Chris BarrettC.H. Dyson School of Applied Economics & Management and

Department of Economics, Cornell University

November 19, 2012 Community and International Nutrition Seminar Series

Cornell University

US Food Aid:Background Trends and Key

Policy Issues on the Cusp of a Farm Bill

1. Increasing emergency-affected populations-Natural disasters and affected persons have increased significantly over the past two generations. -The global number of internally displaced persons (IDPs) has grown from 20 to 27 mn/yr, 1989-91 to 2009-11.

Background trends

0

50

100

150

200

250

300

350

400

1974 1979 1984 1989 1994 1999 2004 2009

Developing World Natural Disasters(5 year lagged moving averages)

Number of Disasters

Millions of Persons Affected

Data source: EM-DAT: The OFDA/CRED International Disaster Database

2. Globalization of food markets-Food aid was originally a surplus disposal program. Take gov’t-held surpluses generated by farm price support programs and give them away beyond the US marketshed.

-But virtually no place lies outside the marketshed today. Even in land-locked developing countries, commercial food imports have grown > 10-fold in the past 20 years!

-This has led to a rapid transition towards cash-/market-based food assistance, especially since 2004 tsunami.

Background trends

3. We have entered a high food price regime-For a variety of reasons, food demand growth has outpaced supply growth for the past decade. The result is historically high (inflation-adjusted) food prices for the indefinite future.-This makes food aid expensive.

Background trends

50

100

150

200

1/19

901/

1991

1/19

921/

1993

1/19

941/

1995

1/19

961/

1997

1/19

981/

1999

1/20

001/

2001

1/20

021/

2003

1/20

041/

2005

1/20

061/

2007

1/20

081/

2009

1/20

101/

2011

1/20

12FAO

Rea

l Foo

d Pr

ice

Inde

x (2

002-

4 =

100)

FAO Real Food Price Index

4. More attention to micronutrient deficiencies -The Green Revolution and globalizing food markets have steadily reduced undernutrition.-But low micronutrient (mineral/vitamin) intake increasingly recognized as equally serious, especially for children due to irreversible effects-Hence growing attention to food aid quality (2011 GAO and Tufts/USAID studies).

Background trends

Developing world prevalence (%) of insufficient 1990-94 1995-99 2000-04 2005-09 Dietary energy 20 17 17 15 Vitamin A (under 5 serum retinol < 20 g/dl) 36 35 33 31 Iodine (urinary iodine < 100 g/dl) N/A 37 33 33 Iron ( under 5 anemia) 49 49 51 61 Source: FAO SOFA 2013 (internal data)

Much Has Changed In US Food Aid Already

For nearly 60 years, the USG has been the world’s largest donor of food aid for strategic, economic and moral purposes. Still 50-60% of global flows each year.

Food aid volumes have fallen sharply over the past decade-plus, from the US andglobally due to trends described already.

Huge reorientation from monetizedprogram food aid (Title I) to emergencyand project (Title II) food aid, again in response to the trends described.

0

500

1000

1500

2000

2500

3000

1990 1995 2000 2005 2010

$ m

illi

on

s (r

eal,

bas

e ye

ar 2

000)

U.S. Food Aid Programs, FY1990-2010

Title I

Title II

Other

0

2

4

6

8

10

12

14

16

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Mill

ions

of m

etric

tons

US shipments

Non-US shipments

Since 1999, global shipments down 64%, US shipments down 68%.

US Food Aid

7. Timeliness (Golden Hour principle)- Delays are expensive and deadly (2004-5 Niger example).- Most losses from disasters are ‘post-exposure’. Rapid, appropriate response

matters enormously to recovery.- Farm Bill still sharply limits local and regional purchases (LRP) in US food

aid programs although they account for 82% of non-US food aid today.- Prepositioning the best feasible Title II option now. But 25-40% more

expensive than regular shipments (GAO ‘07).- Big gains from LRP: USDA LRPP and USAID EFSP projects delivered 62%

(14 weeks) faster, on average, than shipments from US.- Hard earmark on non-emergency funds ties FFP’s hands: big risks of 4th

quarter emergency response interruptions.

Key policy issues

7. Cost-effectiveness- Increasing need with decreasing resources. Need to “do more with less”.- Need to reduce unnecessary (non-commodity) costs: transport is huge

(especially with cargo preference rules … adds ~$150mn/year to costs … but rolled back in July).

- USDA LRPPP/USAID EFSP reduced cost of delivered grains by >50% on average.

- Monetization: just 58-76% cost recovery … hugely wasteful (GAO). The rest of the world abandoned monetization years ago and OMB recommended ending it back in 2002. Yet non-emergency Title II monetization has grown from 28% in 1996 to 74% in 2010. Better options exist: community development funds (Foreign Ops), 202e, Title I buybacks.

Key policy issues

7. Food Aid Quality

- Need to address more varied nutritional needs than simply filling a dietary energy supply shortfall.

- Especially important in light of the First 1000 Days Initiative- Need to match commodity choices to assessed needs to achieve cost-

effective delivery of needed nutrients (what is cheap in $/MT terms not always cheap in $/nutrient terms)

- Increased attention to food aid quality … LRP has proved equal to shipments from US in food quality w/much greater capacity to resolve quality problems at delivery than with shipments from the US.

Key policy issues

7. Flexibility

- With greater food market access and superior timeliness and cost-effectiveness of commercial channels, cash/vouchers often preferred to food.

- Need “response analysis” (i) to identify appropriate form/ source of assistance, (ii) to ensure assistance doesn’t disrupt markets on which the poor – and dev’t – most depend.

- But need options: LRP just 2% of US food aid vs. 82% for ROW. Mainstream LRP not make it a separate program.

- Slow/awkward movement toward budget integration already achieved in Canada, EU and other key donor countries, moving food aid into international development budgets and out of farm policy and agriculture budgets.

Key policy issues

7. Senate- Senate passed a bipartisan Farm Bill capping monetization, making LRP

permanent and slightly reducing the ‘hard earmark’ for non-emergency food aid.- Far from ideal, but progress nonetheless

House- No Farm Bill vote yet. Ag Committee passed a bill that drops LRP, reinforces

monetization and the hard earmark.

If no Farm Bill?- USAID authority for new programming expires Dec. 31. At that point >50% of

the world’s food aid flows cease!

Farm Bill 2012

US food aid still essential to global emergency response.

The Farm Bill offers a chance to further adapt US policy to all that has changed in the world of food aid. But the current House version is a step backwards and perhaps no bill at all.

Key policy issues for the 2012 Farm Bill:- timeliness - cost-

effectiveness- food aid quality - flexibility

Implications: -permanent, mainstreamed LRP - reduced/constrained monetization- relaxed Title II non-emergency hard

earmark

Conclusion

Thank you for your time and interest!