It began as a fairly straightforward announcement of USDA's plans to sell wheat from the Bill Emerson Humanitarian Trust to finance the purchase of rice for food aid to Iraq. But that simple action has led to introduction of new legislation aimed at preventing the “monetization” of one commodity such as wheat to buy another commodity.

The U.S.-led invasion of Iraq and the need for food aid in southern Iraq appeared to catch USDA off guard. Back on March 1, Richard Bell, president of Riceland Foods and a former undersecretary of agriculture, had said that any U.S. rice to be shipped to Iraq should already be in place. But USDA did not announce it planned to release 200,000 metric tons of wheat — and sell part of it to obtain rice — for shipment to Iraq until March 20, the day bombs began falling in Baghdad.

The first inkling of trouble came in a comment in the U.S. Wheat Associates March 28 newsletter. “While most of the wheat that is drawn from the Emerson Trust will go to Iraq, the administration will exchange a portion of it for rice, despite USW's oft-voiced opposition to selling Emerson wheat in the U.S. domestic market.

“Surely the Bush administration can avoid disrupting domestic markets while donating rice by simply using the 416(b) program, or other CCC funds,” USW Chairman Jim McDonald said in the newsletter.

A few days later, Rep. George Nethercutt, who represents wheat growers in Washington state, introduced an amendment to the war supplemental appropriations bill prohibiting selling Emerson Trust wheat stocks to purchase other commodities for shipment to Iraq. The House Appropriations Committee adopted the amendment by a voice vote.

Nethercutt said that USDA's March 20 announcement caused soft white wheat prices at Portland (Ore.) to drop 20 cents a bushel. “USDA should not have “license to destroy the economy of one commodity for the benefit of another,” Nethercutt said in a letter to Agriculture Secretary Ann Veneman.

USA Rice Federation officials tried to defuse the situation, saying it was sympathetic to the concerns of the wheat industry while noting that rice has long been a staple of the diet in Iraq, “and it only makes sense to provide what the people truly need and desire.”

“As Rep. Nethercutt has stated, pitting one farmer against another is not an attractive solution,” the federation's Ben Noble said in a statement. “We understand wheat's concerns about market disruption and certainly don't want to compound their problems. However, these purchases have been factored into our market and, if not honored, we will be in the same boat.”

Noble, the federation's director of government affairs, said USA Rice is urging Congress to stipulate that Nethercutt's amendment will not affect any purchases of rice already announced.

Given that the Iraqis are expected to exhaust their supplies of flour within a month, there should be no shortage of need for wheat and rice shipments to Iraq over the next year. But getting the pipeline started is proving to be a bumpy ride for USDA and U.S. commodity groups.


e-mail: flaws@primediabusiness.com.