We’re still looking over the details, but the first look at President Obama’s proposal to overhaul the international food aid program looks very good. Oxfam has been working this issue for more than a decade and we observe that the changes would:

(1) Cut funding of the primary food aid program (PL 480), which in FY13 was funded at $1.36 billion.

(2) Shift $1.1 billion to a different disaster response budget account under USAID for emergency food assistance. This would allow using more flexible food assistance tools like local purchase of food, or using vouchers instead of food distribution;

(3) Shift $250 million to a development budget account at USAID to support longer-term food assistance programs with food aid resources. This is an addition to the $80 million in funding within this account that is already available for this purposes, bringing total DA funding for non-emergency food aid to $330m;

(4) Create a new highly flexible $75 million emergency contingency fund; and

(5) Shift $25 million to the US Maritime Administration to ensure that US military readiness of the US shipping industry is maintained, since less food aid is likely to get shipped overseas.

A child in Dire Dawa, Ethiopia stands near a wall made of USAID food aid containers in the flood-destroyed area of Bahere Tsege in 2006. Photo: Liz Lucas/Oxfam America

The proposal would end the practice of “monetization” which provides cash to NGOs doing food security programs in developing countries but is highly inefficient and wastes a lot of money.  The proposal would require that 55% of the emergency food aid be procured from the US.  We hope that there is a continuing effort going forward to reduce the requirement that US food aid is tied to domestic sourcing. We recognize that US commodities still have a role to play in addressing hunger, but USAID should not have its hands tied in making the decision about how best to reach those in need.

Already today, two Republican Senators have expressed openness to looking at the proposal and making reforms.  Looks like this could have legs!

USAID Administrator Raj Shah will make a speech on the proposal later today.

Politico yesterday reported a rumor that US food aid programs could see major changes in the next budget. The article frames this move as putting aid “on the chopping block,” but it is not at all clear what is really going on.  Enacting major cuts to food aid programs would be a terrible idea that would cost lives without making a dent in our debt.

But there is another, more hopeful possibility that the administration is about to push for long overdue reforms that would make US aid programs more effective and cost efficient. This could be a very, very good thing.

Let me explain. The US reaches millions of people each year with life-saving aid. From the Horn of Africa to the Sahel to the most recent humanitarian crisis in Syria, US assistance to address hunger and food insecurity is crucial. The US is the most generous donor of food assistance in the world and gets a lot of credit for this.  Cutting aid doesn’t make sense, but why might the Administration seek to fundamentally change this program?

A child in Dire Dawa, Ethiopia stands near a wall made of USAID food aid containers in the flood-destroyed area of Bahere Tsege in 2006. Photo: Liz Lucas/Oxfam America

The reason is that current US food aid programs are excruciatingly inefficient and in some instances counter-productive to helping people build sustainable agricultural livelihoods. Oxfam has been outspoken in its criticism of the way in which the US runs its food aid program. And we’ve offered common sense reforms to make the programs more efficient—reforms that would allow US assistance to reach millions of more people without costing a single extra penny. We applauded Chairwoman Stabenow and Ranking Member Roberts of the Senate Agriculture Committee for their leadership and steps to reform the food aid program as they wrote a new Farm Bill last year.  The bill passed the Senate on a broad bipartisan basis, but floundered in the House.

If the Obama Administration puts forward a proposal to pursue these kinds of reforms, it would mark an effort to break the stranglehold of special interests in the US who profit from the current rules, regulations, and red-tape governing food aid programs. It would be a bold and important step.

Real reforms would give aid humanitarian agencies greater flexibility, including the ability to purchase food from the cheapest, most efficient source. This would in turn reduce costs and speed delivery. It would bring our programs into the 21^st century, in line with most other countries. This is precisely what a recent USDA study of local and regional procurement projects demonstrated. For almost every commodity examined, buying from local or regional sources was cheaper and uniformly faster than shipping it from the US. Many aid groups already do this with their own money and through other emergency aid accounts such as the Emergency Food Security Program out of the International Development Account.  But the primary food assistance program remains essentially outdated, lumbering, and wasteful.

Such a change would also clean up the jurisdictional mess created by current configuration of food aid programs, which are authorized in the Farm Bill, funded through the Agriculture Appropriations bill, but implemented by USAID. Not only would reform rationalize the system, but it would help create a more cohesive approach to the current patchwork of programs to deal with global hunger.

Oxfam America campaigned last year saying that Washington should “stop playing with food aid.” Thousands of people supported us in sending a message to their lawmakers to enact this reform.  If the rumor pans out and the Obama Administration is serious about food aid reform, it would seem the message got through.  Good on President Obama!

I doubt members of the Agriculture Committee thought the eleventh-hour Farm Bill extension would be the conclusion of their year-plus efforts to negotiate a new and improved five-year Farm Bill.

The last-minute inclusion of a one-year extension of the commodity groups’ favorite farm subsidies and rural programs were tucked into the final fiscal cliff bill this week. This means that the debate about the future of US food and farm policy and efforts for real reform will have to continue in 2013.

The fiscal cliff bill does the bare minimum of providing continuing authority for life-saving food aid programs, avoiding most of what could be termed the “food aid cliff”.  The US provides roughly half of all food aid globally. If food aid programs had not been re-authorized, a true cliff would have emerged for tens of millions of people displaced by conflict or whose crops are decimated by floods or rain, and who depend on food aid from the US.

Although the extension of the food aid programs is obviously a relief, it’s a program in desperate need of improvement. Unfortunately the extension was not applied to reauthorization of one of the most promising and successful programs of the 2008 Farm Bill, the USDA Local and Regional Procurement Pilot Program (LRP). LRP ensures the most bang for the food aid buck, because it allows the US Government to purchase food aid from the most affordable and efficient sellers. The LRP pilot has proven to be a highly-effective and efficient way to spend scarce aid dollars to help save lives and build self-sufficiency for vulnerable communities.  As has been well documented, LPR can save time and money, allowing crucial aid to reach more people in need of food assistance. It also invests in communities so they can feed themselves, instead of becoming dependent on food aid in the future.

It is the epitome of irony that a deal designed to tackle some of the looming challenges of government spending allows LRP to lapse, thereby doubling down on the more expensive, inefficient, and outdated models of food aid.  It is a wasted opportunity for Congress, not to mention a waste of money for taxpayers. LPR is the kind of program you would prioritize if your aim was really to make federal spending more efficient and effective.

But that’s not what Congress chose to do, a depressing start to the new year. The National Sustainable Agriculture Coalition issued a press release referring to the Farm Bill extension as “anti-reform” and “a disaster for farmers and the America people.”

Congress must extend authority for LRP, and adopt a host of other reforms to US food aid programs when it reauthorizes the Farm Bill in 2013. The Senate version of the Farm Bill, after much work and compromise, included good provisions on food aid reform that must be the starting point for continued discussions.

We may not have totally fallen off the food aid cliff, but we still have a mountain to climb.

Rice distributed and sold in Liberia. Photo: Ruby Wright/Oxfam International

With Farm Bill negotiations simmering on the back burner and an all-consuming Congressional focus on dealing with the fiscal cliff, the Alliance for Global Food Security, a group of Private Voluntary Organizations who have opposed common sense reforms to food aid programs, took the opportunity to launch a new study on the use of food aid monetization—essentially the sale of agricultural commodities in developing countries—to generate revenues for use in development programs. The Value of Food Aid Monetization: benefits, Risks and Best Practices sets out to provide additional information and evidence on one of the thornier issues in food aid programs authorized through the Farm Bill.

The problem: As the report rightly notes, the Government Accountability Office (GAO) has, on more than one occasion criticized the practice of monetization as a wasteful and inefficient use of US assistance. In their most recent accounting, the GAO found that over a recent three year period, monetization resulted in a loss of $219 million. The reason? It’s difficult to recoup the full cost of purchase, shipment, and delivery of food aid in competitive transactions in developing countries. Cost recovery for monetization activities for USAID administered programs averaged 76 percent. Activities managed by USDA fared slightly worse.

Then there is the question of market impact. Concerns have long been raised (including in the GAO report) that monetized food aid can compete with locally produced goods (or more relevantly, goods produced by smallholder farmers in the same market/country), disrupting lives and livelihoods.

How the Alliance responds: The study produced by the Alliance admits that on a pure cost recovery basis, monetization programs score poorly. But fixating on how much money is lost in monetization only tells part of the story and ignores all the good that can come from selling food aid. To elaborate this point, the study looks at five monetization activities in Gambia, Guatemala, Uganda, Liberia and Mozambique.

So, what exactly does the report tell us?

• In the cases under review, monetization did not disrupt domestic production or marketing. A positive finding, though I suspect there would have been resistance to publishing cases in which monetization did disrupt markets;

• Even if not explicit, it’s pretty clear that monetization serves as an export promotion program and an export subsidy to US producers. Take this language from the Liberia case study in which rice is the monetized commodity: “The six importers [which dominate rice imports] would not import as much [US] parboiled rice commercially because it would be cost-prohibitive, which is overcome by selling in smaller lots and allowing incremental payments.” Is this why we have food aid programs, to promote US agriculture products abroad?

• Program results achieved from the monetization process (as opposed to the ones achieved with the resulting funds generated through monetization) demonstrate benefits in terms of improving food markets, though not necessarily agriculture markets. For instance, one of the key benefits of wheat sales in Uganda has been the contribution to a stronger milling sector. But no data is presented to demonstrate that the improved capacity of millers has resulted in stronger linkages with farmers, particularly smallholder farmers who are the subject of much focus in Feed the Future and other development programs.

And what does the report not tell us?

West Point Market in Monrovia, Liberia.Photo: Aubrey Wade/Oxfam GB

Whether the positive outcomes associated with the monetization program could be achieved through other means. The crux of the issue is not whether monetization proceeds fund good programs that benefit producers or consumers. It is whether monetization is really the only or the optimal means of achieving positive results. For example, several of the case studies note instances of increased market participation by small vendors because of favorable credit or financing provisions accompanying monetization schemes. But these outcomes could also be achieved through strengthening commercial financial services and other assistance provided directly to traders.

And finally, even if one agrees that this study presents compelling evidence that the practice of monetization should continue to be part of US food aid programs, it does not mean having to accept the status quo. If organizations continue to insist on monetization—and if by law a minimum amount of food aid must continue to be sold on markets—we need smart policies and strong guidance and indicators regarding outcomes and acceptable levels of loss in the program.  Provisions in the Senate-passed Farm Bill take a step in this direction by directing agencies practicing monetization to achieve at least 70 percent cost recovery (though USAID and USDA would have discretion to authorize monetization even in instances where this could not be achieved). Of the cases reviewed in this study, this level is met or exceeded in all but one instance. The Senate provisions would not have precluded any of the positive outcomes these activities appear to have achieved.

From the outside, losing 24 percent of aid resources on average in the process of monetization seems like a terrible waste of scarce resources. But what’s worse is that some aid groups that regularly practice monetization seem to be ok with this cost of doing business and are opposed to the Senate reforms. Shame on them. We should strive to do better.

Farmer Kassa Danfakha stands in his field during the dry season; Bembou village, south-eastern Senegal. Credit: Brett Eloff/ Oxfam America

I blogged two weeks ago about the ongoing Sahel food aid crisis and my colleague Anna Kramer has provided a great infographic outlining the key causes and facts. Today, at a meeting being organized by the European Commission, governments, UN agencies, and INGOs (including Oxfam) are meeting in Brussels to discuss the crisis and chart a path forward.

Much of the focus of the meeting will undoubtedly be on meeting immediate emergency needs and filling the appalling funding gap that remains between what governments have identified as needed in the region and what aid has so far been committed. Of the 1.5 billion requested so far, only $642 million has been committed by donors. The US has provided $308 million. But, with such a large gap, it is clear that all donors—the US included—must give more. All of this of course assumes that this additional assistance can be used in creative ways to get assistance to people in need on time, which is now. Perhaps this a manageable task in some communities, but clearly harder in other places such as northern Mali.

Efforts to ensure a successful harvest are also badly in need of funding at the moment. Farmers and pastoralists are again looking forward to the rainy season which is expected to begin in the days and weeks ahead. The onset of the rains usually signals hard work as farmers go to the fields to prepare and plant their crops, but only if they have seeds.

In Senegal, seeds for key crops such as groundnuts appear to be in scarce supply. After the poor crop last year, farmers had few seeds to save. And what seeds they have managed to keep have become a tempting source of nutrition as other food has run out. Without immediate assistance to meet emergency needs and enable farmers to plant and pastoralists to maintain their herds, the cycle of hunger will continue. This is the discussion in Dakar and Niamey, and other capital cities in the region where hunger has taken hold. It will also be on the agenda for the Consultation.

Recovery activities—helping to rebuild assets that have been depleted during a crisis period—such as emergency input distribution are embedded in drought disaster response. The Consultation is also slated to tackle issue such as this in terms of the emergent (and in vogue) concept of resilience building. In a conversation eerily similar to one that took place earlier this year with regard to the Horn of Africa crisis (and where the US launched a multi-stakeholder partnership), the EU is slated to announce a partnership on resilience for the West Africa region.

However it is defined (see here for one example)—whether to signal the need to bridge the gap donors often face between humanitarian aid and long-term development programs; focus attention on government-level early warning systems, preparedness, and response; or to support community-based efforts to assess, prepare, respond to and recover from shocks—the concept of resilience may be a useful one to organize around. (For an interesting Q&A covering some of these issues, see this transcript from a recent USAID-sponsored event.) But governments and other stakeholders need to clearly define a shared framework for understanding and analysis of how resiliency will be operationalized at the community level and how it layers with other development effort to sustainably improve food security and reduce vulnerability over time. The danger is that resilience becomes a fad that garners attention in the short term without attracting the resources needed to bring about transformative and lasting results.

Representatives meeting at the European Commission High Level Meeting on the Sahel must address both of these issues. It’s a tall order, admittedly. But one that can’t be ignored.

Oxfam is aiming to help 1.2 million people across seven countries with programs that include cash transfers and cash-for-work initiatives, veterinary care for the livestock on which many families depend, and access to clean water and sanitation. We are also campaigning to change the root causes of this crisis. Find out how you can support our efforts.

For months now, Oxfam has been warning that a crisis is looming for millions of people across West and Central Africa. Resources have been mobilized, programs modified, and a response developed to provide short-term humanitarian relief. Now entering the “lean season”, more than 18 million are now at risk of hunger as households exhaust their food stocks, and cash reserves dwindle. The next few months will require increased support from donors, UN agencies, and organizations to assist in meeting basic needs. This will require the political will and financial backing of national governments—both donor and developing—to ensure plans to provide assistance are put in place and acted upon in a timely manner (meaning right now).

Unfortunately, early warnings in the Sahel have not yielded the kind of early action that can eliminate the worst suffering. It’s a pattern all too clear from the recent example of the Horn of Africa. As Oxfam and Save the Children documented in their recent report, despite information about the impending disaster, the international community responded late, a delay that cost thousands of lives.

The problem was not that we didn’t know an emergency was looming. In fact, there are now very good early warning systems in place. The problem was that we did not act with the information we had.

Seeking to avoid a similar fate in the Sahel, Oxfam’s first demand has been to call on governments—developing and donor countries alike—to take action now to head off the worst of the suffering and to make sure that adequate resources are provided to meet urgent humanitarian need. And, of course, we support efforts to raise the voice of concerned individuals to send a message to their political leaders (Secretary Clinton, are you listening?) to do the same.

So far, needs identified by governments in the region (for example through the development of national emergency response plans) have not been matched by the funding needed to fully implement response efforts. By the middle of May, two-thirds of need had been covered. In the intervening month, funding requirements have been adjusted upwards to $1.6 billion while contributions have not kept pace.

Scaling-up humanitarian response is just one step in a longer–term process of responding to this disaster and trying to reduce the likelihood and impact of future droughts and crop failures. Addressing the underlying factors that contribute to vulnerability among smallholder food producers requires a sustained effort only possible with real political commitment. Which is why the GROW Campaign is focused on strengthening investments in smallholder food producers. At the same time we are urging governments to act now to respond to the crisis, we are also working with partners in the region to shape an agenda for future once the worst of the crisis has subsided. Our message is that while the next few months are critical, the immediate response does not lessen the need to build resilience over the long-term to break the cycle of hunger.

A good place to start is by incorporating disaster risk reduction activities into the current response to help prepare for the next drought, for example by rehabilitating water points and introducing agriculture practices that can capture and better utilize rain water. Going forward efforts to help farmers manage risk through weather-based index insurance (currently being planned in Senegal through Oxfam America’s R4 work) also hold promise. Side by side these efforts, farmers need strong support backed by their governments to make them more productive as food producers and more able to profit from their efforts. Investments in infrastructure to facilitate market access, research and development to identify practical solutions to help farmers adapt to climate change, and the provision of agriculture extension services to provide advice and information that will increase crop production are just three examples where increased investments are urgently needed.

Calling for these kinds of interventions is easy, conceptualizing concrete solutions more complex, and turning plans into real programs of support for food producers, harder still. But if we want to assist farmers from being in this position then next time a major drought hits, it’s essential.

Oxfam is aiming to help 1.2 million people across seven countries with programs that include cash transfers and cash-for-work initiatives, veterinary care for the livestock on which many families depend, and access to clean water and sanitation. We are also campaigning to change the root causes of this crisis. Find out how you can support our efforts.

After months of negotiation and a failed attempt to write new rules for agriculture into the Super Committee debt deal last Fall, the Senate Committee on Agriculture Nutrition and Forestry took the first step towards reauthorizing a new Farm Bill last week by passing a Farm Bill out of committee. Most of the energy and attention in the bill has been focused on commodity policy and new provisions for crop insurance, both issues Oxfam has written about in the past and continues to monitor in the current deliberations. After all, this is where the real money is and where US agriculture interests really dig in their heels.

Far less scrutiny has been placed on the section of the Farm Bill containing provisions for food aid programs. Over the last several months, Oxfam has sought to shine a light on these issues as a core component of the US response to global hunger.  We’ve argued that the current program is badly outdated and in need of repair.

So, after round one of what is sure to be a bruising, multi-round fight on food and farm policy for the next five years, whither food aid reform? Here’s a quick run-down of what’s included in the food aid provisions of the Farm Bill:

1. Local and regional purchase (LRP): Buying food closer to the source of need seems like a no-brainer since independent analysis has already shown that in many cases it is faster and cheaper than purchase and shipment from the US. Oxfam supported the integration of LRP into the core food aid programs. Instead, the Committee chose to reauthorize a stand-alone program (basically making the existing pilot program permanent) with funding up to $40 million per year. This cap is too low, especially considering that over the life of the current Farm Bill, spending on food aid has averaged $2.3 billion annually. But keeping LRP in the bill is a step in the right direction.

2. More cash: Currently, NGOs implementing development programs using food aid (think, for example, of integrated nutrition programs with a food distribution component) can request up to 13 percent of their program costs in cash. But the needs of these programs often far exceed that 13 percent threshold, leaving aid groups struggling to find the cash they need to run their programs. The upper limit is now set at 35 percent. This isn’t high enough to satisfy need, but is a big step forward nonetheless.

3. Selling less food aid?: To get around the problem of not having enough cash to run programs, NGOs routinely sell food aid, a wasteful practice especially given how expensive it is to ship it  on US-flag vessels (a requirement of current legislation). Selling food aid in developing countries usually generates less funding than it cost to buy the food in the first place. The rate of return on these sales, known as “cost recovery rate,” has been documented at 58 percent for USDA and 76 percent for USAID. What this means in practice is tens of millions of dollars are lost that could otherwise be used to reach millions of people, 2.1 million people per year by one recent estimate. In the proposal adopted last week, this practice gets some discipline: “monetization” cost recovery will be required to meet or exceed 70 percent of the cost of purchase and shipment from the U.S. The architecture of this provision is solid, but the 70 percent floor set for cost recovery is too low. If we’re serious about reducing waste in the US food aid program, the rate of return on food aid sales should be 80 percent at a minimum.  This would be a true compromise as many, including Oxfam, have advocated for eliminating the practice of monetization altogether. Strong monitoring of market impacts of monetization to make sure this activity is not harming local agriculture markets is also missing from the legislation and should be incorporated.

4. Non-emergency food aid:One of the trickier issues in the bill turned out to be the earmark for NGOs to use food aid in development programs. In the last Farm Bill, a special carve-out was created to ensure that non-emergency programs get a portion of the food aid budget.  The problem is this earmarking ties USAID’s hands in times of crisis, making it difficult for them to meet urgent needs and spend money as effectively and efficiently as possible. The Senate Farm Bill proposal now provides for the earmark to fall within a band of between 15 and 30 percent of the total food aid budget, with a floor of no less than $275 million. This gives USAID more flexibility in determining how much of a limited aid budget should go to meeting emergency needs and how much to provide for non-emergency activities. This is a reasonable compromise between the position of many aid groups—including Oxfam—calling for maximum flexibility, and those groups calling for a hard earmark of $450 million (groups, by the way, who have been strangely silent on reforms needed to make food aid less wasteful).

5. And some welcome surprises: Two other issues of note in the Farm Bill are:

• A call to focus on improving nutritional quality; and

• A proposed pilot program for food resilience.

Both provisions carry the name of the late Representative Donald Payne, an advocate of Africa and development and sponsor of legislation to make US food aid more nutritious. Current Senate legislation picks up where the last farm bill left off in terms of promoting a greater focus on nutritional quality of food aid and incorporates provisions from Payne’s legislation. Additionally, the Donald Payne Horn of Africa Resilience Program would, if enacted, provide up to $10 million annually to link short and long-term responses to food insecurity in the Horn of Africa to reduce vulnerability and increase household and community coping capacities.

The reforms proposed by Chairwoman Stabenow (D-MI) and Ranking Member Roberts (R-KS) represent a solid basis for rethinking US food aid. The proposal represents an evolution, not a revolution, in the program, but a welcome move toward greater accountability of foreign aid resources.

The Agriculture Committee’s opening gambit paves the way for deliberation by the full Senate as well as the House Agriculture Committee, which has recently embarked on Farm Bill hearings. House Chairman Lucas (R-OK) has already made clear he has a different opinion about what US agriculture needs. And the House Committee’s recent proposal, cutting $33 billion over 10 years out of the Supplemental Nutrition Assistance Program (SNAP), puts it on record attacking the nation’s largest domestic food assistance program. The question is which direction are they heading with international food assistance?

Post Script

Last week, Oxfam America’s “Food Games” video premiered during the ad breaks on Comedy Central’s “Daily Show” and “Colbert Report” as part of our push to get food aid reform on the Senate agenda. The video, an irreverent (some say creepy) look at how Washington plays with food aid, has also garnered more than 46,000 views on YouTube. Everyone from Mashable to Marion Nestle to Djimon Hounsou and the ONE Campaign has taken a peek, helping to promote Oxfam’s call to fix food aid so that up to 17 million more people can eat during times of crisis.

As my colleague, Gawain, blogged about at the launch, “Food Games” has been a departure for us…a “gamble,” as he puts it. Tell us what you think.

This post was first published in the Guardian’s Poverty matters blog here.

The worst drought in 45 years, a drought with no end in sight at the moment, is ravaging the south-central US and wreaking havoc on farmers and ranchers who are seeing their crops fail and their cattle suffer from lack of water.

Meanwhile nearly half way around the world in the Horn of Africa, a broad swath of the region – including parts of Ethiopia, Kenya and Somalia – is suffering a severe drought that threatens to push millions of people already living on the brink of disaster into a full scale humanitarian crisis.

Even the dry clinical language of the Famine Early Warning System Network (pdf)raises alarm bells:“Households in pastoral and marginal cropping areas in the eastern Horn currently face moderate to extreme levels of food insecurity due to ongoing drought, increasing staple food prices, declining purchasing power and in some areas, limited humanitarian assistance…”

“Current assistance programs are inadequate to mitigate existing and expected food deficits and high malnutrition. In areas with humanitarian access, expanded programming should be implemented to address current and expected food insecurity. However, development of new strategies is critical in order to reach affected households in areas with limited humanitarian access.”

For farmers in the southern US, the drought is surely a disaster that will not only ruin their crops, but holds the possibility of running them out of business. Federal support in the form of crop payments, subsidized crop insurance, possibly disaster payments and an array of other social safety net programmes, will help soften the blow.

Poor farmers and pastoralists in the Horn of Africa face a much different and much deadlier reality. In Ethiopia, 3.2 million people currently need humanitarian assistance; in Kenya 2.4 million people do. And in Somalia, the current drought is compounding an already desperate situation where median prevalence of acute malnutrition was 25% in December last year and has deteriorated since. Without assistance many people, and children especially, will die. The US is responding to this unfolding disaster, for example releasing $80m in food aid to Kenya.

How the US responds to this disaster, or more precisely with what, is the subject of renewed scrutiny thanks to a new report released last week, Delivering Improved nutrition: Recommendations for Changes to U.S. Food Aid Products and Programmes. The study, commissioned in 2008 as part of the farm bill reauthorization, takes a hard look at the commodities the US uses to respond to food insecurity and makes concrete recommendations.

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As I wrote a few weeks back, Senator Coburn lit a fire in the ethanol debate with a proposal to eliminate the Volumetric Ethanol Excise Tax Credit (VEETC), the troublesome subsidy given to ethanol blenders that keeps demand for biofuels artificially high. After he agreed to pull the bill before it was voted on last month and worked with Senator Feinstein, who had crafted a similar piece of legislation, a new proposal was introduced in the Senate on Wednesday. The Ethanol Subsidy and Tariff Repeal Act would eliminate VEETC by July 1.

The tax credit is not set to expire until the end of the year, but the fight is getting heated. In response to the Coburn/Feinstein proposal, Senator Grassley introduced his own proposal that would cut, though not eliminate, ethanol subsidies, an idea the ethanol industry has embraced.

Accompanying this latest effort is the announcement by the FAO that food prices for the month of April remain at historically high levels. Prices remained virtually unchanged in April, though the price of cereal grains, corn in particular, shot up as a result of bad weather in the US. The ethanol lobby will tell you biofuels (and biofuel mandates) have nothing to do with global grain prices. Unbiased experts have a different opinion (.pdf) though.

Maize that will be stored in a village grain bank in Malawi. Food prices for the month of April remained at historically high levels. Photo by Carlo Heathcote/Oxfam.

And even if you don’t buy the argument that our (artificially high) demand for biofuels is behind at least some piece of food price issues, VEETC is just plain expensive (at a time when Congress has vowed to radically reduce government spending). According to one estimate, total government support for ethanol between 2006 and 2012 averaged roughly $10 billion per year (.pdf).

We’re not the only ones on board with Coburn and Feinstein’s effort to repeal VEETC. Fifty organizations signed on their support to the legislation. It’s a shame that ideological rigidity is keeping more critics of our flawed biofuels policy from supporting Senators Coburn and Feinstein.

The Senate is expected to vote on the elimination of ethanol subsidies in the coming days. One of the bill’s co-sponsors, Sen. Tom Coburn, often holds different views on many of the issues that Oxfam cares about, but in this case we are squarely on the same page. (Sen. Ben Cardin is the other co-sponsor). The 45 cent tax credit (the Volumetric Ethanol Excise Tax Credit or VEETC) subsidizes the use of ethanol as an additive to gasoline. It’s not only wasteful (and hence potentially attractive to fiscal conservatives), but it is also contributing to higher food prices that endanger the ability of millions of people around the world to get enough food to eat.

This graph shows the rising price of maize. It originally appeared in the from the Global Food Price Monitor April 7, 2011 and is reproduced with permission from the Food and Agriculture Organization of the United Nations.

Driven by poor policy decisions in the US, artificial demand for corn-based ethanol has created competition between food and fuel. US corn stocks are at a four year low, and the price of corn is up to the level reached in 2008 during the height of the food price crisis that pushed more than 150 million into hunger. While the FAO reported today that their food price index showed a slight decline from last month, they note that their Cereal Price Index remains 60% above where it was in March 2010. The FAO also points to increased volatility in cereal markets, bad news for poor consumers who rely on basic cereals as the source of most (or all) of their calories.

An excellent graph showing the increasing amounts of grain increasingly being used for biofuels accompanies a New York Times article here.

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