January 1999

by Joan Morgan and Derek Nowek

In December, the United States and Russia reached an agreement to provide substantial U.S. food aid to Russia. The U.S. food aid package is a combination of long-term concessional sales and humanitarian assistance to supply the Russian Federation with much needed agricultural commodities. The assistance package will include about 3 million tons of U.S. food commodities valued at US$625 million, plus another US$260 million in transportation and distribution costs.

The food aid will be provided through three U.S. Department of Agriculture (USDA) programs: the Public Law 480 (P.L. 480) Title I program, the Section 416 (b) program, and the Food for Progress program. For U.S. agricultural exporters and freight carriers doing business in Russia, one immediate impact of the food relief effort is a short-term revival of the trade and cargo activity that dropped significantly since the Russian economic crisis began last August.

Concessional Sales
Under the P.L. 480, Title I program, the United States will provide the Russian Government with concessional sales (a low interest long-term loan) of 0.5 million tons of corn, 0.3 million tons of soybean meal, 0.2 million tons of soybeans, 0.2 million tons of wheat, 120,000 tons of beef, 100,000 tons of rice, 50,000 tons of pork, and 30,000 tons of nonfat dry milk.

Once the food aid agreement is implemented, the Russian Government will most likely nominate an agent in the United States to release tenders to the public and coordinate bidding procedures. Tenders will be announced publicly. U.S. agricultural commodities and freight bids will then be submitted to that agent. The USDA will oversee the purchase plan presented by the nominated agent to ensure it meets U.S. legal requirements. A final selection of commodity suppliers and vessels will be made based on the lowest landed cost, which is a combination of the price of the commodity and the freight cost.

Grant Aid
Under the Section 416 (b) program, the food aid package includes a government-to-government donation of 1.5 million tons of U.S. wheat. Some of the grain has already been purchased by the U.S. Government and is considered part of American food surplus disposal.

Humanitarian Aid
Under the Food for Progress program, Russia will receive an additional 100,000 tons of commodities, such as rice, flour, vegetable oil, and dry milk. These commodities will be supplied to various U.S., Russian, or international private voluntary organizations for distribution inside Russia.

Cargo Preference
By law, at least 75 percent of all U.S. food aid commodities will have to be transported on U.S. flag vessels, if available. This requirement applies to shipments under P.L. 480 Title I, Food for Progress, and Section 416(b) programs. The Commodity Credit Corporation will finance an estimated $260 million of transportation costs to deliver and discharge the food aid commodities at Russian ports or borders. Freight and commodity tenders will be announced publicly.
For more information, visit the web sites listed in the box below.

Joan Morgan covers agribusiness and Derek Nowek covers transportation for BISNIS in Washington, D.C.

For more information, visit the web sites listed below:

• The USDA's Foreign Agriculture Service (FAS) web site provides information on its export assistance and food aid programs: www.fas.usda.gov/fasprograms.html.

• U.S. companies interested in selling commodities to USDA as food aid should visit the USDA's Farm Service Agency (FSA) web site: www.fsa.usda.gov/pas/default.asp.

• U.S. companies can link directly to the FSA's Commodity Operations page for up-to-the-minute commodity information or to review commodity reports online at: www.fsa.usda.gov/pas/commnfo.htm.

• U.S. companies should also visit the Commodity Purchase & Sales Invitation Programs and Contract Awards page at: www.fsa.usda.gov/daco/kccotran.htm. This page provides information on the commodity operations of the Farm Service Agency's Kansas City Commodity Office, which performs USDA commodity transactions.

• For more information on shipper and export assistance, visit the USDA Transportation Handbook at www.ams.usda.gov/tmd/export/index.htm.

• To be included on the USDA's directory of freight forwarders serving agricultural shippers, visit USDA at www.ams.usda.gov/tmd/freight/freight.htm.

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)