Food fund promise unfulfilled

Throughout the world, countries are grappling with higher food and commodity prices as demand continues to grow.
Washington Post Staff Writer
Friday, February 18, 2011; 10:59 PM

World financial leaders gathering in Paris this weekend have put the recent rise in food prices high on their agenda, examining whether new trading rules or better regulation of commodity markets might help avoid sharp runups in the cost of wheat, sugar and other staples.

But food experts and analysts say the leaders may do better to focus on promises already made and fund a marquee world initiative on food security. Set up by the G20 group of nations at a gathering in Pittsburgh in 2009, the Global Agriculture and Food Security Program (GAFSP) was designed to help countries expand agricultural production, build access to markets, and make their food supplies more resilient - buffering them from the type of price spikes currently rippling through world markets.

The program has so far garnered less than $1 billion in pledges, and of that only $367 million has been paid. A U.S. pledge of $475 million has gone largely unfulfilled, with Congress stripping all but $66 million of the proposed funding, according to U.S. and program officials. Major European nations - still strained by the recent recession - have yet to contribute to the fund, and fast-growing emerging market nations such as China and Brazil are also absent from the donor list, according to program documents.

The recent price increases "could have a bit of a silver lining if they show these programs are necessary," said Kimberly Elliott, a senior fellow at the Center for Global Development. "This is not a problem that is going away."

Prices of some grains such as wheat have doubled in the past year. United Nations and World Bank food price indices are nearing record highs. And there is concern that food inflation may push tens of millions of additional people into poverty or lead to political instability in some countries.

But there is debate over how to respond.

Spurred by France, which currently chairs the G20, officials have been discussing, for example, whether new regulations on commodity trading might prevent speculators from pushing up prices by investing heavily in grains or other goods on the expectation that they will increase even further in value.

Yet it is unclear how much of a role speculation plays in the movement of prices - particularly in the long term, when investors would find it difficult to influence what one U.S. Treasury official described as a "vast and decentralized" world food market.

The current run-up in prices, according to World Bank, Treasury and other officials, is largely because of bad weather in a couple of key countries and a decision by Russia to ban grain exports as a result. The Russian ban remains in place - U.S. officials said they would seek in Paris to discourage nations from taking such steps - but the impact may well abate in coming months if weather patterns and crop forecasts turn more favorable.

"Droughts, floods and export bans are the main sources of disrupting supply," not speculation, said the Treasury official, who was not authorized to speak publicly because of the discussions underway in Paris.

What may be more helpful to those most affected by short-term price increases is to boost investment in local agriculture.

That's in part what the GAFSP was designed to do when leaders of the major nations agreed to it two years ago. Administered by the World Bank, the money made available so far is going to projects such as improving irrigation for smaller farmers in Niger and helping Mongolian ranchers get better access to nearby markets.

Reliance on local products is one reason why the recent price increases aren't having an even more devastating effect on the world's poor, the World Bank noted in a recent food price survey. In Africa, for example, the jump in grain prices has prompted some to eat more local products such as cassava and sorghum.

But response to the fund has, to some, been underwhelming.

"I am sick and tired of . . . summits and U.N. conferences that are great on promises, then nothing ever happens," said Rep. Jim McGovern (D-Mass.).

The GAFSP was the highest-profile initiative to grow out of a G20 promise to devote more resources to food security, but so far only six nations have provided money. Other contributors include Canada - the largest donor at $224 million - Australia, South Korea, Spain and Ireland.

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