Chris Barrett

1. US Food Aid: Background Trends and Key Policy Issues on the Cusp of a Farm Bill Chris Barrett C.H. Dyson School of Applied Economics & Management and Department of Economics, Cornell University November 19, 2012 Community and International Nutrition Seminar Series Cornell University

2. Background trends 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.

3. Background trends 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.

4. 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.

5. Background trends 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).

6. US Food Aid 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 and globally due to trends described already. Huge reorientation from monetized program food aid (Title I) to emergency and project (Title II) food aid, again in response to the trends described.

7. Key policy issues 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.

8. 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.

9. 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.

10. 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.

11. Farm Bill 2012 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!

12. Conclusion 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

13. Thank you for your time and interest!