IN his budget proposal, President Barack Obama laid out significant changes to how the U.S. would fund its food aid, the most notable being the proposal to implement a 55% floor on funds to purchase U.S. commodities, which the Administration said would provide more flexibility and reduce inefficiencies.
The reconfiguration comes under Title II of the Food for Peace (P.L. 480) program of the farm bill that is currently administered by the U.S. Agency for International Development (USAID).
An Administration official explained that the proposal would be to take $1.5 billion and redistribute it into three cash accounts (Figure).
The official said the goal of the changes is to create "greater flexibility" and "get the right kind of food to the area that needs it faster."
First, $1.1 billion would be transferred to International Disaster Assistance (IDA). That account already has $300 million available for flexible response to food crisis situations by using local and regional purchases as well as cash and voucher purchases.
In a White House fact sheet, the Administration said studies show that local and regional procurement of food and other cash-based programs can get food to people in critical need 11-14 weeks faster and at a savings of 25-50%.
The food aid reform proposal guarantees that, in 2014, no less than 55% of the requested $1.47 billion in total funding for emergency food assistance in IDA will be used for the purchase, transport and related costs of U.S. commodities. The change "recognizes the central role U.S. commodities have and continue to play in global hunger needs," the official said.
A portion of P.L. 480 Title II funds historically would be made by monetizing aid -- selling U.S. commodities in the region and then using the money to provide the assistance.
Instead, the $250 million in funds would be shifted to Development Assistance for the Community Development & Resilience Fund and would go directly to non-governmental organizations and private voluntary organizations to provide the same kind of community development being utilized now.
The Government Accountability Office estimates that this costs 25 cents for every $1 generated, which is an "inefficient way" to generate development assistance funds, the Administration official said.
Ellen Levinson, president of Levinson & Associates and lobbyist for the Alliance for Global Food Security, said the real purpose of monetizing aid is to supply a commodity that's needed to fill a food shortfall, or "gap," in the recipient country that will create other benefits that cannot be derived from direct cash funding, such as increasing economic activity in the recipient country and addressing credit, hard currency or small volume constraints that limit procurement of sufficient food supplies on the international market.
Levinson added that if one examines U.S. versus local/regional procurement with the "same simplistic 'efficiency' lens as applied to monetization," one would find that the fiscal 2012 USAID local/regional purchase/cash transfer program was 60% more expensive per metric ton than U.S. food aid provided for emergencies under P.L. 480 Title II.
The USAID fiscal 2012 year-end report on food aid shows that local/regional purchases/cash transfers averaged $2,836/mt, compared to $1,188/mt for emergency Title II programs.
"Even if we subtract out the 42% of the program that was used for cash transfers, the cost per ton averaged $1,645 for the local/regional procurement and food voucher component, 28% above the average for Title II emergency aid," she noted.
Last, the reforms would create a new emergency contingency fund of $75 million to enable emergency food assistance.
The official estimated that the change will generate $500 million in savings over the next decade, predominantly from a reduction in shipping costs. The official noted that 2 million to 4 million additional people can be served by making these modifications to emergency food aid, and 800,000 more families can be served based on adjustments to how development food aid is administered.
Many agricultural groups had feared that the Administration would change or eliminate the Food for Progress program. However, the President did not suggest any changes.
Food for Progress is administered by the U.S. Department of Agriculture's Foreign Agricultural Service, and its main source of funds is the USDA Commodity Credit Corp., which is authorized to provide commodities and up to $40 million each fiscal year to ship those commodities overseas.
Upon rumors of potential food aid changes, agricultural groups and several lawmakers expressed their concerns to the President in recent weeks and explained the importance of the Food for Peace and Food for Progress programs.
"Growing, manufacturing, bagging, shipping and transporting nutritious U.S. food creates jobs and economic activity here at home, provides support for our U.S. Merchant Marine ... and sustains a robust domestic constituency for these programs (that's) not easily replicated in alternative foreign aid programs," a letter from the groups said.
The President's budget was presented to Congress, but it will be lawmakers who decide -- through appropriations and the farm bill writing process -- whether to move forward with his suggestions.