Analysis, Interviews, and ReviewsArchive
Oct 10, 2007
Tipping the Balance on Food Aid
For generations, parents have evoked the “starving children in Africa” argument as a tactic for getting their children to clean their plates at the dinner table. The smart kid’s response is often to question how the food on his plate is connected to food eaten – or not eaten – by a child living ten thousand miles away. The answer? More closely than one would think.
American Agriculture and the Cycle of Food Scarcity
The reality is that US agriculture is intimately linked with food scarcity around the world through the practice – in place since the depression era – of paying farmers subsidies for growing certain crops, mainly commodities such as wheat, corn, rice, soy and cotton. The intention behind subsidies was to keep threatened farm families in business through crises and keep food on American tables. Today’s Farm Bill pays commodities farmers a direct payment based on acreage, regardless of whether it has been a boom year or bust, whether demand is high or low. According to the Organization for Economic Cooperation and Development the United States gave $43 billion in government support to American farmers in 2004, compared with $0 given by African governments to their farmers. European countries generally outpace the United States in their farm payments.
Farm subsidies act as an incentive for a farmer to grow as much of his product as he can, so he does. Yet when the crop is ready for harvest there is often a huge surplus beyond what is demanded by US buyers. That allows the buyer (which is usually a food processor of some kind, since wheat, for example, needs to be milled into flour before it can be used) to name his own price, one which inevitably is very low.
Agricultural processors in the United States have found ways over the years to absorb some of the farm sector’s excess production. Those ways include the abundant use of high fructose corn syrup in processed foods, as well as the preference for margarine, soybean and corn oils as fats in those same products. It is the reason why a jumbo box of Twinkies costs less than a pound of spinach, and consequently, why the face of poverty in the United States is often obese rather than skeletal.
Yet despite the way in which food producers absorb some of the country’s corn, wheat and soy, US farmers still produce far more than they can sell domestically, so they earmark the rest for international sale. This effectively creates the same dynamic on the world stage as exists domestically: more supply in proportion to the existing demand, and the world price for the commodity drops accordingly. Indeed, prices have sunk so low for some commodities that the sale of US products overseas has been likened to “dumping,“ a dynamic which led the Brazilian government last year to pressure the WTO into investigating US cotton subsidies. The result was a WTO ruling that, among other things, the US’s direct payment cotton subsidies are “illegal” under WTO trade rules.
Low prices hurt farmers everywhere, but they mean the difference between success and survival for small subsistence farmers living in developing nations. These farmers sell their crops at local markets, but because of the influence of US products exported to their locality or region, the price they can demand for their goods drops. As it pertains specifically to much of sub-Saharan Africa, the majority of small-scale African farming is conducted by women, and those women are often feeding their families and eking out a small living by growing crops. Yet that small living is getting even smaller – and even disappearing – because the presence of US excess supply drives down prices. That means less money to buy seed and fertilizer and transportation to market. And it means less food on the plates of African children.
The connection does not end there.
Aid and its Impact on Hunger
Since the early nineteen-eighties – a time particularly associated with the Ethiopian famine of 1983-84 and a resulting growth in awareness of African hunger – sub-Saharan Africa has received nearly $500 billion in official aid from wealthy donor countries. Despite this outpouring of cash a third of sub-Saharan Africans – over three-hundred-million people – are undernourished, more now than two decades ago. The number of Africans subsisting on less than one US-dollar a day has nearly doubled since 1981, according to Oxfam International.
Part of the problem lies in the structure of food aid programs. The United States is the planet’s largest aid donor overall in terms of individual dollars spent, and its largest donor of food aid. In the past five years US donations to the UN’s World Food Programme, the largest humanitarian organization in the world, accounted for at least 49 percent, and as much as 67 percent, of the organization’s total received donations. In addition to the UN, governments of developing nations as well as US-based humanitarian relief organizations, such as CARE and Catholic Relief Services, have been major recipients of donations from USAID, the administrator of the US governments largest food aid program, Food for Peace. These recipients work either to convert those donations into cash for their own humanitarian programs, or to distribute the food where it is most needed, whether in refugee camps, regions suffering from drought or natural disaster, or areas where poverty is so severe the people simply do not have money to buy food of their own.
Yet the form those donations take makes the US food program the object of strong criticism, despite the volume of food it provides. Specifically, the US “ties” its donations, meaning that the vast majority – around 80 percent – of all US food donations must come in the form of US-farmed commodities and be shipped on US-flagged cargo ships. The practice of tying aid dates back to 1954 when President Eisenhower signed the US Food for Peace bill into law. It was originally seen as a way to dispose of large stores of excess powdered milk the country had at the time. Not much has changed: the US government still supplies the Food for Peace program by purchasing some of the surplus produced by US farms and shipping it on US-flagged carriers, a practice which literally keeps the US shipping industry in business. As a result, US taxpayers pay twice for the goods – once in the form of a subsidy payment to farmers and again when it purchases the surplus to supply Food for Peace. In addition, the cost of shipping, storing and distributing goods costs the program close to 50 cents on every donated dollar. Half of the money is thus literally lost in transit.
The waste that occurs in such a system is certainly something to mourn, but the impact is in fact more personal for the subsistence farmer. Not only has her product been devalued by the flooding of her market with US-farmed commodities, but if she lives in or near a community that is the recipient of in-kind food aid she might find she doesn’t have any local buyers at all, since all her potential customers are now receiving their food for free. Thus she gets hit twice by US farm practices. That dynamic is effectively putting her – and millions like her – out of business; it gives her few options but to get in line for aid hand-outs herself.
It should be noted that not all in-kind food aid is bad. Food scarcity can occur for any number of reasons: environmental disaster, military conflict, poverty. In cases where regional agricultural output has been damaged or is insufficient, then in-kind food aid can be the right response. Max Finberg, Director of the Alliance to End Hunger, a group focused on building the public and political will to end hunger around the world, estimates that around 50 percent of worldwide food crises could be appropriately alleviated using in-kind food donations.
For the other half, where abject poverty makes people unable to buy the food available in their areas, cash can be used to sponsor voucher programs or work initiatives. According to an analysis done in Ethiopia by the Overseas Development Institute, providing in-kind food aid in these environments where local food is available can dramatically damage livelihoods, as it puts local producers out of business and it has a demotivating effect on the local population, creating cycles of dependency. The ODI study went further to statistically confirm that cash programs in environments where local food is available result in higher overall household well-being.
Given the problems associated with farm subsidies and in-kind food aid the solution seems straightforward: stop farm subsidies and start providing more food aid as cash. Unfortunately, the politicized nature of both those programs means neither change will come easily.
The US Farm Bill – Not for the Family Farmer
Proponents of the farm bill argue that it is needed for stability, and that the nation’s family farms would be at risk without it. On the surface, the statistics seem to support that contention given that the number of small and family farms has been dropping to near extinction over the past decades. The current farm bill does almost nothing to help them, however: According to the USDA, the largest 8 percent of American farmers receive 78 percent of subsidy payments. That translates into a check of less than $1000 on average for the smallest 80 percent of US farms.
“Subsidies do not make [family farms] whole,” said Tom Buis, President of the National Farmer’s Union, an organization representing over 250,000 farm families in the US.
Even more alarming was a GAO report published in mid-2004 which analyzed USDA-reviewed subsidy payments and found that 30 percent of the payout went to recipients who were not eligible to receive them.
In short, subsidies aren’t helping family-owned farms as they were designed to. Instead, they simply perpetuate a problem of over-supply while benefiting large agri-businesses. Yet some believe that even their full-bore elimination would not solve the problem.
“Farmers use their land,” argues Daryll E. Ray, director of the Agriculture Analysis Policy Center at the University of Tennessee. “When people talk about subsidies they are saying that if we did away with subsidies farmers would produce less. That is true if you look at it one commodity at a time. But that is shallow thinking. Are those who are growing cotton going to let that land lie idle or are they going to put in another crop? Well, they’re going to put in another crop.”
Dr. Ray avers that it is the dynamics of industrialized agriculture that require farmers to grow to their maximum capacity because the costs they incur – such as buying land, paying for the energy they consume, purchasing, leasing and insuring mechanical equipment, buying seed and fertilizer – are unavoidable. At the same time, farmers do not set prices based on those costs; instead they sell based on what food processors – the companies that mill wheat or slaughter cows – are willing to pay.
Tom Buis agrees. “We think the best bet is to increase demand and get the profit from the marketplace, but sometimes we have some difficulties. The way agricultural commodities work you walk in there and ask ‘what will you give me for them.’ You don’t set a price based on the cost of producing that product.”
In the case of corn, until last year the cost of growing corn exceeded the market price for three decades.
The result is that the small-and-mid-sized farmer is squeezed between the large company that sells him his seed, fertilizer and tractors and the large company that processes his crops to make them edible. It’s difficult for a small farm to survive among giants, which is why the small American farm is disappearing, replaced with huge generic agribusinesses that maximize their yields so as to squeeze the greatest profit out of shrinking margins.
But regardless of whether surpluses are a result of an outdated and mismanaged subsidies system or a consequence of industrial farming, it would be naïve to believe that simply identifying a problem will result in substantive change in the farm bill as it gets passed back and forth between the House and Senate this autumn. Any changes to the farm bill will cause significant disruption in agricultural markets since they have been setup specifically to take advantage of the current system. “Farmers…are going to be pushing for [the farm bill] to change as little as possible,” says Ray.
Another argument for why few will be willing to substantively touch the subsidies program is their political hot-button status. More than one expert made the analogy between food and energy, arguing that subsidies function as a safety net that protects the farm industry from unexpected hits such as poor-yield years or environmental disasters. Removal of that safety net would threaten American’s food-independence, which would put the country in the same position regarding its food as it is with energy: dependent on potentially hostile third parties for our supply. As flawed as this logic is in many ways (the US already imports almost as much as it exports) it still carries a lot of weight.
Thus cash payments to farmers are not going away. They could, however, change. Ray suggested a production control approach to agriculture, one element of which would be a set-aside program whereby farmers would be paid to leave fallow a percentage of their land. This already happens implicitly, as farmers of certain commodities are often paid regardless of whether they planted on any given year, but what Ray is suggesting is something more intentional, as well as more market- and environment-friendly.
Another possibility is to stop tying subsidies to crop acreage – a practice which encourages excess production – and start tying it to something that would more clearly benefit the food industry and the environment. For example, subsidies could be connected to mandatory energy-efficient farming practices or organic farming methods. Farms specializing in producing local products for local consumers could also get a special bonus, as could farmers who grow endangered varieties, since another consequence of high-yield farming has been to decrease the diversity of the world’s crops – and thus make them more vulnerable to pests, fungi and other destructive blights.
The structure of food aid also needs an overhaul, though if agricultural subsidies are a politicized subject, aid in the form of cash instead of food is equally so.
Cash for Food – A Contentious Proposition
“I’ve never met a farmer who wasn’t appalled by the fact that close to a billion people go to bed hungry every night, especially when we have the capacity to create excess food,” said Tom Buis, the farm association president. “If US taxpayers are paying for the food aid, it seems to me the US government ought to be willing to purchase US products.”
The Bush administration felt the strength of that conviction last year when its proposal to convert 25 percent of its $1.2 billion food aid budget into cash payments was criticized by both the farm lobby and, surprisingly, humanitarian organizations, resulting in its withdrawal. The farmers’ resistance was obvious; the nonprofits not as much so, though a series of Wall Street Journal pieces suggested that as beneficiaries of the Food for Peace program, humanitarian organization such as CARE and Catholic Relief Services might see their existence threatened by any shift in the food program toward cash. Less cynically, there was also concern among them that the Bush proposal to move to cash was just a way of masking planned decreases in food aid spending. CARE has recently announced its intention to stop accepting in-kind food donations from USAID; its stated reason is that it believes the in-kind food aid policy exacerbates food scarcity.
Max Finberg, the hunger nonprofit director, has a broader perspective on the failure. “No one was consulted, or brought into the process before it was announced, or asked, ‘Why don’t you consider doing it this way,’” he said. “The mistake they made was to try to do a well-intentioned reform to be able to buy food aid by taking it out of the current program. The current program doesn’t meet the needs of the world’s hungry as it is. It doesn’t even meet a third or more of the world’s food needs.”
The solution? “More money, more money, more money.”
Finberg proposes an experimental cash-based program separate from and in addition to the existing $1.2 billion food aid budget. This would allow the USAID to experiment with cash programs and acquire some best practices before dipping into the core food aid budget.
The idea of experimenting with cash-based programs has traction; a pilot project of this sort is included in the current farm bill now being debated in the Senate.
The Role of the Donor
With the administration hailing falling budget deficit estimates any requests for more cash will have to wade through a minefield of justifications. But if the current session of the US Congress could see clear to reform the current farm bill down from the current $43 billion in yearly farm support – or even just work on better administration to recapture that lost 30 percent in misallocated funds,an effort the Senate Agriculture Committee has said is part of its focus – surely a few hundred million could go to the world’s hungry. The market itself could also relieve some of the subsidies pressures. As government mandated demand for bio-fuels drives farmers to devote more acreage to corn production the result could eventually be higher supply and higher demand. If managed well, dynamics such as this could provide a segue into decreasing farm subsidies without making farmers feel the pinch. If mismanaged, a lucky few will find themselves collecting two checks, a cash subsidy and a windfall from skyrocketing prices in another wasteful double-dip of federal dollars.
No matter what happens, individual donors also have a role to play in feeding the world’s hungry. Much financial support is needed to advocate for a change in the way our food industry is run and subsidized. Advocates could lobby leaders about the importance of changing American food policy, communicate the connection between the US surplus production and the US Surgeon General’s declaration of an obesity epidemic, as well as highlight the association between Big Agriculture and environmental degradation.
As for how to directly help food-scarce populations, donors should not wait until a disaster or famine strikes, as it is often too late in the aftermath of a crisis to ensure that ones funds are used for those most in need. Instead, work with reputable, locally situated organizations that work to build long-term food security through farming programs focused on small farmers. This is not just a question of a “green revolution”, but includes overlooked issues like land rights, access to markets, and improved functioning of food markets. Where food scarcity is more acute, seed and fertilizer vouchers, as well as food vouchers, are often a far more effective approach for navigating through a crisis without damaging the long-term prospects for farmers. For large-scale organizations there is much to be learned from the World Food Programme: Despite its dependence on US donations, the WFP has made a clear and intentioned move toward more cash purchases, a move which will hopefully lead, in the words of WFP head Josette Sheeran to a “virtuous cycle of food security.”