Order Code RS20235
Updated November 28, 2006
CRS Report for Congress
Received through the CRS Web
Farm and Food Support Under USDA’s
Section 32 Program
Geoffrey S. Becker
Specialist in Agricultural Policy
Resources, Science, and Industry Division
Summary
“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 appropriation (now approximately $6.5 billion
yearly) is transferred to the U.S. Department of Agriculture (USDA) account that funds
child nutrition programs. Other Section 32 funds are used by USDA to purchase meats,
poultry, fruits, vegetables, and fish, which are diverted mainly to school lunch and other
domestic food programs. Several times in recent years, the Secretary of Agriculture also
has drawn substantial amounts from Section 32 to pay for special farm disaster relief.
This has added to the debate over how much flexibility the Secretary should have over
use of the reserve, and whether the disaster aid has or could come at the expense of the
other Section 32 activities. This report will be updated.
What Is Section 32?
Section 32 of the act of August 24, 1935, authorizes a permanent appropriation equal
to 30% of annual U.S. customs receipts (P.L. 74-320 as amended; 7 U.S.C. 612c). This
money was first available to assist Depression-era producers of non-price-supported
commodities. Section 32 funds, along with up to $500 million in any unobligated prior-
year funds, are to be used 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 considerable discretion in deciding how to achieve these broad objectives.
Uses of Section 32 Funds
USDA’s best-known use of Section 32 funds is direct purchases of non-price-
supported commodities, such as meat, poultry, fruits, vegetables, and fish. This activity
began shortly after passage of the 1935 law and continues today. The department seeks
outlets for these purchases that do not disrupt private markets. Early in the program,
USDA began donating its purchases to low-income families and schools, on the premise
that the donations would supplement, not displace, normal food purchases by these
Congressional Research Service ˜ The Library of Congress

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recipients. Distribution of Section 32 commodities is credited with stimulating growth
of the national school lunch program.
Today, school lunch and other domestic nutrition programs benefit in two ways from
Section 32 funds. First, much of the Section 32 permanent appropriation now simply is
transferred into USDA’s Food and Nutrition Service (FNS) child nutrition account, where
it is supplemented by a separate direct appropriation under the annual USDA
appropriation law. The commingled funds are then used to reimburse schools, child care
centers, and other eligible sites for meals served to children. These cash reimbursements
are required by the separate Richard B. Russell National School Lunch Act.
Second, a smaller — but still significant — amount of Section 32 money is set aside
each year to purchase non-price-supported commodities directly and provide them to
schools and other feeding sites. These purchases are made by USDA’s Agricultural
Marketing Service (AMS). Some of these commodities ($450 million worth in FY2006)
are “mandated,” i.e., required to be bought and distributed to schools at rates specified by
the school lunch act. Others are are so-called “bonus” commodities, which schools and
other domestic food programs receive after AMS makes emergency commodity purchases
to relieve farm surpluses that occur throughout the fiscal year (such bonus purchases were
valued at $81 million in FY2006).
Section 32 has been used to fund other programs. By law, some of the money is
transferred annually to the Department of Commerce for fishing industry activities. Other
amounts are set aside each year for some USDA program administration. In some but not
all years, the Secretary directs Section 32 money into special disaster assistance programs.
Fiscal Year 2006 Estimated Spending
The estimated Section 32 breakout for FY2006 illustrates in more detail how money
is collected and spent.1 The program’s permanent appropriation was $6.482 billion,
representing 30% of prior calendar-year customs receipts. This figure was reduced by:
$38 million, a rescission mandated by Congress for budgetary savings.
$5.188 billion, transferred to the child nutrition program cash account, to help
pay for federal child nutrition programs budgeted at about $12.66 billion in FY2006.
(The difference, $7.47 billion, is provided directly through the annual, i.e., FY2006,
USDA appropriation.)
$79 million (30% of customs revenue from fish product imports), transferred to
the Commerce Department for fisheries activities.
This left $1.177 billion, to which was added $286 million in unobligated FY2005
money that was carried into FY2006, for a total of $1.463 billion. From this:
! $465 million was designated for planned AMS commodity purchases, to
partially fill required commodity assistance mandated by Section 6(e) of
the school lunch act. (This separate law requires FNS to provide
1 Primary sources: USDA 2007 Budget Explanatory Notes for Committee on Appropriations; and
unpublished November 2006 data from the AMS budget office.

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commodity support for each meal served — in FY2006, an estimated
average rate of 17.8 cents for a total of $978 million in child nutrition
commodity entitlements. To buy these commodities, $513 million was
budgeted from the annual child nutrition account in the FY2006 USDA
appropriation, with Section 32 funds buying the remaining $465 million
in commodities.)
! $85 million in additional commodities were purchased to fulfill another
school lunch act requirement that at least 12% of assistance be in the
form of commodities.
! $700 million was made available by USDA in direct payments mainly to
compensate Florida crop producers for hurricane and disease losses, and
some for livestock drought relief.
! $2 million went for disaster relief foods (e.g., for Hurricane Katrina).
! $44 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.
! $81 million was used for “emergency removals” of surplus commodities
during the course of the fiscal year ($62 million for fruits and vegetables;
$2 million for meats and $16 million for poultry).2
Subtracting the above spending, and making an upward bookkeeping adjustment to
account for “deobligations” of prior year obligations, AMS estimated that it had a
“carryout” of $147 million at the end of the year, which was to be added to available
funding for the next fiscal year (FY2007).
Commodity Purchases
Overview. Section 32 pays for direct purchases of commodities that are not
covered by agricultural price support through USDA’s Commodity Credit Corporation
(CCC). A portion of these are planned, specifically the $465 million in purchases to
satisfy Section 6(e) mandated assistance under the school lunch act. Others are unplanned
purchases are of “surplus” commodities, using the contingency fund. All Section 32
purchases differ from CCC price support in that Section 32 does not specify which
commodities must be assisted, at what levels, or how, leaving such decisions to the
Secretary of Agriculture.
In planning the required 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 administers the purchase contracts and pays the vendors.
2 As noted earlier, such emergency purchases are provided as a “bonus” to schools (over and
above their “entitled” amounts) and to other designated domestic food assistance programs.

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Contingency Fund Purchases. Over the course of the year, USDA taps the
contingency reserve for so-called emergency surplus removals. The department may learn
about these needs through its own commodity experts or be informed of surplus or other
problems by outside farm and industry organizations.
Table 1. Section 32 Contingency Fund Purchases, by Commodity,
FY1995-FY2006
Commodity
Total
Number of
Commodity
Total
Number of
Purchased
Years
Purchased
Years
(million $)
Purchased
(million $)
Purchased
almonds
29.6
3
grapefruit
10.9
4
apples
79.1
6
lamb
27.1
5
apricots
65.9
9
mixed fruit
17.5
2
asparagus
26.3
6
oranges
69.5
4
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 peas
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
93.8
8
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 potatoes
38.2
5
dates
10.8
5
tomatoes
20.7
3
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
1.0
1
walnuts
65.9
8
grape juice
18.1
3
TOTAL
1,854.7
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 12-year period covered; part-year (not total) FY2006 data was incorporated into total.
As Table 1 indicates, some commodities are bought more frequently than others.
AMS made contingency purchases of salmon in 11 out of the 12 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.

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Were these contingency purchases, particularly of commodities bought in multiple
years, justified? AMS maintains that each of its purchase decisions is based upon 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 commodity purchases, and lack of
performance measures.3 What OMB and other critics view as flaws, program supporters
view as flexibility to quickly and efficiently address agricultural problems.
Table 2. Total Purchases
(FY1995-FY2006, in millions)
1995
$96.7
2001
$200.2
1996
$55.8
2002
$206.9
1997
$100.9
2003
$222.1
1998
$194.8
2004
$226.5
1999
$144.5
2005
$149.5
2000
$191.95
2006
$81
Donations of Contingency Purchases. Besides schools, other bonus recipients
may include soup kitchens, food banks, and needy families, among others. The annual
total of contingency purchases — and thus the foods provided to these outlets — has
varied. Recent totals have varied from $56 million in FY1996 to more than $226 million
in FY2004 (Table 2). The annual total declined steeply in 2005 and again in 2006. This
change has raised concern among many domestic food providers. They concede that the
food they have received through this Section 32 activity is a “bonus” and not
“entitlement” allocation, but say they had come to rely on the higher levels to help meet
client demand.
Specialty Crop Requirement. The 2002 farm bill (P.L. 107-171, §10603)
requires that not less than $200 million annually in Section 32 funds be used to buy fruits,
vegetables, and other specialty crops, $50 million of it for fruits and vegetables for
schools through the Defense Department Fresh Program. There has been some debate
over whether the $200 million is “new” money. USDA had maintained that it already was
spending more than this level each year, particularly when both mandatory and
contingency (bonus) purchases were counted. Some lawmakers have countered that
language in the farm bill conference report directs that the $200 million should be in
addition to such past purchases. The Senate reports accompanying the annual USDA
appropriations have reminded USDA of these farm bill instructions, but the different
interpretations have not been resolved.
Disaster Assistance
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
3 This assessment can be accessed at [http://www.whitehouse.gov/omb/expectmore/].

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Compensation Program” to cover 2001 and 2002 drought losses by cattle, lamb, and
buffalo producers in 37 states. USDA said it would fund these payments, estimated to
cost $752 million, with unobligated Section 32 funds — satisfying one Section 32
criterion, to “re-establish farmers’ purchasing power.” In December 2002, the department
increased the available funding to $937 million. From late FY2002 through FY2003, total
Section 32 funding reached just over $1 billion, a level that appeared to be unprecedented
for such a Section 32 use, according to long-time observers.
Some other producer groups and domestic food program interests had contended at
the time that diverting some $1 billion to the disaster payments threatened the solvency
of the contingency fund needed to make the many bonus purchases throughout the year
for various 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 while covering “normal” contingency
purchases, officials made several adjustments in 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 (H.J.Res. 2, signed into law February
22, 2003) transferring $250 million from the CCC account to replenish the Section 32
account to carry out emergency surplus removals. The Administration again turned to
Section 32 in late 2004 (i.e., early FY2005), taking $650 million from the account to
make disaster payments to producers of fruits, vegetables, and nursery crops in Florida
to compensate them for hurricane and/or disease losses. In a disaster assistance package
included within the FY2005 Military Construction Appropriations Act (P.L. 108-324),
Congress had transferred $90 million from the CCC account to the Section 32 account to
cover some of this spending.
Other Section 32 Uses
USDA also uses its broad discretionary authority to spend Section 32 money on
activities other than surplus commodity buys. For example, in 1999 it used $54 million
to make direct payments to hog producers affected by low market prices. Export
subsidies and related activities also have been supported in the past. Section 32 funded
a pilot food stamp program in the early 1940s, 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 appropriated $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 for the
special purchase of sunflower oil in FY1988, and $50 million for a similar program in
FY1994. An emergency FY1999 appropriation (P.L. 106-31) included an extra $145
million for Section 32, to help cover hog producer payments during a period of extremely
low prices. One longstanding constraint is that no more than 25% of each year’s available
funds can be earmarked for any one agricultural commodity (including its processed
products). When USDA indicated that it had reached that limit for pork in 1999, language
in P.L. 106-31 suspended the limit for 1999 only, enabling USDA to tap more of that
year’s remaining reserve to provide more assistance to pork producers.