Can We Provide Better Financing for Food Aid in Emergencies?

This is a joint posting with Owen McCarthy and Julia Barmeier

The events in Haiti have demonstrated the reactive nature of emergency response -- specifically the myriad of appeals for funding for food, medicines and basic supplies. While these initiatives can produce positive results for the disaster victims, they are often encumbered by long delays, which mean that people stay hungry and sick for days, weeks or even months. The United Nations says that it is currently feeding 4,000 people, and hopes to feed 2 million people within a month.

In a forthcoming paper, coauthored with Benjamin Leo and Owen McCarthy, I argue that emergency food aid would be more effective if it were financed on a multi-year, cash basis by rich countries, rather than on a year-by-year, reactive basis as is currently the case. The government of Australia recently announced a multi-year grant of $130 million over four years to the World Food Programme, giving this agency much-needed flexibility to implement its programs. This type of funding will enable agencies that provide food aid to purchase food using forward contracts, call options or other instruments available on futures markets (thereby locking in a lower price, usually). This stands in contrast to the current procurement system, in which food is purchased mostly on spot markets. There is no doubt that the need for food in Haiti will continue to be great, for months if not years. Can we do better in terms of financing food aid?

In the immediate wake of the Haiti earthquake last week, the UN issued an appeal for $562 million, half of which the organization says will be earmarked for emergency food aid, and the rest intended to assist with health, water, sanitation, nutrition, and other key needs. While it is unclear how much of the $281 million for food aid will be spent on emergency food supplies bought on the spot market, it is likely that a large portion of it will be. While obviously difficult to predict in any given year the magnitude, geography, and number of natural disasters to which organizations like the UN must be called into action, there likely is opportunity to realize cost savings while avoiding sudden shortages of food funding and supplies. Carefully planned food purchases would likely enable emergency response agencies to buy food from lower cost suppliers and might also allow food to be moved to where it is needed in a timely manner.

For the people of Haiti, this type of help cannot come too soon.