September 5, 2007 / 8:07 AM / 10 years ago

FEATURE-Commodity boom eats into aid for world's hungry

6 Min Read

By Missy Ryan

WASHINGTON, Sept 5 (Reuters) - Food donations to the world's hungry have fallen to their lowest level since 1973 as surging grain and shipping prices outpace the aid budgets of rich nations.

The United Nations has cut food rations in places like Uganda and Cambodia, and the situation has raised alarm among aid groups, who worry aid will come up short for the world's 850 million hungry people.

The United States, the largest donor of food aid, which spends about $2 billion a year on donations to Ethiopia, Sudan, Afghanistan and other vulnerable nations, is watching as soaring costs eat into aid budgets.

In 2004, the United States paid an average of $363 to buy a tonne of food aid and ship it to the developing world, officials say. This year, delivering that same tonne of aid abroad will cost an estimated $611, an increase of 68 percent.

Part of the story behind that jump is growing demand for corn-based ethanol, an alternative to gasoline, which helped push spot maize prices to a 10-year high earlier this year.

There's also burgeoning demand for grains and food in emerging markets like India and China -- wheat is at an 11-year high on U.S. markets and global rice prices have jumped 50 percent since 2000 -- and recent record crude oil prices.

Little is certain this early into the price boom, but aid professionals are already clear who will lose out unless donor countries move to increase aid budgets in step.

"The amounts available will come down, and you're going to be able to feed fewer people. This is the worry," said Charles Uphaus, who tracks foreign aid at Bread for the World, a U.S.-based advocacy group.

Indeed, global food aid in 2006 was around 6.7 million tonnes, the lowest level in 34 years, the UN says, while the number of hungry people has grown by 4 million each year since the mid-1990s. Aid officials are worried, too, by more frequent food emergencies, often driven by violence and war.

The recent price trends "are going to really put pressure on willingness and abilities of governments to provide food aid," said Stuart Clark, a policy advisor at the Canadian Foodgrains Bank, which delivers the bulk of Canadian food aid.

SMALLER SHIPMENTS, STRETCHED AID

The run-up in prices adds another wrinkle to an ongoing debate over U.S. food aid, under scrutiny this year as Congress writes new legislation for farm programs, food stamps, and food aid.

A report earlier this year from an independent government watchdog found that as much as 65 percent of U.S. emergency food aid funds are spent on transport and overhead.

With prices rocketing in the space of weeks, some major aid groups, like Atlanta-based CARE USA, find themselves in a pinch when they receive crop donations that are significantly smaller than the amount originally approved by the government.

"They come back to us and say, 'Sorry, we're not going to give you the full amount," said Bob Bell, who heads CARE USA's food resources team. Last year, CARE received 14 percent less wheat aid in Mozambique than it was promised.

The price trend can cut off some needy communities entirely, aid groups say, and only exacerbates budget cuts for longer-term assistance. They also see knock-on problems for the nutrition and agriculture projects they operate and even in paying staff on the ground.

Yet for charities who bank on sales of donated U.S. crops in poor countries to fund their development work, higher prices can be welcome news.

David Evans, a vice president at Food for the Hungry, a U.S.-based charity, said higher prices bring more money for the nutrition, water and sanitation, and other assistance projects the group runs in Bolivia, Rwanda, Mozambique and elsewhere.

Soaring shipping prices -- which have increased 63 percent per tonne of U.S. aid since 2004 -- are particularly troublesome because U.S. law prohibits buying crops abroad.

The European Union shifted to providing its assistance in cash years ago, and other donors, like Canada, allow up to half of food aid funds to buy crops in the developing world. That allows the Canadian Foodgrains Bank, for example, to sidestep the price crunch to a certain degree, Clark said.

ROOTS OF THE PROBLEM

Many believe the cycle of famine and hunger will end only when agriculture in fragile countries becomes more productive and competitive. That could, eventually, increase supplies on world markets and help ease prices.

"If the U.S. is serious about addressing world hunger, the way to do that is increasing production, not shipping U.S. commodities ... around the world," Uphaus said.

But agriculture development has fallen off in recent years as aid budgets target HIV/AIDS, education and other new priorities.

There are competing priorities even within food aid. "Donors seem to put their money in high-profile operations, cutting rations for victims of AIDS and TB and their families. This is actually dangerous," the UN official said.

Suresh Babu, an economist at the International Food Policy Research Institute, believes donor countries can arrest hunger only by bolstering poor countries' agriculture sectors. That will happen, he said, "maybe not next year, but five to ten years down the road." (additional reporting by Lisa Haarlander in Chicago)




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