May 2013 Quarterly

Does Food Aid Need to be Reformed?


By Ellen Levinson
Executive Director, Alliance for Global Food Security

For nearly six decades, the Food for Peace Act has provided U.S. commodities to meet shortfalls in developing countries, thereby assuring that the U.S. Government responds decisively when a food crisis occurs and is positioned to lead worldwide efforts to combat chronic hunger. Since 2009, International Disaster Assistance (IDA) funds have also been available to meet food needs.  They are used to buy commodities overseas and to provide food vouchers and cash to people in need. 

As part of fiscal year 2014 budget proposal, President Obama recommends “Food Aid Reforms” aiming to end funding for the Food for Peace (P.L. 480) Title II program and, instead, redirecting most of the funds  to general development assistance and International Disaster Assistance (IDA) accounts. The Administration’s budget proposes to transfer from Title II funds: $1.1 billion dollars to International Disaster Assistance; $250 million to Development Assistance; and $75 million to a new Emergency Food Assistance Contingency Fund. The rationale is to allow the U.S. Agency for International Development (USAID) the flexibility to channel those funds towards a wider range of procurement options; that developmental and emergency food aid programs can work just as well without the structure of the FFP Act; and the proposed changes would save money and reach more people.

The analysis here explores some basic questions about the efficacy of these proposed reforms.  Are the reforms necessary for USAID to be more responsive to emergency needs and to serve more people?  Can the continuance of successful developmental food aid programs be assured with this move?   Are there other ways to provide the flexibility and cost effectiveness that USAID seeks without voiding the Food for Peace Act and the reliability it provides?

USAID asserts that the proposed changes will enable the U.S. Government to reach four million additional beneficiaries employing the same amount of resources available through Title II programming. Careful analysis of the data, however, does not substantiate this claim. Not only are the suggested reforms essentially more expensive than existing Food for Peace (FFP) programs, but they also threaten the current pool of sufficient resources guaranteed under Title II programs and cardinal to food crisis response.

For example, based on USAID data, in FY 2012 overseas procurement using IDA funds for local and regional food purchases was 78% more expensive per metric ton than that through P.L. 480 Title II food aid programs. Moreover, the president’s proposal does not factor in procurement costs of fortified foods primarily available in the U.S., given USAID’s plans to increasingly rely on nutritious food. Clearly, the reforms will not generate the anticipated “cost savings,”and are therefore unlikely to reach an additional four million people.

Most importantly, the proposed reforms offer no guarantee that the funds will be available for food aid alone. Once resources are transferred, they may be used for programs not necessarily related to food assistance.A vast variety of Americans support the Act: farmers, labor unions, food processors, port authorities, rail and shipping firms, faith-based and development organizations. Furthermore, the budget request for IDA resources reflects only a $530 million increase rather than the proposed $1.1 billion increase resulting from addition of the P.L. 480 funds. It may be important to remember that long term Title II emergency food aid is bound to be more costly per beneficiary in comparison to local-regional programs. Besides, local procurement of food aid is challenged by low productivity, insufficient and substandard food processing, poor storage, and, in some cases, exposure to toxins.

Given these facts, the availability and reliability of U.S. food assistance is likely to significantly decrease.  Yet, there is merit in flexibility to buy from local producers where feasible and to use development assistance funds to finance the capacity-building activities associated with Title II food aid programs. 

There are ways to deliver USAID’s desired flexibility without eroding the structure, transparency and assurance of the Food for Peace Act.

First, keep the current approach of using both the P.L. 480 Title II program and IDA accounts. This enables the U.S. government to contain costs while providing a steady pipeline of appropriate commodities to support emergency and developmental food aid programs.   The Title II procurement process includes an early warning system, regularized tenders to buy U.S. commodities through competitive bidding, and an internet-based system for monitoring orders and deliveries.  For flexibility and quick response, U.S. commodities particularly useful for emergencies, such as fortified cereals and nut butters, are prepositioned in seven warehouses overseas. In the early phase of a crisis, those commodities, as well as IDA-funded cash transfers, food vouchers, or local-regional procurement are used. U.S. commodities destined for overseas warehouses can be the first food assistance to arrive. Therefore, increasing the prepositioning of U.S. commodities that are particularly useful for emergencies should be encouraged.

Second, maintain the current spending levels for the FFP Title II program, and adjust IDA funding to ensure that adequate amounts are available for cash transfers, food vouchers, and local-regional procurement of emergency food aid. The President’s reform proposal allocates $637 million for IDA programs, $262 million more than the FY 2012 level of $375 million.

Third, for areas where hunger is a chronic problem, assure P.L. 480 Title II programs conducted by private voluntary organizations and cooperatives continue to receive at least $400 million per fiscal year. The funds are catered towards capacity building for community-based programs. Local capacity building is attributed to reducing future need for emergency aid.

Fourth, improve value received per dollar spent when commodities are monetized. This can be achieved by selecting a commodity that both meets the food shortfall in the recipient country and engenders benefits that cannot be derived from direct cash funding. These benefits can be increasing economic activity or addressing credit (hard currency or small volume) constraints that limit food procurement in the international market.

Finally, assure that USAID and the U.S. Department of Agriculture have funding to build the capacity of small farmers and processors in food-insecure areas to improve the quality, safety, and quantity of food supplies, laying the groundwork for countries and regions to meet their own food needs.

Sources

http://www.usaid.gov/foodaidreform

http://www.usaid.gov/what-we-do/agriculture-and-food-security/food-assistance/quick-facts/fiscal-year-2012-food-peace

http://www.aflatoxinpartnership.org/en/Research_and_Information.aspx


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