Monetization of U.S. in-kind food aid
[3] According to a study by Barrett and Lentz, monetization in the United States is driven by the "iron triangle" of producers and processors, the U.S. shipping industry, and NGOs.
[3] Furthermore, U.S. law requires 75% of nonemergency food commodity tonnage be purchased, bagged, or processed, which provides U.S. companies with business.
The law requires 50% of Title II grains to be bagged in the U.S. and 75% of U.S. food aid must ship on U.S. flag carrier vessels.
Critics claim it carries the risks of other types of food aid, which include displacing imports and disruption of local markets.
These issues have brought a number of objectors, including the WTO, U.S. commercial exporters, and recipient country producers and traders.
"[5] Additionally, monetization has been labeled “inefficient” by a number of analyses, including that of the Government Accountability Office (GAO).
In 1988, Title II PL 480 expanded to cover development projects as well, and non-emergency funding through monetization had a minimum level of 10%, which increased to 15% with the 1996 Farm Bill.
[1] Additionally, it allowed for third-party monetization, which means food aid can be sold in one county to generate money to finance emergency or development programs in another country.
The 2008 Farm Bill raised those values to 7.5 and 13 respectively and expanded the list of uses for those funds, giving the Office of Food for Peace greater flexibility to provide cash to cooperating sponsors when monetization would not be appropriate.
Since the introduction and subsequent changes of Title II, non-emergency food aid and the number of cooperating sponsors, most of which are US-based NGOs, have increased.
[4] According to a 2007 report from the United States Government Accountability Office, while the minimum level of nonemergency funding through monetization is 15%, it reached almost 70% in 2001.
[10] Between FY1999 and 2005, the overall contribution of monetized food aid could conservatively be as large as $900 million in support of projects with the assumption of a 60% recovery rate from the delivered commodities.
While there are challenges and constraints to the effective use of monetized proceeds, experience demonstrates that food aid monetization can be an effective resource for grassroots development in foreign countries.“[11] However, the benefits of these projects are often descriptive, so the actual impact in numbers and estimates on sustainability and broad impact are difficult to estimate.
They provide the example of selling food through small traders and processors based in villages to help stimulate competitive distribution channels.
Catholic Relief Services, Save the Children, CARE, and other aid groups signed a 2006 declaration stating monetization is inefficient and diverts food from the poor.
