery to state drop-off points. The

Kansas City office of USDA’s Farm Service Agency (FSA) administers the purchase contracts
and pays the vendors.
Over the course of the year, USDA taps the contingency reserve for so-called emergency surplus
removals, which are then distributed as “bonuses” to domestic food assistance programs. The
department may learn about these needs through its own commodity experts or be informed of
surpluses or other economic problems by farm and industry organizations. Table 1 shows the
annual value of these purchases since FY1996.
Table 1. Total Annual Contingency Purchases
(FY1995-FY2006, in millions)
1996 $56.2 2000 $200.2 2004 $226.5
1997 $100.9 2001 $200.2 2005 $149.5
1998 $194.8 2002 $206.9 2006 $81
1999 $144.5 2003 $222.1 2007 $56.9
As Table 2 on the following page indicates, some commodities are bought more frequently than
others. AMS made contingency purchases of salmon in 11 out of the 13 years examined, at a total
cost of nearly $112 million. Other relatively frequent purchases were of peaches, apricots,
cherries, walnuts, beef, potatoes, apples, asparagus, figs, pears, and pork.
Were these contingency purchases, particularly of commodities bought in multiple years,
justified? AMS maintains that each of its purchase decisions is based on an analysis of market
conditions at the time, and that industry requests to buy products are rejected if conditions do not
justify them. Some have questioned the decision-making process. In a 2005 assessment, the
Office of Management and Budget (OMB) concluded that Section 32 had not adequately
demonstrated results due to, among other things, unclear purposes, no basic criteria for surplus 3
commodity purchases, and lack of performance measures. What OMB and other critics view as
flaws, program supporters view as flexibility to quickly and efficiently address agricultural
Table 2. Section 32 Contingency Fund (Bonus) Purchases, by Commodity,
Total Value Number of Total Value Number of
Purchased Years Purchased Years
Commodity (million $) Purchased Commodity (million $) Purchased
almonds 29.6 3 grapefruit 20.0 5
apples 96.4 7 lamb 28.1 6
apricots 67.5 10 mixed fruit 17.5 2
asparagus 28.0 9 oranges 69.5 4

3 This assessment can be accessed at

Total Value Number of Total Value Number of
Purchased Years Purchased Years
Commodity (million $) Purchased Commodity (million $) Purchased
beans 16.7 3 peaches 164.4 10
beef 125.8 7 pears 46.7 6
bison 18.5 3 pineapple 21.3 5
black-eyed 4.0 2 plums 8.2 3
blackberries 0.9 2 prunes 20.3 3
blueberries 40.6 5 pork 163.3 5
catfish 6.0 2 potatoes 102.8 7
cheese 5.0 1 raisins 88.7 5
cherries 109.1 9 raspberries 4.9 5
corn 5.1 1 salmon 111.7 11
cranberries 73.8 5 strawberries 14.6 4
currants 0.2 1 sweet 38.2 5
dates 10.8 5 tomatoes 22.8 4
egg products 10.0 1 trail mix 97.1 4
figs 23.5 6 tuna 14.0 2
fowl (spent) 25.8 3 turkey 66.4 4
goose 1.8 2 walnuts 65.9 8
grape juice 26.0 4 Total 1,911.5
Source: USDA and House Appropriations Committee, various hearing reports. Each category represents
commodities and/or any foods processed from them, purchased by AMS. Purchases for each category are cumulative
for the 13-year period covered.
Besides schools and child care centers, recipients include soup kitchens, food banks, and others
serving the needy. The annual total of contingency purchases—and thus the foods provided to
these outlets—has varied. Recent annual totals have varied from $56 million in FY1996 to more
than $226 million in FY2004; the total has declined steadily since FY2004, to $57 million
FY2007 (Table 1). The drop in purchases raises concern among many domestic food providers.
They concede that the food they have received through this Section 32 activity is a “bonus” and
not an “entitlement,” but say they had come to rely on the higher levels of prior years to help
meet client demand.
In 2002 and again in 2004, the Bush Administration decided to use Section 32 to pay for special
disaster initiatives. On September 19, 2002, USDA announced a “Livestock Compensation
Program” to cover 2001 and 2002 drought losses by cattle, lamb, and buffalo producers in 37
states. From late FY2002 through FY2003, total Section 32 monies for this program reached just

over $1 billion, a level that appeared to be unprecedented under Section 32, according to long-
time observers. Some other producer groups and domestic food program interests had contended
at the time that diverting so much money to these payments threatened the solvency of the
contingency fund needed to make the many bonus purchases throughout the year for fruit,
vegetable, poultry, pork, and other commodity groups suffering surpluses and/or low prices. Also,
commodity recipients, especially food banks, pointed out that they rely heavily on Section 32
bonus foods (even though such foods are not entitlements) to help supplement their resources.
To help pay for the disaster program and still cover “normal” contingency purchases, officials
made several adjustments in various USDA spending accounts for FY2003. Strains on the Section
32 budget also were relieved somewhat when Congress approved a provision in the omnibus
FY2003 appropriation resolution (H.J.Res. 2) transferring $250 million from the CCC account to
replenish the Section 32 account to carry out emergency surplus removals. The Administration
turned to Section 32 in FY2004, FY2005, and FY2006, spending more than $1.3 billion over the
four years in direct payments primarily to producers of fruits, vegetables, and nursery crops for
hurricane and/or disease losses—for example, $100 million in FY2007 to growers whose trees
were eradicated to combat citrus canker. Other notable portions went for livestock assistance for
various losses. In a disaster assistance package included within the FY2005 Military Construction
Appropriations Act (P.L. 108-324), Congress transferred $90 million from the CCC account to the
Section 32 account to cover some of the past spending.
USDA also uses its broad discretionary authority to spend Section 32 money on other activities.
For example, in FY1999 it used $178.3 million to make direct payments to hog producers
affected by low market prices. (An emergency FY1999 appropriation, P.L. 106-31, included an
extra $145 million to reimburse Section 32 for a portion of these costs.) Export subsidies and
related activities also have been supported in the past. Section 32 funded a pilot food stamp
program in the early 1960s, paid for production and diversion payments to other producers in past
years, and supported several supplemental feeding programs.
Congress itself periodically designates other uses. For example, it designated an additional $75
million for Section 32 in a 1983 jobs law (P.L. 98-8), to purchase and distribute foods to needy
families in high unemployment areas. Congress earmarked $10 million of Section 32 funds for
the special purchase of sunflower oil in FY1988, and $50 million for a similar program in
In early 2007, the Administration announced its recommendations for a new farm bill. One of
these recommendations was to spend an additional $2.75 billion of Section 32 funds, spread over
10 years, to purchase more fruits and vegetables for the domestic nutrition programs, with the aim
of increasing recipients’ consumption of these products. This would have brought total fruit and
vegetable purchases (mandated and bonus combined) to approximately $500 million or more per
year—although the exact level would depend on how USDA calculated current “average”

Administration officials indicated that these new purchases would not increase Section 32
spending beyond current “baseline” projections. However, it was unclear at the time how the
Administration could avoid “new spending” unless it diverted some current Section 32 spending
from other commodity purchases (e.g., of meat, poultry, fish) or from other potential Section 32
uses, such as future disaster assistance.
Congress developed its own approach to increased fruit and vegetable purchases in the new farm
law (P.L. 110-234). The law encompasses several provisions aimed at fulfilling the goal of
increased fruit and vegetable consumption while maintaining Section 32 spending within the
budget baseline. First, under the nutrition title (Title IV), §4304 amends the Richard B. Russell
National School Lunch Act [after (42 U.S.C. 1769)] to authorize a new program to provide fresh
fruits and vegetables in selected elementary schools nationwide, targeting those with higher
numbers of students who are eligible for free or reduced price meals. The program is to replace a
similar, smaller one funded at about $20 million in FY2008. Under §4304, funding is mandated in
the following amounts, to come from Section 32: $40 million on October 1, 2008; $65 million on
July 1, 2009; $101 million on July 1, 2010; and $150 million on July 1, 2011. For each
succeeding July 1, the 2011 amount is to be adjusted for inflation.
Second, the bill—in §14222, in Title XIV, the miscellaneous title—spells out explicit instructions
on how each year’s Section 32 money must be allocated. These instructions are intended as a way
to fund the fresh produce program without raising spending above the budget baseline, as
estimated by the Congressional Budget Office (CBO). They contain a statutory formula that
essentially caps Section 32 “unobligated” funds: that is, the amount the Secretary (through AMS)
is permitted to spend after transfers for use in the child nutrition programs and to Commerce for
fisheries activities. These annual caps rise gradually from $1.173 billion in FY2009 to $1.322
billion in FY2017 (and thereafter are tied to inflation).
Under the new law, the funding for the fresh fruit and vegetable program (noted above) is
required to come out of these capped, unobligated amounts. After subtracting this funding, the
remainder is the maximum that the Secretary is permitted to spend for all other traditional Section

32 activities, such as surplus commodity purchases, farm economic and disaster assistance,

administration of marketing orders, and so forth. For example, in FY2009, $105 million of the
$1.173 billion cap must be used for the fresh fruit and vegetable program. That will leave $1.068
billion for all other Section 32 activities. Thus, the apparent effect of the new farm law is to
constrain policymakers’ historical discretion in Section 32 spending decisions.
A separate provision in the new law (§4404 in the nutrition title) seeks to resolve differing
perceptions of a directive, in the 2002 farm bill, to spend not less than $200 million of Section 32
funds annually to buy fruits, vegetables, and other specialty crops for domestic nutrition
programs. USDA has maintained that it already spends more than this level each year, when both
mandatory and contingency (bonus) purchases are counted. In fact, Section 32 specialty crop
purchases averaged $308 million annually over FY2000-FY2006, according to USDA purchase
data examined by CRS. The 2002 farm bill conference report had directed that the $200 million
should be in additional purchases, and Senate reports accompanying annual USDA appropriations
have reminded USDA of these farm bill instructions. However, USDA officials argued that these
instructions were not binding because they were in report language rather than in the law itself.

To clarify this situation, §4404 of the new law states that the Secretary shall purchase, “in
addition to the purchases” made under the 2002 law, the following amounts of fruits, vegetables,
and nuts for domestic nutrition programs: $190 million for FY2008; $193 million for FY2009;
$199 million for FY2010, $203 million for FY2011; and $206 million for FY2012 and each
subsequent year. In other words, the Department is now bound by law to purchase at least $390
million in fruits, vegetables and nuts in FY2008, a minimum that will gradually increase to $406
million by FY2012. (These purchases can be purchased in frozen, canned, or dried as well as
fresh forms under §4404.) The additional purchases required by the 2008 farm bill match CBO
projections as to what the Department is likely to spend in future years.
Other language in P.L. 110-234 also will affect Section 32. Under §4305 in the nutrition title, the
Secretary is required to purchase whole grains and whole grain products for use in the school
lunch and breakfast programs. Under §14222 in the miscellaneous title, the Secretary must make
available, in FY2009 only, $4 million in Section 32 funding for these purchases, further reducing
the “unobligated” pot of Section 32 money.
USDA’s FY2008 appropriation was passed along with 10 other appropriations bills in the
Consolidated Appropriations Act, 2008 (P.L. 110-161). This law also appears to include an effort
to rein in USDA-AMS’s discretionary use—or at least the availability—of Section 32 monies. It
rescinds a total of $684 million: $184 million that otherwise was projected to be available in
FY2008 for surplus purchases (called “Estimated Future Needs” in AMS budget parlance), plus
$500 million in prior unobligated balances. The committees noted, in accompanying explanatory
language, that even with this rescission, $297 million will still be provided for estimated future
needs (i.e., the contingency fund) in FY2008.

Table A-1. Section 32 Funding, FY1992-FY1999
Fiscal Year: 1992 1993 1994 1995 1996 1997 1998 1999
1. Approp. (30% Customs
Rcpts.) 5,161,360 4,978,817 5,355,069 5,789,936 6,263,764 5,923,377 5,730,108 5,701,866
2. Rescission -5,287 -5,000 -7,958
3. Ag Risk Prot. Act (P.L.
4. Transfer fr. CCC or
Supplemental 145,000
iki/CRS-RL340815. Transfer to FNS -4,675,092 -4,290,455 -4,770,109 -5,249,077 -5,597,858 -5,433,753 -5,151,391 -5,048,150
g/w6. Transfer to Commerce
s.or(fisheries) -64,113 -61,408 -61,944 -64,765 -72,893 -66,381 -65,734 -66,426
6a. GSA Board of Contract
http7. Budget Authority (net of
above lines) 422,155 626,954 523,016 470,807 588,013 423,243 512,983 724,332
8. Unobligated Prior Year
Balance 262,430 120,788 246,301 245,951 235,129 300,000 233,868 131,967
9. Recovery Prior Year
Obligations 14,634 39,737 20,805 25,755 739 38,784 - 3,528
9a. Offsetting Collections
10. Available for Obligation
(net of above) 699,219 787,479 790,122 742,513 823,881 762,027 758,306 859,827

Fiscal Year: 1992 1993 1994 1995 1996 1997 1998 1999
11. CN Commodity
Purchases 399,051 399,914 399,714 399,876 399,084 399,949 400,000 400,000
12. State Option Contracts
13. Removal Defective
14. F&V Pilot Project
15. Emergency Surplus
Removals 102,928 63,399 78,452 96,679 56,172 100,947 194,774 144,484
16. Diversion Payments 8,600 -300 9,000
17. Livestock Drought Relief
iki/CRS-RL3408118. Other Direct Payments 178,265
leak20. Disaster Relief 11,175 4,636 3,463 530 1,168 2,150 15,200 7,014
://wiki21. Specialty Crop Purchases (P.L. 106-224)
22. Oilseed Purchases (CCC) 50,000 50,000 50,000 23,900
PROCUREMENT 563,154 526,549 531,629 496,785 480,324 512,046 609,974 729,763
24. Commodity Purchase
Services 5,989 5,060 4,423 5,907 5,733 5,624 6,176 6,580
25. Marketing Agreements &
Orders 9,288 9,569 8,118 9,977 10,016 10,488 10,189 10,853
26. TOTAL,
ADMINISTRATIVE FUNDS 15,277 14,629 12,541 15,885 15,750 16,113 16,365 17,433
27. TOTAL OBLIGATIONS 578,431 541,178 544,170 512,669 496,073 528,158 626,339 747,196

Fiscal Year: 1992 1993 1994 1995 1996 1997 1998 1999
[line 10 minus
line 27] 120,788 246,301 245,951 235,129 327,808 233,868 131,967 112,630
28.Unobligated Balance Returned to Treasury 27,808
29.Unobligated Balance, End
of Year 120,788 246,301 245,951 235,129 300,000 233,868 131,967 112,630
Source: House Appropriations Committee reports and USDA Budget Explanatory Notes, various years; AMS personal communication. Table compiled by CRS.
Table A-2. Section 32 Funding, FY2000-FY2007
Fiscal Year: 2000 2001 2002 2003 2004 2005 2006 2007
1. Approp. (30% Customs Rcpts.) 5,735,558 5,738,449 6,139,942 5,798,093 5,927,395 6,052,036 6,481,777 7,029,269
2. Rescission -15 -468 -163,000 -37,601 -37,601
iki/CRS-RL340813. Ag Risk Prot. Act (P.L. 106-224) 200,000
g/w4. Transfer fr. CCC or Supplemental 250,000 90,000
://wiki5. Transfer to FNS -4,935,199 -5,127,579 -5,172,458 -4,745,663 -4,699,661 -5,152,962 -5,187,621 -5,731,073
http6. Transfer to Commerce (fisheries) -69,921 -72,828 -79,127 -75,224 -79,724 -77,539 -79,284 -82,817
6a. GSA Board of Contract Appeals -47
7. Budget Authority (net of above lines) 730,423 738,042 887,889 1,227,206 1,148,010 748,535 1,177,271 1,177,731

8. Unobligated Prior Year Balance 112,630 241,270 107,825 192,156 134,322 408,051 286,160 146,760
9. Recovery Prior Year Obligations 50,355 3,254 40,157 5,518 24,273 60,039 120
9a. Offsetting Collections 139,277
10. Available for Obligation
(net of above) 893,408 982,566 995,714 1,459,519 1,287,850 1,180,859 1,523,470 1,463,888

Fiscal Year: 2000 2001 2002 2003 2004 2005 2006 2007
11. CN Commodity Purchases 400,000 400,000 399,935 200,000 400,000 399,322 549,792 664,860
12. State Option Contracts 948 3 134 0 0
13. Removal Defective Commodities 500 1,000 67 36 0 1,871
14. F&V Pilot Project 6,000
15. Emergency Surplus Removals 200,215 200,234 206,898 222,090 226,475 149,496 81,010 56,892
16. Diversion Payments 30,778 11,900
17. Livestock Drought Relief 172,867 867,000
18. Other Direct Payments 39,700 8,000 218,750 278,763 700,000 101,650
19.Lamb Grading/Certification 957 592 103 100
iki/CRS-RL3408120. Disaster Relief 500 9,200 40,597 1,901 11317
g/w21. Specialty Crop Purchases
s.or(P.L. 106-224) 199,991
leak22. Oilseed Purchases (CCC)
://wiki23. TOTAL, COMMODITY PROCUREMENT 631,493 852,782 786,292 1,299,641 854,595 868,348 1,332,703 836,590
24. Commodity Purchase Services 8,406 8,964 6,906 11,199 10,266 10,848 28,866 31,146
25. Marketing Agreements & Orders 12,241 12,995 10,359 14,844 14,938 15,502 15,141 15,493
26. TOTAL, ADMINISTRATIVE FUNDS 20,646 21,959 17,265 26,042 25,204 26,350 44,007 46,639
27. TOTAL OBLIGATIONS 652,140 874,741 803,557 1,325,684 879,799 894,698 1,376,710 883,229
[line 10 minus
line 27] 241,270 107,825 192,156 134,322 408,051 286,160 146,760 262,399
28.Unobligated Balance Returned to Treasury 80659
29.Unobligated Balance, End of Year 241,270 107,825 192,156 134,322 408,051 286,160 146,760 500,000
Source: House Appropriations Committee reports and USDA Budget Explanatory Notes, various years; AMS personal communication. Table compiled by CRS.

Unless noted, the sources for the above tables are various House Appropriations Committee and
USDA budget documents. The data were confirmed and updated by the budget office of USDA’s
Agricultural Marketing Service (AMS), which administers the account. Following are
explanations of each of the activities, by numbered line, in the tables.
This represents the equivalent of 30% of gross U.S. customs receipts collected during the
calendar year preceding the fiscal year in which the funds are to be used. These are the total funds
available to Section 32 in a given year.
In some years, Congress has rescinded a specified portion of the funds available as unobligated
balances (see lines 28 and 29, below). Rescissions, represented in these tables as negative
numbers, generally are to achieve budgetary savings. For example, the FY2006 appropriations act
for USDA and related agencies (H.R. 2744; P.L. 109-97) contained a Section 32 rescission of
$37.6 million. As noted, much more money was rescinded under the appropriation for 2008 (P.L.
110-161), a total of $684 million—$184 million that otherwise was projected to be available in
FY2008 for surplus purchases (called “Estimated Future Needs” in AMS budget parlance), plus
$500 million in prior unobligated balances.
P.L. 106-224 both amended the federal crop insurance program and also provided emergency
“market loss” payments to producers of a variety of agricultural commodities. Section 203 of the
act provided $200 million that the Secretary was required to use to purchase “specialty crops that
have experienced low prices during the 1998 or 1999 crop years, including apples, blackeyed
peas, cherries, citrus, cranberries, onions, melons, peaches, and potatoes.” The obligation of this
money appears in line 21, below.
On several occasions, Congress has provided additional funds to the Section 32 account (i.e., over
and above amounts made available by the permanent appropriation) in order to address other
specific situations. This occurred for FY2005, for example, when Congress directed USDA to
transfer $90 million from the Commodity Credit Corporation (CCC; the funding mechanism for
the Department’s farm price and income support programs) to help cover some of the costs of
Section 32-financed disaster payments to Florida producers of fruits, vegetables, and nursery
crops hit by hurricane losses. A transfer also was made at Congress’s direction for FY2003, when
$250 million was moved from the CCC to help recover a portion of the costs of a Section 32-
funded drought assistance program that totaled more than $1 billion (over FY2002-FY2003; see
line 17 under the obligations entries.) For FY1999, Congress appropriated an extra $145 million
to help cover about $178 million in direct payments to hog producers in response to historically
low prices (see line 18, below).

This is the amount (represented as a negative number) that is transferred each year to USDA’s
Food and Nutrition Service (FNS) to cover a portion of the cost of the child nutrition programs.
For example, for FY2007, the total child nutrition appropriation was $13.345 billion; this total is
primarily based on the entitlement spending requirements of the National School Lunch Act (42
U.S.C. 1751 et seq.) and the Child Nutrition Act of 1966 (42 U.S.C. 1771 et seq.). To meet this
total spending level, the annual appropriation provided $7.614 billion and designated that the
other approximately $5.731 billion come from Section 32. These yearly determinations of how
much to directly appropriate and how much to transfer from Section 32 generally are made by
congressional appropriators based on Administration recommendations.
Under the Fish and Wildlife Act of August 8, 1956 (16 U.S.C. §§742a -754j-2), an amount
equivalent to 30% of the gross U.S. customs receipts collected on imported fishery products is
transferred to the Department of Commerce to promote, research, and develop fishery products
(also represented as a negative number).
To determine how much is available to Section 32 after the required transfers, two items are
added to the budget authority in line 7. They are the unobligated prior year balance (line 8),
representing what AMS did not spend during the previous year on various Section 32 obligations;
and any recoveries of obligations that were made but not spent in prior years (line 9). The
“offsetting collections” (line 9a) of $139.3 million were returned to Section 32 from USDA’s
Farm Services Agency as unused funds from a disaster-related direct payment event.
AMS uses the money in this total amount (in line 10) to pay for activities that fall within two
broad “obligations” categories: commodity procurement (lines 11 through 22, below), and
administrative funds (lines 24 and 25, below).
Section 6(e) of the school lunch act requires USDA-FNS to provide support in the form of
commodities for each meal served. In FY2007, this rate averaged more than 17 cents per meal
served, for a total of $919 million. Another school lunch act requirement has mandated that at
least 12% of total assistance (cash plus commodities combined) be in the form of commodities.
To reach this level, USDA had to spend another $200 million for commodities, bringing total
commodity “entitlement” spending to $1.119 billion. To buy these commodities, USDA used
$665 million in Section 32 money (the amount in this line), plus $454 million in child nutrition
account money.
In past fiscal years, USDA had budgeted approximately $400 million for the Section 32 share of
these costs. This number dropped to $200 million in FY2003, as funds were shifted to help cover
the costs (approximately $1 billion) for a special livestock drought assistance program announced
in 2002. The “lost” $200 million in child nutrition entitlement commodities were still purchased;
the Department moved some unobligated balances from other child nutrition accounts, and
received CCC funds for these activities.

AMS in recent years has been budgeting $5 million annually for such contracts but has never
spent the full amount. State option contracts are intended to be used to assist state commodity
distribution agencies to convert bulk or raw USDA commodities into products that can be more
easily used by domestic feeding programs. Net costs to Section 32 are not incurred because the
states reimburse USDA. The Department asserts that this set-aside “avoids the need to have states
pay USDA up-front for further processing.” Historically the states have requested such contracts 4
for poultry products.
AMS also has been budgeting $1 million annually for the removal of defective commodities, but
rarely spends the full amount. The money is intended to be available in case AMS must respond
quickly to remove a commodity obtained by USDA for any domestic food program that is later
found to pose a health risk. For example, the $36,000 spent in FY2005 was for a recall of catfish
and $67,000 in FY2004 for a recall of ground beef. In FY2007, AMS replaced $1.9 million in
beef stew found to have E. coli contamination.
Section 4305 of the Farm Security and Rural Investment Act of 2002 (P.L. 107-171, the 2002
farm bill) required USDA to conduct a pilot project aimed at improving student consumption of
fruits and vegetables. It was operated in 107 elementary and secondary schools during the 2002-

2003 school year and funded, as required by the 2002 farm bill, through the Section 32 program.

Total spending was $6 million.
These figures represent the value of unanticipated purchases of non-price supported commodities
(i.e., commodities that do not receive mandatory support through the CCC) over the course of the
year. The Department decides whether it should conduct such purchases based on requests made
by agricultural or industry groups and/or the advice of its own commodity experts, who for each
purchase analyze economic conditions such as farm prices and production levels. The premise is
that removing products from normal marketing channels helps to limit supply and thereby
increase prices.
At the start of each year, the Department predicts how much it may need to spend for these so-
called emergency surplus removals, and the figure usually amounts to several hundred million
dollars. This figure is published in the Department’s annual budget justifications to Congress as
“Estimated Future Needs.” For FY2006, the Department initially estimated its future needs at
$416.3 million, but as the tables indicate, the actual spending was about $81 million. Unspent
funds from this obligation item are what constitute the bulk of the unobligated balance at the end
of the year (see below).

4 Source: Part 5, page 411 of FY2006 appropriations hearings before the Agriculture, Rural Development, Food and
Drug Administration, and Related Agencies Appropriations Subcommittee of the House Appropriations Committee,

Commodities acquired under this activity (sometimes referred to as the contingency fund) are
usually distributed to domestic feeding programs as “bonus” foods. That is, these additional
commodities are over and above the “entitlement” commodities such programs receive under
other authorities. As the tables indicate, the value of emergency surplus removals has varied
widely, from a recent low of $56.2 million in FY1996 to $226.5 million in FY2004.
These have been made to producers to divert production from commercial markets, usually to
counter low prices. Such payments may be in exchange for destruction of a crop, or for diversion
to livestock feed and/or to use as commodities for domestic feeding programs. For example, AMS
made diversion payments for potatoes in FY1997 ($9 million) and FY2001 ($11.9 million), the
last year any diversion-type payments were made; some of the crop went to livestock feed and
some to domestic feeding.
On September 19, 2002, the Bush Administration announced a new “Livestock Compensation
Program,” which provided payments to cattle, lamb and buffalo producers in 37 states to
compensate them for drought losses in 2001 and 2002. A total of $172.9 million was used for this
program in FY2002 and another $867 million in FY2003, apparently an unprecedented level for
this type of activity under Section 32. At the time, the spending raised concerns among other
producer groups and among domestic food program interests that there might not be sufficient
funds in FY2003 and beyond to conduct emergency surplus removals (see line 15, above). In
response, officials made several adjustments in other USDA spending accounts and also received
$250 million from the CCC in order to replenish Section 32.
These have been made to agricultural producers for either economic or disaster-related reasons;
usually, these payments are transferred to USDA’s Farm Service Agency (FSA) for disbursement.
In FY1999, for example, Section 32 funded a total of $178.3 million in direct payments to
smaller-sized hog producers, as part of a broader USDA effort to assist the industry during a time
of historically low prices. In FY2001, $39.7 million in direct payments were made to lamb and
sheep producers experiencing economic losses. In FY2003 and FY2004, respectively, $8 million
and $18 million were used for a “ewe lamb replacement and retention program,” again for sheep
producers who were dealing with economic and drought problems. The Secretary also approved a
total of $422.2 million to be disbursed over two fiscal years, FY2004 and FY2005, as direct
payments to fruit, vegetable, and nursery plant growers affected by Florida hurricanes. Another
$700 million went for direct payments in FY2006, a portion of it to pay growers whose trees were
removed by USDA’s Animal and Plant Health Inspection Service citrus canker eradication
program; and other portions for hurricane relief, and for livestock grazing losses. In FY2007,
another $100 million in direct payments were made for citrus canker tree losses, plus $1.65
million to hog and poultry producers whose animals likely received feed contaminated with 5

5 In early 2007, pet food ingredients from China that contained the chemical melamineapparently added to boost the
ingredients’ protein levels—sickened or killed many dogs and cats in North America. The ingredients subsequently

These funds, made available in FY2001-FY2004, were for AMS services provided to support the
FSA payment program described in line 18, above.
These funds are used to provide food commodities to victims of hurricanes and natural disasters.
Spending levels have varied over the years. For example, in FY1999, $7 million was used to
assist victims of a freeze in California’s Central Valley, and of Hurricane George in Puerto Rico.
The highest in recent years was the $40.6 million spent in FY2005, the year of Hurricane Katrina.
See line 3, above.
At Congress’s direction, funds were used in several years in the late 1980s and early 1990s to
purchase, for export, sunflower seed oil and cottonseed oil.
This is the total of lines 11 through 22.
These are the administrative costs AMS incurs for food buying operations and coordination with
FNS and FSA. The increase, beginning in FY2006, is for development of a “Web-Based Supply
Chain Management System” to replace AMS’s older commodity procurement system.
These funds are used to support administration and oversight of federal marketing orders and
agreements for milk, fruits, vegetables, and tree nuts under the Agricultural Marketing Agreement
Act of 1937 (7 U.S.C. §601 et seq.).
This is the total of lines 24 and 25.

were found in some hog, chicken, and fish feed. For background see CRS Report RL34080, Food and Agricultural
Imports from China, by Geoffrey S. Becker.

This represents the total of lines 23 and 26 (the combined total for all commodity procurement
and administrative activities).
Any remaining funds at the end of a fiscal year may be carried over and spent the next fiscal
year—up to a prescribed maximum. Only in one recent year was money returned to the Treasury
because the cap was exceeded: $27.8 million in FY1996, when the cap was still $300 million.
Section 10602 of the 2002 farm bill increased the maximum carryover to $500 million.
This carryover ranged from a low of $107.8 million at the end of FY2001 to a high of $300
million at the end of FY1996. This figure appears on line 8 of each subsequent fiscal year as
“Unobligated Prior Year Balance.”
Geoffrey S. Becker
Specialist in Agricultural Policy, 7-7287