463. Summary Notes of the 576th Meeting of the National Security Council1

U.S. Food Aid

The President: The PL–480 program was initiated as a surplus food program in an attempt to raise the price paid U.S. farmers for their products, principally wheat. It has become an AID problem because we must now substitute bushels of wheat for those dollars which the Congress is not giving us to use in assisting foreign countries economically.

AID Director Gaud: The PL–480 program has gone through three stages. The first stage involved disposal of surplus commodities. Our agreements provided for very easy terms. In the second stage, we made our conditions tougher. In the third stage during which surpluses became shortages, we were unable to do what we wanted to. The present stage involves the usage of the surpluses we have while retaining specific self-help actions we require of countries receiving assistance.

There are four identifiable issues:

Do we insist on specific clauses covering marketing requirements or should we be flexible on this point, deciding on a case-by-case basis? It is recommended that we stretch the marketing requirements and keep the clauses covering this issue flexible.
Without jeopardizing our long-term objectives, we must decide whether we can increase food aid to fill the gap left because of the reduced AID funds appropriated by Congress. Specific countries involved are Ceylon, Colombia, and Chile.
Should we use food aid to build up buffer stocks in the recipient countries?
Should we soften the terms and the amount of down payment now being required in existing agreements? Two countries particularly involved are Brazil and Colombia.

The President: Why doesn’t Brazil want our wheat?

AID Director Gaud and Secretary Freeman: Our terms are too high in their opinion. They believe our wheat will cost them too much.

Secretary Freeman: The wheat situation in the U.S. has turned around. Availabilities may well be down if current crop estimates are [Page 902] correct. Food agreements have been tightened up with a view to forcing recipient countries to carry out self-help measures. Our wheat exports dropped because the worldwide harvest is good. The wheat market overreacted. We now have checked the downward price trend. The bushel price may be $1.50. Our policy should be to move out PL–480 wheat rather than to force commercial wheat sales.

The present estimate is that we will have to move 400 million bushels to get a domestic price of $1.40 to $1.50 a bushel. Current sales are estimated at 300 million bushels. The only place to sell additional quantities is in India.

The President: If India goes out in the open market to buy wheat, it should buy from us.

Secretary Fowler: The question boils down to the Indian problem. Given the domestic supply situation, if we push wheat sales, we face the prospect of eroding the self-help provisions in our agreements and affecting the commercial market. Among the options listed in the Freeman-Gaud paper (copy attached),2 an option not listed would provide that the condition of our sale would depend upon agreement of India to purchase 500,000 tons of U.S. wheat. We would insist on other countries matching what we did. In general, we should insist that food aid be included in the total aid picture insofar as matching is concerned. Our present domestic supply problem should be handled in such a way as not to weaken the matching principle in future years.

Walt Rostow: We have a chance to break down zonal restrictions involving the movement of food in India. To do so would be a real plus and is worth a try. When the Indian Consortium is negotiated in November, we should try to get our food aid counted as part of our contribution.

Secretary Rusk: We should ask the Senior Inter-Departmental Group to look at our various food and AID policies.

The President: Recommendations should be sent to me. If food recipient countries must buy wheat in addition to the amounts they are receiving from donors, they should buy from the United States.

Bromley Smith
  1. Source: Johnson Library, National Security File, NSC Meetings, Vol. 4, 10/11/67. Confidential/Sensitive; For the President Only. Drafted by Bromley Smith. An attached list of those attending indicates that, in addition to the President, Rusk, McNamara, Helms, Fowler, Freeman, Schultze, Gaud, Rostow, and Hamilton participated in the discussion. (Ibid.)
  2. Reference is to an October 10 memorandum from Freeman and Gaud to the President entitled “Food Aid for India in 1968.” (Ibid.)