USAID officials said that a 41 percent surge in prices for wheat, corn, rice and other cereals over the past six months has generated a US$120 million budget shortfall that will force the agency to reduce emergency operations. That deficit is projected to rise to US$200 million by year’s end. Prices have skyrocketed as more grains go to biofuel production or are consumed by such fast-emerging markets as China and India.

Officials said they were reviewing all of the agency’s emergency programs — which target almost 40 countries and zones including Ethiopia, Iraq, Somalia, Honduras and Sudan’s Darfur region — to decide how and where the cuts will be made.

“We’re in the process now of going country by country and analyzing the commodity price increase on each country,” said Jeff Borns, director of USAID’s Food for Peace, the organization’s food aid arm. “Then we’re going to have to prioritize.”

The reductions, international relief agencies say, will seriously complicate already strained efforts to combat global hunger, particularly in Africa, Central Asia and Latin America.

Poor countries in those regions are struggling to cope with record food price surges, which have made it difficult for aid groups to sustain their operations in some countries.

The cuts will likely have a direct impact on major USAID partners, including aid groups and the United Nations World Food Program, the largest international provider, which counts on U.S food aid for 40 percent of its distribution.

The U.N. program is confronting similar price pressures. It announced this month that it was facing a US$505 million shortfall due to soaring food and fuel costs, and would cut distribution if it did not receive new funds. Meanwhile, need is increasing. Afghanistan, for instance, recently put in an emergency request for US$77 million to cope with skyrocketing prices that have put key staples out of reach for more and more Afghans.

“Look at what’s happened to wheat prices alone — they shot up 25 percent in one day last week,” said Josette Sheeran, executive director of the World Food Program. “This is really the first emergency we’ve faced without a drought, war, natural disaster. We will have to cut the amount of people being served or the amount of food being served if we do not get more funds.”

Groups that work with USAID, several of which have been informed of the shortfall over the past two weeks, are alarmed. Emergency aid is earmarked only for countries in desperate need as a result of natural disasters, civil strife or other humanitarian crises. Although the United States has proportionally provided less of the world’s food aid in recent years, it still provides about half the global total in efforts to relieve hunger among more than 800 million people. In 2007, USAID gave about 2.5 million tons of food, accounting for more than 50 percent of the emergency aid in a number of nations, including Ethiopia.

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