World Food Program Wants Even More Money, Despite Ease in Crisis

Wednesday, May 13, 2009

By George Russell

http://www.foxnews.com/story/0,2933,520033,00.html

A little more than a year after the United Nations World Food Program declared that the globe faced a "silent tsunami" of rising food prices and oil costs, the crisis appears to be over. But for the WFP the fact that the tsunami has receded hasn't stopped it from asking for more money than ever.

WFP says it needs $6.3 billion this year, and roughly the same amount in 2010 and 2011 to feed the world's most desperately hungry. That's $600 million more than last year, when the so-called hunger tsunami was at its worst. And it's considerably more than double the roughly $2.7 billion annually that the agency spent before WFP chief Josette Sheeran declared the existence of a food crisis on April 22, 2008.

So far, it's received only $1.13 billion of the 2009 total, though the agency says it's confident that all $6.3 billion will be collected.

Meantime, however, world oil prices, which have ticked upward beyond $58 per barrel in the past few days, are still less than 40% of the $150 per barrel they reached in April, 2008, when the food crisis was declared.

International food prices-especially for grains-are down 35% to 50%, from their highs, after a record harvest of many crops last year and more of the same forecast this year. WFP says world wheat supplies are at their highest level in six years. According to a report by Commodity Information Systems, Inc., a U.S.-based analytics firm, U.S. wheat stocks rose by 9% between April and May alone. And a new report by the U.N.'s Food and Agricultural Organization says that world cereal stocks by the end of 2009 should be at their highest level since 2002.

Click here to read the FAO Report.

According to the WFP itself, grain prices will remain "at current levels or to increase slightly over the next 18 months."

But despite those dramatic decreases in food costs, a WFP spokesman says the organization has dropped its own budget estimates for this year and the near future by only $1 billion, or about 14%.

Why the difference between WFP's budget planning and food and energy costs in the real world?

According to WFP, a number of factors are involved, starting with the fact that the agency is feeding more hungry people: 105 million in 2009, vs. 86.1 million in 2007.

For some of its operations, WFP is also feeding them longer; an average of four months vs. the previous year's three. "In dire situations, like in the Horn of Africa, some people require sustained food supplies throughout the year, not just during peak hunger periods," according to the agency spokesman.

In addition, the spokesman said, it simply didn't lower its costs to the levels that current prices might indicate were appropriate. "Our downward budget revision reflected a 25% reduction in our food costs and a 7% reduction in our transport costs," the spokesman said, adding that "only 20% of our transport costs move in tandem with fuel."

But that would still seem to leave a lot of leeway. And in some cases, WFP not been spending less money on food but more—purchasing expensive food products that cost many times more than the basics it provided before there was a food emergency. Among the items mentioned by a WFP spokesman were corn soya grain blends rather than traditional corn; and chickpea- and peanut-based manufactured products, which the spokesman said were "more nutritious".

But they are also much more expensive. Using South African prices as a baseline, the spokesman said corn soya blend costs 45% more than traditional corn, and chickpeas a whopping 1,100% more, while one ready-to-use peanut-based product cost 1,400% more.

The spokesman did not cite the amounts involved, but in a tacit admission that WFP may have overused the pricey commodities last year-despite the "silent tsunami"-said that "we have encouraged our country directors this year to look at ways to use these more nutritious products selectively and where they can have the most nutritional impact."

But the most dramatic switch for WFP from its past policies, is not what it purchases but how it purchases.

WFP is now using its increase in funds to make much greater numbers of cash-on-the-barrelhead purchases of local food supplies in developing regions, rather than passing on large quantities of foodstuffs donated by rich exporters like the U.S.

Last year, for example, WFP got $4.15 billion in cash from donors and only $887 million in in-kind food supplies, and according to the spokesman spent $1.1 billion procuring food in 73 developing countries.

The change in WFP's cash vs. in-kind balance is something that it has sought as a long term strategy to become more of an international food welfare agency doling out cash than a food bank handing out imported emergency supplies.

Many WFP experts have long argued that in-kind contributions stunt local food markets and depress local food prices, and that the agency's increasing use of cash in local markets "helps small farmers produce food and gain access to income so they no longer need food assistance," as the WFP spokesman put it.

But at the same time as the WFP has been buying local food in a major way, the spokesman revealed that "an analysis of domestic food prices for 58 developing countries shows that in around 80% of the cases, food prices are higher than 12 months ago, and in around 40% higher than three months ago. In 17% of the cases, the latest price quotations are the highest on record."

This price hike, the spokesman said, hit hardest at the "urban poor and food deficit farmers who are dependent on the market to access food."

WFP insists that its own food purchases in those fragile markets have had little to do with the devastating local food price spiral-which has been going on despite the drop in world food prices.

"We always seek to [procure food] in a way that disrupts markets as little as possible," the spokesman said. "We have competitive tenders and do not pay monopoly prices."

That may be so, but competitive tenders for additional supplies in tight food markets can cause prices to go up. And prices where WFP buys food are definitely going up.

In fact, that is where the "silent tsunami" seems to have moved: from world markets, where basic food commodities appear to be in abundance, to local markets in the struggling parts of the world where the WFP is now buying increasing amounts of its supplies.

And WFP intends to keep buying.

George Russell is executive editor of FOX News