Presentation to CRS Research Policy CouncilMay 11, 2011

Cornell University & Congressional Research ServiceCapstone Initiative, 2010-2011

Professor Chris Barrett

Students: Leah Bevis, Aurelie Harou, Sarah Pedersen, Luke Pryor, Marc Rockmore, Morgan Ruelle

Coordinated by Cynthia Mathys

U.S. Global Food Security Initiative:Policy Issues and Implementation Options

USG has long record of dev’t assistance with a priority in improving food security worldwide for important strategic, economic and moral purposes.

Highly current: 2007-8 food price crisis and 2011 record highs have sparked renewed interest due to political instability (Haiti, Madagascar), increased hunger and poverty, land grabs, etc.

USG support for global food security is broadening beyond traditional foci: food aid, CRSPs, and support for int’l agricultural research.

Goal of the capstone project: To provide background lit reviews, identify illustrative case studies, summarize policy implications of emerging issues related to the USG global food security initiative (Feed the Future), and US food aid programs.

Project Motivation

Four Priority Areas

Summarize fast changing research literature in areas where USG and private sector interest are increasingly turning:1)Risk management, incl. index based risk transfer products

- Increased recognition that uninsured risk is a major drag on economic growth and poverty reduction

- Lots of innovation in commercial risk mgmt (IBRTPs)

2)Safety nets and social protection- Much experimentation with new forms of safety nets

3) Food aid quality- Food aid as USG int’l safety net … quality a growing issue

4) Smallholder market access- Rapid expansion of agrifood value chains in the developing world

Project Motivation

Risk in Developing Countries

• Uninsured risk has major negative effects in developing world– Low-growth strategies are employed to lower risk exposure– Negative shocks often drive people into long-term poverty traps

• Risk in the developing world comes in a variety of forms– Covariate risks experience by most people simultaneously

– Droughts, wars, price swings, etc.– Idiosyncratic risks experienced by single people or households

– Disease, deaths, or injuries, etc.– Agriculture is particularly susceptible to risk

• Risk management in the developing world remains very limited– Community-based programs– Government-run programs– Market-based programs

Leah Bevis and Luke Pryor

Market-Based Programs:Index-Based Risk Transfer Products (IBRTPs)

• Traditional insurance is problematic in the developing world– E.g. High cost and slow (due to infrastructural problems)

• One potential solution: IBRTPs– Different from traditional:

• Pay-out based on area-level shocks, not individual losses– Solves some problems:

• Low-cost, fast and no moral hazard/adverse selection– Comes with its own problems:

• Basis risk (difference b/n insured and individual effects)

Leah Bevis and Luke Pryor

Examples of IBRTPs

• Micro Scale: Index-Based Livestock Insurance– ~2,000 participating herders in Northern Kenya– Protects against livestock death due to drought– Removes 25-40% of risk

• Macro Scale: Caribbean Catastrophe Risk Insurance Facility– Protects against hurricanes and earthquakes– Sixteen member countries– Paid out $12.8 million in 2010 after Tropical

Cyclone Tomas

Leah Bevis and Luke Pryor

Government-Based Programs: Safety Nets

• Targeted transfers to poor or otherwise vulnerable households– Differ from other social protection: Non-contributory

• Wide variety: village to national levels– Food Stamps (US); Progresa/Opportunidades (Mexico); National

Rural Employment Guarantee Act (India)• Up to 25% of Mexican families and 52 million Indian families

• Potential to reduce poverty and vulnerability– Direct transfers– Provide insurance in event of shock

• After shocks: Reduce sales of vital assets• Pre-shock: Enable families to take risks on income generating activities

– Induce socially desirable behavior• School attendance or nutrition

Marc Rockmore and Morgan Ruelle

• Transfer type: Cash, Near-Cash, In-Kind

• Conditionality: Assistance is contingent on specific behavior(s):

– Food Aid vs. Food for Work

– Searching for employment, school attendance

• Choice of program type

– Group targeted

– Administrative capacity

Safety Net Design

Marc Rockmore and Morgan Ruelle

International Safety Net: Food Aid Quality

• Definitions:– Food Quality: food safety, nutritional values, sensory

values (taste, smell, texture), convenience values (ease of cooking)

– Food AID Quality: protecting the health and safety of beneficiaries; providing quality food at the right time, place, and amount; providing quality food at an acceptable cost that aligns with national regulations

• Is food aid a nutrition intervention?

Sarah Pedersen

• Objectives Matter:– Not all objectives are nutritional. Emergency programming

aims to save lives by providing food to those in need. However, if nutritional objectives are neglected, recipients risk deteriorating health.

– Tradeoffs exist between feeding the largest number of people and providing nutritionally balanced rations

– Nutrient-dense foods cost more, but tackle hidden hunger (micronutrient deficiencies), and may better target vulnerable populations (pregnant/lactating women, infants/children, persons with HIV/AIDS)

– Consider other metrics besides per-unit costs: cost per outcome achieved?

Food Aid Quality

Sarah Pedersen

• Increased opportunities for improved impact on recipients– Proliferation of food aid products & procurement and

delivery mechanisms– Improvements in scientific understanding of human

health and nutrition• Food safety

– Due to a lack of uniform standards, safety of food aid remains inconsistent and not well regulated

• No silver bullet– New USAID/Tufts Food Aid Quality Review points out

that products, programs and processes all affect the impact of emergency food assistance on people in need

Food Aid Quality

Sarah Pedersen

Smallholder Market Access

• Increased attention to smallholder access– To reduce poverty & increase food security

• Trends in the agrifood industry in least developed countries– Liberalization of trade and FDI in developing countries– Public sector demand for LRP for food aid programs– Growing demand by regulators and consumers for

multidimensional sustainability labeling for food

Aurelie Harou

Smallholder Market Access

• Smallholder market participation decision– Crop-, firm-, and household-specific attributes– Most poor households (incl. farming households!)

are net buyers of goods: adversely affected by higher food prices

• Smallholder welfare impacts– Integration in modern marketing channels normally,

but not always, helps participating farmers and farm workers

– Reallocation of land for export crops can increase smallholders’ exposure to catastrophic risk

Aurelie Harou

Smallholder Market Access

US Policy Implications

1) Food aid policies- Poor timing can result in higher price volatility- LRP can help smallholder access markets

2) Trade policies- Import tariffs and quotas- Nontariff trade barriers: food safety standards

3) Development and growth policies

- Smallholder market access enhanced by economic growth and poverty reduction, greater agricultural productivity, improved infrastructure and sociopolitical stability

Aurelie Harou

This capstone project:

-Will help CRS provide Congress with information about the range of policy tools available for addressing global food security. Four background papers to CRS.

-Directly informed members and staff through two Congressional briefings and two policy briefs

-Exposed talented students to CRS and to policy research and policymaking process within the Congress.

Project Summary

Outputs and Outcomes

Project Summary

Global food security is high on policy agenda again:-Global food prices at record highs-G-20 has made food security a high priority-Farm Bill debates starting up-Pending foreign assistance reform legislation-Food Aid Convention renegotiation underway

The policy tools of the USG are evolving in response to a changing global food economy and heightened concerns about policies to address food security. It is essential for the Congress to be well informed.

Thank you for your time, interest and comments!

Thank you