On June 22, four U.S. House members introduced the American Farmers Feed the World Act, most likely hoping to add its content to the upcoming farm bill. Reps. Tracey Mann (R-Kan.), John Garamendi (D-Calif.), Rick Crawford (R-Ark.), and Jimmy Panetta (D-Calif.) announced that the bill would ensure that the Food for Peace (FFP) program, managed by the U.S. Agency for International Development, would operate as Congress had intended it to function in 1954.
That is, it would reserve at least half of its budget to purchase American-grown commodities and ship them overseas to dispose of domestic surpluses.
While well-meant, the provisions of the America Feeds the World Act will not restore the original intent of the FFP, which raised domestic prices for corn, wheat, soybeans and other row crops by shipping excess grain to low-income countries as aid.
Today, world commercial markets for agricultural commodities function very differently than they did seventy years ago. Which is why these provisions will undermine USAID’s ability to use FFP to reduce hunger in low-income countries and foster goodwill toward the U.S. by adding to the program’s current restrictions, and making it much less efficient than it is today.
Many of the bill’s provisions reflect a lack of understanding of the chaotic global economic and policy environment in which FFP was first established. They miss how government policies have adapted and FFP has evolved to remain efficient and effective in meeting Congress’s intent within existing statutory restrictions.
During World War II, international commercial markets were highly unreliable. Food production in Europe had collapsed. In that context, American farmers were encouraged by federal authorities to increase agricultural output so that the government could provide food to U.S. and allied troops serving overseas, as well as civilian populations in those countries.
Between 1940 and 1945, areas harvested for U.S. corn, wheat, and oat increased by 9, 15, and 22 percent, respectively. Between 1948 and 1951, food shipments to Europe under the Marshall Plan — worth about $43 billion in today’s prices — obscured the long run implications of much higher U.S. domestic production. These did not become apparent until the early 1950s when agricultural production recovered in Europe and elsewhere. Moreover, as the price support programs introduced in the 1948 farm bill took effect, the federal government began to accumulate large stocks of unwanted grain.
The 1954 Agricultural Trade Development and Assistance Act, which authorized FFP, was partly a response to these increasing surpluses. Its major purpose, however, was to provide food to developing countries who had few or no resources to pay for it. In the program’s first two decades, most of the aid was provided as development assistance to help such countries improve their economies. That effort was quite successful. Many early beneficiaries, such as Japan, Indonesia, and Peru, are now important commercial customers for U.S. food and agricultural products. Until the 1990s, most food aid shipments were made through concessional loans to low-income countries and were less expensive than the direct donations of commodities currently being made under the FFP.
In the 1950s and early 1960s, commodities shipped under FFP contributed significantly to total U.S. agricultural exports. For example, in 1957, food aid shipments accounted for about 30 percent of U.S. exports. In stark contrast today, U.S. commercial exports are flourishing. There are almost no government-held grain stocks, and food aid shipments in total account for less than 2 percent of total U.S. agricultural exports.
The proposed act’s provisions will hurt those in need. Capping (to 50 percent of the total) all funding to be used for activities other than purchasing commodities in the U.S. and transporting them to overseas ports, will constrain the mix of commodities that can be used. This provision favors bulk raw commodities over processed commodities that often provide more nutritional benefits. It also could limit how much can be spent on moving commodities to people living in inland locations, who are often worse off and harder to reach.
This legislation will be even more harmful to the operation of non-emergency, development aid provided under the program. This is an ironic consequence, given that Congress intended this form of aid to be key in the early decades of FFP. The share of funds provided as cash to the organizations that implement these non-emergency aid programs would be reduced. These funds cover non-food expenses such as salaries for staff conducting these development activities. Instead, those organizations would be forced to quit altogether or resort to monetizing the commodities they receive under FFP. That monetization process is known to be a substantial and unfortunate waste of money. It typically generates proceeds that are 25 to 30 percent less than the cost of obtaining, processing, and shipping the commodities.
If the Act’s real objective is to discourage agricultural development assistance in order to squeeze out a negligible increase in the volume of U.S. commodities purchased for food aid, it will be a failure, having no impact on domestic crop prices received by U.S. grain and other farmers. The ultimate goal of non-emergency agricultural aid projects is to help small farmers in developing countries become more productive and thus more resilient in the face of external shocks such as bad weather or civil conflict.
Extensive research shows that investment in such resilience-enhancing activities reduces the likelihood that a country will need emergency humanitarian assistance in the future. Those investments are also an important source of goodwill towards the U.S. among recipient countries, and an important contribution to our nation’s national security.
Vincent H. Smith is a nonresident senior fellow and the director of Agricultural Policy Studies at the American Enterprise Institute and Professor Emeritus at Montana State University. Stephanie Mercier is a former Chief Economist of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, and a principal at Agricultural Perspectives, an agricultural policy consulting firm.