Order Code RL34081
Farm and Food Support Under
USDA’s Section 32 Program
Updated May 29, 2008
Geoffrey S. Becker
Specialist in Agricultural Policy
Resources, Science, and Industry Division

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Farm and Food Support Under
USDA’s Section 32 Program
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 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.

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Contents
What Is Section 32? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
How the Account Has Operated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Uses of Section 32 Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Commodity Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Entitlement Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Contingency Fund Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Donations of Contingency Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Disaster Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Other Section 32 Uses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Provisions of the 2007-2008 Farm Bill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Administration Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Farm Bill Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FY2008 Appropriations Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Appendix. Section 32 Funding, FY1992-FY2007 . . . . . . . . . . . . . . . . . . . . . . . 10
Line-by-Line Explanation of Terms in Appendix Table . . . . . . . . . . . . . . . 11
1. Approp. (30%) of Customs Rcpts . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2. Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3. Ag Risk Protection Act (P.L. 106-224) . . . . . . . . . . . . . . . . . . . . . . 11
4. Transfer from CCC or Supplemental . . . . . . . . . . . . . . . . . . . . . . . 11
5. Transfer to FNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6. Transfer to Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7-10. Budget Authority, through Available for Obligation . . . . . . . . . 12
11. CN Commodity Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12. State Option Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
13. Removal Defective Commodities . . . . . . . . . . . . . . . . . . . . . . . . . 13
14. F&V Pilot Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
15. Emergency Surplus Removals . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
16. Diversion Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
17. Livestock Drought Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
18. Other Direct Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
19. Lamb Grading/Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
20. Disaster Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
21. Specialty Crop Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
22. Oilseed Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
23. Total, Commodity Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . 15
24. Commodity Purchase Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
25. Marketing Agreement & Orders . . . . . . . . . . . . . . . . . . . . . . . . . . 15
26. Total, Administrative Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
27. Total Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
28. Unobligated Balance Returned to Treasury . . . . . . . . . . . . . . . . . 15
29. Unobligated Balance, End of Year . . . . . . . . . . . . . . . . . . . . . . . . 15

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List of Tables
Table 1. Total Annual Contingency Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Table 2. Section 32 Contingency Fund (Bonus) Purchases, by Commodity,
FY1995-FY2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

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Farm and Food Support Under
USDA’s Section 32 Program
What Is Section 32?
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.

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CRS-2
How the Account Has Operated
An accounting of a completed fiscal year (FY2007) provides a snapshot of how
money has traditionally been collected and spent.1 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 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
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.

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CRS-3
and vegetable products; $1 million for lamb, and nearly $1 million
for geese).2
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. Treasury.
The Appendix to this report contains a table 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.
Uses of Section 32 Funds
Commodity Purchases
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
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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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 amounts.
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).
Entitlement Purchases. 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.
Contingency Fund Purchases. 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

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CRS-5
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. Section 32 Contingency Fund (Bonus) Purchases,
by Commodity, FY1995-FY2007
Commodity
Total Value
Number of
Commodity
Total Value
Number of
Purchased
Years
Purchased
Years
(million $)
Purchased
(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
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
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 potatoes
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.
3 This assessment can be accessed at [http://www.whitehouse.gov/omb/expectmore/].

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CRS-6
Donations of Contingency Purchases. 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.
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 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.
Other Section 32 Uses
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

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CRS-7
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 FY1994.
Provisions of the 2007-2008 Farm Bill
Administration Proposal. 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” purchases.
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.
Farm Bill Language. 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).

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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.
FY2008 Appropriations Action
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

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CRS-9
(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.

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CRS-10
Appendix. Section 32 Funding, FY1992-FY2007
[$1,000]
Fiscal Year:
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
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 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
-5,287
-5,000
-7,958
-15
-468
-163,000
-37,601
-37,601
3. Ag Risk Prot. Act (PL106-224)
200,000
4. Transfer fr. CCC or Supplemental
145,000
250,000
90,000
LESS TRANSFERS:
5. 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 -4,935,199 -5,127,579 -5,172,458 -4,745,663 -4,699,661 -5,152,962 -5,187,621 -5,731,073
6. Transfer to Commerce (fisheries)
-64,113
-61,408
-61,944
-64,765
-72,893
-66,381
-65,734
-66,426
-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)
422,155
626,954
523,016
470,807
588,013
423,243
512,983
724,332
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
262,430
120,788
246,301
245,951
235,129
300,000
233,868
131,967
112,630
241,270
107,825
192,156
134,322
408,051
286,160
146,760
9. Recovery Prior Year Obligations
14,634
39,737
20,805
25,755
739
38,784
11,455
3,528
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)
699,219
787,479
790,122
742,513
823,881
762,027
758,306
859,827
893,408
982,566
995,714 1,459,519 1,287,850 1,180,859 1,523,470 1,463,888
OBLIGATIONS:
COMMODITY PROCUREMENT:
11. CN Commodity Purchases
399,051
399,914
399,714
399,876
399,084
399,949
400,000
400,000
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
102,928
63,399
78,452
96,679
56,172
100,947
194,774
144,484
200,215
200,234
206,898
222,090
226,475
149,496
81,010
56,892
16. Diversion Payments
8,600
-300
9,000
30,778
11,900
17. Livestock Drought Relief
172,867
867,000
18. Other Direct Payments
178,265
39,700
8,000
218,750
278,763
700,000
101,650
19.Lamb Grading/Certification
957
592
103
100
20. Disaster Relief
11,175
4,636
3,463
530
1,168
2,150
15,200
7,014
500
9,200
40,597
1,901
11317
21. Specialty Crop Purchases
(PL106-224)
199,991
22. Oilseed Purchases (CCC)
50,000
50,000
50,000
23,900
23. TOTAL, COMMODITY
PROCUREMENT
563,154
526,549
531,629
496,785
480,324
512,046
609,974
729,763
631,493
852,782
786,292 1,299,641
854,595
868,348 1,332,703
836,590
ADMINISTRATIVE FUNDS:
24. Commodity Purchase Services
5,989
5,060
4,423
5,907
5,733
5,624
6,176
6,580
8,406
8,964
6,906
11,199
10,266
10,848
28,866
31,146
25. Marketing Agreements & Orders
9,288
9,569
8,118
9,977
10,016
10,488
10,189
10,853
12,241
12,995
10,359
14,844
14,938
15,502
15,141
15,493
26. TOTAL, ADMINISTRATIVE
FUNDS
15,277
14,629
12,541
15,885
15,750
16,113
16,365
17,433
20,646
21,959
17,265
26,042
25,204
26,350
44,007
46,639
27. TOTAL OBLIGATIONS
578,431
541,178
544,170
512,669
496,073
528,158
626,339
747,196
652,140
874,741
803,557 1,325,684
879,799
894,698 1,376,710
883,229
[line 10 minus line 27]
120,788
246,301
245,951
235,129
327,808
233,868
131,967
112,630
241,270
107,825
192,156
134,322
408,051
286,160
146,760
262,399
28.Unobligated Balance Returned to
Treasury
27,808
80659
29.Unobligated Balance, End of Year
120,788
246,301
245,951
235,129
300,000
233,868
131,967
112,630
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.

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CRS-11
Line-by-Line Explanation of Terms in Appendix Table
Unless noted, the sources for the above table 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 table.
1. Approp. (30%) of Customs Rcpts. 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.
2. Rescission. 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 this table as a negative number, 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.
3. Ag Risk Protection Act (P.L. 106-224). 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.
4. Transfer from CCC or Supplemental. 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).
5. Transfer to FNS. 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

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CRS-12
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.
6. Transfer to Commerce. 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).
7-10. Budget Authority, through Available for Obligation. 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).
11. CN Commodity Purchases. 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.
12. State Option Contracts. 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

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CRS-13
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 for poultry products.4
13. Removal Defective Commodities. 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.
14. F&V Pilot Project. 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.
15. Emergency Surplus Removals. 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 table indicates, 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).
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 table indicates,
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.
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, 2005.

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CRS-14
16. Diversion Payments. 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.
17. Livestock Drought Relief. 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.
18. Other Direct Payments. 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 melamine.5
19. Lamb Grading/Certification. These funds, made available in FY2001-
FY2004, were for AMS services provided to support the FSA payment program
described in line 18, above.
5 In early 2007, pet food ingredients from China that contained the chemical melamine —
apparently added to boost the ingredients’ protein levels — sickened or killed many dogs
and cats in North America. The ingredients subsequently 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.

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CRS-15
20. Disaster Relief. 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.
21. Specialty Crop Purchases. See line 3, above.
22. Oilseed Purchases. 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.
23. Total, Commodity Procurement. This is the total of lines 11 through
22.
24. Commodity Purchase Services. 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.
25. Marketing Agreement & Orders. 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.).
26. Total, Administrative Funds. This is the total of lines 24 and 25.
27. Total Obligations. This represents the total of lines 23 and 26 (the
combined total for all commodity procurement and administrative activities).
28. Unobligated Balance Returned to Treasury. 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.
29. Unobligated Balance, End of Year. 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.”

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