April 11 (Bloomberg) -- President Barack Obama is proposing a fundamental shift in how the U.S. feeds the hungry overseas, a plan the administration says will help more people for less money though critics warn it will cost jobs at home.
Some of the money now spent on U.S. crops that are shipped overseas, the bedrock of how the world’s biggest food donor has fed people for generations, would be shifted to buying food in developing countries under the $3.8 trillion budget plan Obama submitted to Congress yesterday.
Purchases of U.S. corn, soybeans, peas and other crops from U.S. agribusinesses including Archer Daniels Midland Co., Cargill Inc. and Bunge Ltd. would see a 21 percent cut next year under the proposal. Farmers in the developing world would be helped as the U.S. Agency for International Development took over programs now overseen by the U.S. Agriculture Department.
“The current approach to food aid can become, at times, an impediment to its very own mission,” said Raj Shah, the administrator of the USAID, in a speech yesterday in Washington. “The president’s proposal reflects the growing bipartisan consensus that the traditional approach to development must be modernized to help us efficiently meet the economic and moral challenges of our time.”
The U.S. is the only major food donor that still mainly sends products overseas rather than buying them closer to crisis areas. So-called local-purchase initiatives have been pursued on a limited basis since George W. Bush was president and would expand under Obama’s proposal.
Under Obama’s plan, funds for U.S.-grown food aid would be redirected toward other foreign nutrition-assistance initiatives starting Oct. 1. Spending on the Agriculture Department’s Food for Peace program would be shifted to USAID initiatives that handle immediate responses to disasters as well as longer-term development. USAID’s food-aid budget would grow to $1.8 billion in 2014, up from $300 million in cash aid this year.
The United Nations World Food Program, the biggest distributor of food aid, called the proposal “a positive sign of the United States’ steadfast commitment to supporting efforts to eliminate hunger,” Executive Director Ertharin Cousin said in a statement.
Backers of the current approach say shipping donated U.S. crops generates jobs and ensures that famine-struck areas have food when nearby crops aren’t sufficient. Donated U.S. food maintains about 44,000 jobs for farmers and mariners at companies including Liberty Maritime Corp., a Lake Success, New York-based shipping company, according to USA Maritime, a coalition of companies and maritime unions. The current system also keeps the domestic merchant marine available for defense needs, the group said in a statement.
The organization “is severely disappointed that the Obama administration has moved forward with this misguided proposal,” said James L. Henry, chairman of USA Maritime. The shift to cash would essentially create “a system of global food-stamp vouchers” that would be “relying on allegedly cheaper foreign suppliers” rather than high-quality U.S. goods, he said.
Moving away from commodities purchases may also raise the risk of future cuts to nutrition assistance, said Ellen Levinson, executive director of the Alliance for Global Food Security, a coalition of private volunteer organizations.
“Once funds are shifted from Food for Peace to disaster assistance and development aid, it is not possible to ensure that in the future they will continue to be used for food aid,” she said in a statement. “Instead, it becomes a year-by-year process.”
Decatur, Illinois-based Archer-Daniels-Midland referred questions about the program to trade organizations, while White Plains, New York-based Bunge did not respond to requests for comment. Minneapolis-based Cargill, the largest closely held U.S. company, “supports flexibility in food aid programming to allow for both in-kind commodity donations and cash donations depending on specific recipient needs and market circumstances,” spokeswoman Susan Eich said in an e-mailed statement.
“The company believes that as food aid policy attempts to meet the needs of the world’s hungry, it should not distort markets or harm local production,” she said.
The Food for Peace name would continue under USAID in Obama’s proposal, with a pledge that a majority of emergency aid for the 2014 fiscal year still will go to U.S. goods and shipping companies. About 2 million to 4 million people in addition to the 53 million helped by food aid would be served under the new approach, assuming existing funding levels, according to the agency.
“This is one of those examples where we believe we can create greater efficiencies” while serving more people, Agriculture Secretary Tom Vilsack told reporters yesterday. The White House proposal includes $25 million in shipping subsidies for vessels that can help the military, helping ease some of that industry’s concerns, Shah said.
Any changes to food-aid programs would need to pass Congress to become law. A shift away from U.S. goods to cash support “will require careful consideration,” Senator Thad Cochran of Mississippi, the top Republican on the Senate Agriculture Committee, said earlier this week. That panel, charged this year with drafting a new agriculture bill, would lose jurisdiction over the bulk of its food-aid funding under the shift to USAID, which is part of the State Department.
“We need to remember what’s best for our farmers,” said Cochran.
The American Soybean Association, which represents growers of the most-valuable U.S. crop after corn, today said it opposes the shift.
“We remain absolutely opposed to the replacement of in-kind aid with cash, which takes a key market away from American producers and places aid recipients at risk by allowing purchases from suppliers whose safety and quality are unknown,” said Danny Murphy, president of the St. Louis-based group and an oilseed grower from Canton, Mississippi, in a statement.
The program has become less vital for U.S. farmers, while more-flexible aid programs will spend tax dollars more widely, the USAID’s Shah said. U.S. farmers are projected by the USDA to generate record profits this year.
The Obama plan, even if it isn’t approved this year, represents a milestone in the debate over foreign aid, said Gawain Kripke, policy director at Oxfam America, which is supporting the proposal.
“This will be looked at as the moment the change began,” he said. “In the end it will mean helping more people.”
Donations of U.S. surplus food have been a hallmark of its humanitarian aid. President Herbert Hoover’s path to the White House began coordinating European food relief after World War I. Marshall Plan assistance kept countries including Greece and Italy from turning communist after World War II. The Food for Peace program that governs most foreign nutrition assistance, signed into law by President Dwight D. Eisenhower, gave farmers producing bumper crops an outlet for their goods while helping the hungry abroad.
The policy came under fire in the 1990s, as humanitarian groups said donated food did little to develop farm economies elsewhere and encouraged dependence on U.S. exports. Richer nations began shifting to cash aid, rather than commodities, in an effort to get assistance to needy areas faster and boost developing-world agriculture.
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