Ballooning food prices around the world are prompting a reevaluation of the underpinnings of aid practices that many analysts consider to be inefficient and, in some cases, counterproductive. And while many hope rising prices will force changes in the way food aid is administered, it also appears this could further entrench current practices.

At least two key food aid providers, the World Food Programme (WFP) of the UN and the United States Agency for International Development (USAID), warn their current budgets can’t keep up with rising costs. The WFP says it is short of more than $500 million and has issued an emergency appeal to donors, noting that the cost of its food purchases has risen 55 per cent since June.

The problem relates to two factors, says Sophia Murphy, a senior advisor at the Institute for Agriculture and Trade Policy in Washington. The first is “less surplus, so less in-kind food to ship.” Countries like the US are less able to donate domestically grown products because of tightening supply related to increasing demand for grains in Asia and expanding biofuel production in the West.

High demand and low stockpiles have led to increased prices, which in turn has reduced the amount of food that aid organisations can afford to purchase.This second factor has been problematic for those buying food with US dollars, which has seen its value steadily decline. “Hence the crisis for the WFP — they get about 50 per cent of their resources from the US, and that money is not buying enough food,” she said.

Food experts also point out the difficulties posed by current inflationary pressures are only one part of food aid woes — but one that exposes deeper problems with the way this aid is administered. Food aid is split between two kinds of sources: cash payments and in-kind food transfers.

Most donor governments prefer cash payments, which are used to purchase food directly in recipient countries or the surrounding region. This has several benefits. For the donor country it is the least expensive option because it reduces logistical and transportation costs associated with sending food that is grown domestically. And for recipient nations, the food arrives more quickly and is a boon to local production as it is purchased either within the country itself or nearby.

The other half of food aid comes from in-kind shipments, nearly all of which originate in the US. This type of aid is seen as problematic for several reasons. The first is the cost to the donor country, which must pay more because of long distance transportation and lengthier logistical coordination. Farmers in recipient nations are also disadvantaged because this type of food aid is often sold at prices below the prevailing rate, thus creating a disincentive for local production and making countries more reliant on imports.

In the current bout of food inflation, both of these types of food aid have struggled to keep up with demand because both rely on purchasing food, whether at home or abroad. But whereas the first encourages local production, Christopher Barrett, of Cornell University, and Daniel Maxwell, of Tufts University, warn in a policy brief that the second can “undermine agricultural production, market development and international trade, thus impeding economic development.” — IPS