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August 16, 2011

Poor farmers no threat to U.S. agribusiness; they will become its customers: Howard Buffet

by Howard Buffet

The reasoning would almost be comical if it were not life-threatening to millions of people. James Henry, the Chairman of the USA Maritime coalition, recently expressed concern that poor farmers in less developed countries could threaten revenues of companies like ADM or Liberty Maritime Corp because of a program called Purchase for Progress (P4), initiated by the World Food Programme (WFP).

These industries face a larger threat from increased commodity prices that have slashed U.S. food aid. In 2005, the U.S. provided 4,233,000 metric tons of food assistance; in 2010, it provided 2,914,401 metric tons, a 32 percent reduction. It is simple math; when corn and wheat double in price, the U.S. government buys less to send to disasters such as what is occurring in the Horn of Africa.

For the past three years I have called for a doubling of our country's commitment to food assistance just to stay even with our historical giving levels. Even this falls short of meeting the demand created by drought, floods, disease and earthquakes. With a billion people going to bed hungry every night and another billion on the edge of food insecurity, it is difficult to believe that we will run out of opportunities for Mr. Henry's coalition to meet its revenue targets.

It is also hard to imagine large U.S. companies being threatened by poor, small-scale farmers trying to feed their families and pull themselves out of poverty. P4P is the most innovative program I have seen; it is consistent with a business approach to solving poverty -- something most CEOs of U.S. companies would and should applaud. As a businessman, it is the type of approach that I have searched for to incorporate into our charitable work. To date, it is the largest single investment our Foundation has made -- and it is likely to become the largest overall, second only to our water programs.

P4P provides training, access to credit and market access for poor farmers. The objective is to use WFP's buying power as an interim step. It is expected that farmers will eventually forgo sales to WFP and in the future sell to companies who operate in their country like ADM, Bunge, Cargill, Maseaca or Tiger brands.

Once these farmers learn about contracts, quality requirements and delivery obligations while building a credit rating, they have found a permanent way out of poverty. They can eat three meals a day and send their children to school. After a decade of funding 100 agricultural projects in 37 countries, P4P addresses two key concerns I have as a funder: it provides a permanent exit strategy for donor or aid dollars and it can be executed at scale.

One point that seems to be missing in this discussion is that as countries work their way out of poverty, increase their GDP and overall wealth, they become consumers of goods produced from countries such as the U.S. Their purchasing power increases and they import our products -- creating U.S. jobs and sustaining our industries, not threatening them, as Mr. Henry suggests. The idea that our strategy should be to keep people hungry and malnourished so we can ship them our commodities is absurd.

I have personally seen the successes of P4P and talked with farmers who have had their lives transformed as a result of the program. I realize that stock options and profit are important to many of us in the corporate world, but I do not believe it is an either-or situation, and profit should not ride on the backs of hungry people. I think we can continue to do quite well in spite of these farmers increasing their income by a few hundred dollars a year. Of course, it is easy to say -- neither Mr. Henry nor I have ever suffered from periods of hunger and we put our children to bed every night with full stomachs.

Huffington Post

Directly related articles:

Food aid: U.S agribusiness, shipping interests vs. local sourcing
Howard Buffet mischaracterizes our position on food aid: USA Maritime
Warren Buffett's son is super-wrong about food aid to Africa


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