The Power of Food Reserves: Volume 4

Posted October 23, 2009

One of the political challenges in talking about food reserves, at both the national and international level, is that they are too often dismissed as a tool that has failed. Of course, food reserves have seen success and failure. And because many reserves have been mismanaged, agriculture economist Dr. Daryll Ray reminds us, "We need to delineate between the concept of the reserve and the way it's administered."

Roger Johnson, President of the National Farmers Union, addressed this political obstacle at a meeting we organized with ActionAid on food reserves last week. "At this point in history, we've entered an era that government is looked upon as the problem, not the solution. And that the private sector should be in charge of everything, including food aid."

"There is this sentiment that reserves are an old idea," said Johnson. "Nobody wants to talk about an old idea. The other side will say, 'we tried that, it didn’t work.'" But he believes that there is a new political opportunity to gain wider support for reserves, and that could involve emphasizing the benefits for consumers and the disadvantaged of the world.  

"Reserves accomplish a lot of the same things whether you are a farmer or consumer," said Johnson. "The predictability in pricing is a good thing for both. It is essential for lesser developed countries. If they are going to become more developed, the most common way to grow is through agriculture."

Larry Mitchell, former CEO of the American Corn Growers Association, emphasized the national security implications of not having a food reserve. "Our current reserve is in the hands of multinational corporations," said Mitchell. "We are one short crop away from being at the mercy of their benevolence. We need a public option for food."

"This is pretty scary to me," said Mitchell. "When we went to war in March 2003, we had less than a day’s worth of corn and soybeans. The impacts of a reserve are well-past hunger. It is also an issue of national security. I know why we are at war in the middle east. I don’t know who we’ll be going to war with when we need food."

Mitchell compared the deregulatory effects of the 1996 Farm Bill on agriculture to the repeal of the Glass-Steagall Act in 1999 on the banking industry. He emphasized the need to return to sound food management through a food reserve. A new reserve system could include more than just traditional grain and would benefit both the livestock industry and the emerging bioeconomy.

"Most farmers I know are willing to give up $7 corn if they can get a consistent and guaranteed $4, and a proper food reserve can help us accomplish that," said Mitchell.

Victor Suarez, IATP board member and director of the National Association of Rural Commercialization Enterprises in Mexico, highlighted the urgent need for government intervention in agricultural markets, not only to address the food crisis, but also as a counterweight to big agribusiness companies.

"When we start talking about strategic food reserves what we’re really talking about is state intervention into the market," said Suarez. "Markets are not self-regulating, particularly with regards to food. There’s always been a need for organized societies to prevent risks. In Mexico, when food prices rise, the free market logic is that people simply stop eating. One thing we have learned is that organized small farmers cannot confront alone organized monopolies. It is in no way a free market."

Instead, Suarez stressed the need for people and governments to work together to address the breakdown in the global food system—because we all are affected.

You can find video interviews, powerpoint presentations and more blog postings from our meeting on global food reserves at our web site.

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The Power of Food Reserves: Volume 3

Posted October 22, 2009

Details matter. This was clear in discussions about food reserves at a meeting last week we organized with ActionAid. How food reserves are run, by whom, and with what purpose, are all critical factors in determining whether a reserve is successful.

There is increasing interest in food reserves at the local, regional and international levels as a way to help better manage our food system. We heard two proposals about how institutions might best manage the details of food reserves.

Dr. Daryll Ray, of the Agricultural Policy Analysis Center at the University of Tennessee, outlined two central functions of a reserve: 1) to mitigate short-term disruptions or sudden demand; and 2) to stabilize world prices for consumers and farmers.

Ray pointed out that while critics have pointed to the costs of reserve programs, the costs of not having a reserve program can be enormous; including factors often not calculated by economists such as hunger, poverty, loss of food security and political destabilization. Ray suggested that poor management had unfairly given reserves a bad name. "We need to delineate between the concept of the reserve and the way it's administered," said Ray.

Food reserves can be useful at multiple levels, according to Ray. At the local level, families often use reserve concepts through traditional canning and freezing. But there are also different options for farmers, communities and local governments to store food in a shared facility. At the national and regional levels, reserves can be coordinated through governments and federations of cooperatives.

At the international level, with a goal toward stabilizing world supply and prices, Ray proposed an institutional framework similar to how the U.S. Federal Reserve operates. It would be politically independent, composed of regional chairs, and ultimately legitimized by the UN Commission on Trade and Development (UNCTAD) and the Food and Agriculture Organization (FAO).

"Food reserves are just one component of a food security system," said Ray. "We also need to look at production, infrastructure and increasing the purchasing power of people who are hungry."

Robin Willoughby of Share the World's Resources discussed food reserves within new efforts at the multilateral level to address a failed global food system. He emphasized that the context for reserves is very important. Food reserves are designed for a number of purposes, including: 1) to stabilize prices; 2) for humanitarian reasons; 3) for export promotion through regional trade blocs; or 4) to mitigate speculation.

He pointed out that there are severe institutional constraints to putting together a global food reserve. Global institutions have a patchwork of overlapping mandates with no obvious place to oversee such a system. And many of the most important actors (including smallholder farmers) are excluded from global discussions.

Because of these constraints, Willoughby proposed a Global Food Security Convention. It would encompass a new vision for food and agriculture that is based on human rights and multilateral cooperation. It would be based on three pillars: legal (human rights); political (inclusive and democratic); and technical (implementation).

You can watch video interviews and view powerpoint presentations from presenters at the global food reserve meeting at our web site. Next, we'll look at food reserves within the context of the U.S. and Mexico.

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The Power of Food Reserves: Volume 2

Posted October 22, 2009

In a bow to the power of markets, the U.S. removed the last traces of its grain reserve program in the 1996 Farm Bill. The result have been damaging across the board, with increasing volatility in agriculture markets—along with big swings in farm subsidies from year to year. But other countries see the continuing value of food reserves and are using them in creative ways to serve a variety of different purposes.

At a meeting on food reserves we co-organized with ActionAid last week, we heard about how two of the world's biggest agricultural exporters, Brazil and Canada, use food reserves. And how West African countries, struggling to provide enough food for their people, are using food reserves at the local level.

Celso Marcatto, of ActionAid Brazil, described the role of the state-controlled food company CONAB. While plagued by mismanagement in its early years, Brazilian President Luiz Inácio Lula da Silva instituted a series of reforms beginning in 2003 to refocus its mission. CONAB's purpose is two-fold: to ensure there is enough food in times of crisis and to help stabilize markets to limit speculation. In 2006-07, CONAB helped stabilize the corn market through the release stocks. In 2008, despite the dramatic spike in global prices for rice, CONAB's reserve program helped to stabilize prices within Brazil. "It was possible for Brazil to pass through the food price crisis without suffering too much," said Marcatto.

CONAB also helps run the Brazilian Procurement Program, known as PAA. The program purchases food from smallholder farmers and donates it to social organizations addressing people in need. The program also works with smallholder farmer organizations to help them set up their own reserves. The result is more stable prices for smallholder farmers and greater food access for those who  are hungry.

Marcatto and other civil society organizations are now targeting Mercosur, a regional trade agreement that includes most of South America. Currently, Mercosur is completely focused on commercial issues. "The idea is to pressure Mercosur countries to discuss hunger more seriously, said Marcatto. "We want Mercosur to be a policy space to support efforts to address hunger regionally—including reserves and support for small-scale farmers."

Ian McCreary, a former member of the Canadian Wheat Board and now with the Canadian Foodgrains Bank, relayed the history of the international wheat agreement, which was launched at the end of World War II and included 47 countries. While there were certainly bumps, the agreement was largely successful until it was finally broken in 1969. McCreary said the wheat agreement offers some important lessons in looking forward, particularly the importance of good governance and accountability. Ultimately, we must ensure that stocks aren't used to punish other countries as the U.S. did in the mid-1980s when it released its wheat stocks onto the global market and devastated other wheat producers around the world, according
to McCreary.

McCreary had three recommendations for food reserves moving forward: 1) they should be commodity-specific; 2) they should be nation- and region-specific, and governance must be strong in those areas; and 3) there needs to be international disciplines to ensure that hardships are not externalized on other countries.

"We have to have a mixture of intervention engaged not as a cleanup factor, but to take the rough edges out of the marketplace. The process of reserves fits within that context," said McCreary. 

Saliou Sarr, of the West African Farmers' Network (ROPPA), sees food reserves in an entirely different context. ROPPA is a network of 16 countries. His region's challenge is to increase their own food production to feed their people, and reduce their dependency on aid from other countries. Sarr pointed to a confluence of factors contributing to hunger in the region, including: the lowering of food stocks in the U.S., Europe and China; structural adjustment programs pushed by the World Bank that discouraged public investment in agriculture; and limitations on the use of tariff protections imposed by the World Trade Organization.

In response to the food crisis in the region, ROPPA has taken multiple approaches to food stocks, including public stocks, stocks at the farm level and at local food banks. In public stocks, their experience has been troubled, undermined by political mismanagement. But local food banks have been more successful in Bali, Niger and Burkina Faso. There, a committee at the village level buys grain during harvest when prices are low. Then, they use collective storage, and sell it to families in need throughout the year at a price that is affordable. This model has been limited because of the lack of production capacity. Right now, they are exploring food reserves at the village and family level, to work alongside greater access to credit and seeds,  to help build production and ensure there is enough food.

"We think a good mastery of the management of stocks at the world level should include capacity building for production, active policies that give priority to internal markets, and reinforce regional integration," said Sarr. "People can have sovereignty with regards to their food supply."

You can view video interviews and powerpoint presentations of participants at our meeting on global food reserves at our Food Security Web site. Next, we'll look at proposals for how food reserves might work in a global context.

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The Power of Food Reserves: Volume 1

Posted October 21, 2009

Make no mistake, the food reserve—a tool as old as food production itself—is a powerful idea. Most people think it's just common sense. The idea is simple: put some food aside in times of plenty to ensure there is enough in lean times. But a meeting we co-organized with ActionAid in Washington, D.C., last week, revealed how strongly this common sense idea challenges the free market ideology that permeates our global food system.

IATP's Sophia Murphy succinctly explained how reserves help address market failures that have plagued both farmers and consumers: "Reserves are really about how to make the market do its job better. They can put a floor or ceiling on prices in the face of monopolistic or oligopolistic markets."

We decided to organize the food reserve meeting for two main reasons: 1) the failure of agriculture markets is just too glaring to ignore. The FAO announced last week that the world's hungry has now reached 1.06 billion people; 2) countries, regions and international institutions are re-examining agriculture policy, particularly the role reserves might play to stabilize food systems.

Our first session gave an overview of the global issues around food reserves. Sophia pulled from an IATP report released last week outlining four main reasons food reserves are being considered: 1) to correct market failures; 2) to smooth volatile prices; 3) to complement and regulate the private sector; 4) for emergencies. Sophia also discussed the limitations of food reserves when it comes to addressing global hunger: reserves will not solve poor agriculture production which plagues many countries, or address chronic (as opposed to short-term) hunger that is often tied to people simply not having money to buy enough food.

The failure of global food markets has created a ripe political moment to assess reserves. "There is a new awareness among governments that food really matters—and a sense among governments that they've lost a lot of the tools that they've had when food is not available," Sophia told participants.

Chris Moore, at the United Nations World Food Program (WFP), reported that both donor and recipient countries are seeking advice from the agency on best practices for running food reserves. The WFP, the world's largest food assistance agency, is already using a variety of food reserves. Moore described reserves in Haiti and other Central American countries, community cereal banks in Cameroon and the Sahel region of West Africa, and a multi-partner national grain reserve system in Mali. The WFP is working with West African countries to assess a regional system to help multiple countries coordinate national stocks.

For countries assessing whether a reserve is the right tool to use, Moore outlined a series of key questions: What do we want reserves for? What other options have been tried? Can you ensure the reserve is well-managed? What transparency rules are in place? Can a regional group integrate reserves and food security needs across borders? And finally: How can reserves fit within a path toward food security?

Hui Jang, of the USDA's Foreign Agricultural Service (FAS), had a starkly different view on reserves. The FAS's mission is to expand U.S. agriculture exports. She argued that reserves distort relationships between supply and demand. And that the existence of a reserve does not guarantee stability. She cited the recent price spike in rice, even though many Asian countries had been building up their reserves for several years. Despite the reserves, countries stopped exporting and prices shot through the roof. Countries will undermine an international or regional reserve system because they will act in their own interest in times of crisis, Jang reported.

Instead, she proposed a financial reserve where countries struggling with hunger could purchase grains and inputs (seeds, fertilizer, machinery, chemicals and the hiring of consultants to boost production). In addition, she proposed a series of other tools to help poor countries like adding futures markets, catastrophic bonds, improved infrastructure and  crop insurance.

Jang's presentation follows the strong support for technological fixes (particularly biotechnology) to address global hunger pushed by her boss, USDA Secretary Tom Vilsack, at the newly minted National Institute for Food and Agriculture, and Bill Gates at the World Food Prize meeting last week.

But the growing consideration of food reserves around the world indicates that most aren't holding their breath for the next technological quick fix. Many see the market failures we are experiencing in agriculture as structural and ultimately requiring government intervention to ensure that everyone has enough healthy food to eat and farmers are paid a fair price.

You can view powerpoint presentations and video interviews with participants at our food security page. In our next blog, we'll report on how other countries and regions are using food reserves as a tool. 

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Grain Reserves vs. World Hunger and Market Volatility

Posted October 14, 2009

With world hunger surpassing one billion people, in a time of extreme market volatility, IATP's Sophia Murphy has authored a new report exploring the option of strategic food reserves. The report, "Strategic Grain Reserves In an Era of Volatility," was released today—a day before a public briefing on food reserves in Washington, D.C. tomorrow. That meeting will include
representatives from Brazil, West Africa, Mexico, Canada and the U.S. to
discuss their experiences with food reserves and how a new system of reserves
might work.

Though food reserves have been used for thousands of years (China has run an ever-normal granary since 498 A.D.! More info in the report, pg 5.) they have fallen out of discussion in recent decades. Sophia Murphy's research examines the risks and potential benefits of grain reserves in our current socioeconomic atmosphere:

“Given the extreme volatility we’ve seen in agriculture in recent years, grain reserves deserve another look,” said Sophia Murphy in our press release announcing the new report. “There are no magic bullets. Reserves alone will not end chronic hunger, and many reserves have been poorly run. But with sufficient resources, clarity of purpose, and effective governance, reserves can play a key part in a food system designed to eradicate hunger.”

Check back for updates from the "Food Reserves: Facing the Hunger Challenge," briefing soon!

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The Cost of Palm Oil

Posted October 14, 2009

Matilda "The day the (palm) seeds arrived in our country on the plane, I wondered, `what are these seeds?'" Matilda Pilacapio told us at a meeting in late September. Pilacapio is a human rights advocate from Milne Bay, Papua New Guinea and she stopped by our Minneapolis office on the way to a meeting with Cargill—the largest palm oil importer in the U.S.

Papau New Guinea, a former British colony, contains some of the last remaining intact rainforests and 5 percent of global biodiversity. Palm oil first came to the island in 1994, when Pilacapio was the country's Minister of Agriculture. Palm quickly replaced coconut that had been grown on plantations owned by British companies and the British government's Commonwealth Development Corporation.

"Life has dramatically changed," Pilacapio told us. "We have a traditional life of sharing and giving. What we have, we share with our village. Now, our people live in a monetary world. Our people are at a crossroads."

In the mid-1990s, the World Bank required a number of structual adjustment programs in Papua New Guinea as conditions for a loan to the country's government, according to Pilacapio. Among the changes, were the user pay system—where people pay for things like education and health care—but also land registration (which opened up land that had previously been controlled by Indigenous peoples). Part of the World Bank loan to the country was to develop palm oil plantations, says Pilacapio.

Cargill owns three palm oil mills in Papua New Guinea. The company took over the mill in Milne Bay, where Pilacapio lives three years ago. She currently works with the Milne Bay Women in Agriculture to strengthen traditional agriculture systems in response to Cargill's expanding oil palm plantation in the region.

Pilacapio said young people in Papau New Guinea who want to farm no longer have access to land because so much is going toward palm oil plantations. Previously able to provide food for its own population, the growth in palm oil plantations has led Papua New Guinea to become heavily dependent on food imports.

Pilacapio came to visit Cargill as part of an effort by Rainforest Action Network to get the company to improve its practices at palm oil plantations, starting with simple things like creating buffer zones to protect water systems. Thus far, the company has not budged. Pilacapio is asking Cargill to: 1) stop the expansion of palm oil plantations, particularly from traditional landowners and onto virgin lands; 2) share its profits with local governments and landowners; 3) provide workers with better wages and working conditions; and 4) clean up water that is downstream from their milling plant.

So, what is the cost of palm oil? In the marketplace, the palm oil produced in Pilacapio's community certainly doesn't reflect all its costs, including damage to a traditional culture, diminished food security in the region, the loss of biodiversity and effects on global climate change. The "monetary world" Pilacapio describes is not working.

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Next stop: Barcelona

Posted October 9, 2009

IATP's Anne Laure Constantin is blogging from Bangkok at the global climate talks.

Although the two week climate talks session in Bangkok formally ends today, specific discussions on how to reduce emissions from agriculture were essentially over yesterday. The outcomes of this week's agriculture discussions are now reflected in "non paper #17." The whole text is bracketed, as Uruguay and New Zealand (the two countries chairing the drafting group this week) were unable to produce a consensus among members.

As the process of drafting accelerated, many developing countries felt like they did not have enough capacity to follow the discussions, and not enough understanding of what the possible implications of this new part of the climate agreement would be. It seemed hard to reconcile the widespread feeling that agriculture should feature in the final agreement with the little time available until Copenhagen. UNFCCC members will resume consideration of the agriculture sectoral approach at the next negotiations session in Barcelona (Nov. 2–6).

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IATP reports on Bangkok climate meeting

Posted October 8, 2009

IATP President Jim Harkness just returned from Bangkok at the global climate talks. In this video, he reports on the state of the talks and what they could mean for agriculture.

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Walking a tightrope: Secretary Vilsack on U.S. agricultural policy

Posted October 8, 2009

On October 5, U.S. Secretary of Agriculture Tom Vilsack came to Minneapolis to deliver the fifth and last Freeman Lecture at the University of Minnesota. The lecture’s namesake, Orville Freeman, was governor of Minnesota and then Secretary of Agriculture during the Kennedy and Johnson administrations (1960–68). About a thousand people came on a rainy night to hear Secretary Vilsack speak and then engage in a “Great Conversation” program with University Deans Brian Atwood and Allen Levine. The audience included former Vice President Walter Mondale, former Secretary of Agriculture Bob Bergland, Jane Freeman (Governor Freeman’s widow and political partner), and Senator Amy Klobuchar, who introduced Secretary Vilsack. IATP board member, Rod Leonard, Governor and Secretary Freeman’s aide, helped to organize the lecture.

However, before Secretary Vilsack arrived at the Ted Mann Concert Hall, he had to run a media gauntlet instigated by a New York Times story published the day before that recounted how a 22-year-old Minnesota woman had been paralyzed by consuming contaminated hamburger produced by Cargill, the Minnesota-headquartered, global agribusiness giant. As is usual with stories of alleged corporate malfeasance, the lawyers and public relations experts had told Cargill executives not to talk to the media, leaving Secretary Vilsack with the unhappy task of explaining why the USDA’s Food Safety Inspection Service (FSIS) is unable to require slaughterhouses to test for meat pathogens on carcasses before they are shipped to meat processors, such as Cargill. On the way from the airport, he was interviewed by Minnesota Public Radio, and parried questions about how both Cargill and FSIS had failed to detect the contamination and withdraw the hamburger from commerce before it could sicken Minnesotans and other consumers.

Secretary Vilsack had to walk an explanatory tight rope between USDA’s mandate, under different laws, both to protect public health and to advance agribusiness interests. Dr. Kenneth Peterson, FSIS’s assistant administrator, did not make the Secretary’s task any easier by telling the Times that FSIS “could mandate testing, but that it needed to consider the impact on companies as well as on consumers. ‘I have to look at the entire industry, not just what is best for public health.’” Dr. Peterson interprets FSIS’s statutory responsibility under the Meat and Poultry Inspection Acts as protecting the industry’s reputation and bottom line. So if mandatory testing would harm either, FSIS would not insist on testing. At the Freeman lecture, Secretary Vilsack didn’t clean up Peterson’s statutory confusion, but asserted correctly in a press release the following day, "Protecting public health is the sole mission of the USDA Food Safety and Inspection Service.” And yet the damage had been done—again, not only to consumer health, but to USDA’s reputation for continuing to allow the meat industry to self-regulate in fact, if not in law.

The Secretary walked other USDA tightropes more artfully and eloquently, aided by the recently published "Agricultural Census 2007." First, he noted that he would deliver a eulogy today for Dr. Norman Borlaug, a former University of Minnesota plant breeder and Nobel prize winner for his work to “feed the world.” Then the Secretary followed with a series of paradoxes shaped by facts and the programs that he is required to oversee.

Recalling the loss of millions of U.S. farmers since President Woodrow Wilson exhorted the nation to plant victory gardens to aid the World War I effort, Secretary Vilsack sang the praises of how the remaining 200,000 farms of more than a thousand acres, aided by biotechnological research, had doubled and tripled crop yields to feed the U.S.—and the world. But the loss of 80,000 mid-size farms in the last five years is something that the Obama administration would seek to prevent from re-occurring.

More than a billion people still don’t have enough to eat, so the Obama administration will help private companies to export not only U.S. crops but U.S. technology—especially genetically modified seeds—to enable the world to feed itself, said Vilsack. The President’s new global food security initiative would start in Afghanistan by deploying 64 former and current USDA staffers to help Afghan agriculture. Vilsack emphasized support for the 5 percent of U.S. farmers who produce 70 percent of U.S. agricultural production. He promised to cut subsidies to U.S. farmers, if U.S. trading partners open market access to U.S. exports under World Trade Organization rules.

Although two-thirds of USDA’s budget goes to feed an increasing number of hungry Americans, 35 percent of U.S. children are obese, so USDA would work to improve nutrition, remove the stigma of free school lunches and breakfasts, and work with the National Football League on an exercise program for school children, said Vilsack.

The average age of farmers is 57-years-old, and getting older. More than 50 percent of all farmers work off-farm jobs more than 200 days a year (with 90 percent working off farm jobs at some point in the year) to enable them to stay on their farms. USDA’s new Know Your Farmer, Know Your Food program would support the small-scale farmers—108,000 new farmers from 2003–2008 alone—who would satisfy the demand (13 percent increase in local farmers markets in 2008) for local, largely organic food. USDA’s support for rural internet service would help them market that food and help rural people develop new businesses.

While the Secretary's presentation has been rearranged above, my overwhelming impression of him is that of a compassionate and politically adroit man trying to manage conflicting duties. The Secretary spoke about his visit to a Kenyan orphanage (he too was an orphan) and how his question “What do you like most about school?” to a child was met with the response, “Our meal.” He recalled how Secretary Freeman had initiated the first pilot project in federal food assistance and how it had grown to feed 38 million (climbing to 40 million due to growing unemployment or under-employment) Americans today. He clearly aspires to do something similarly great.

Jane Freeman closed the evening by thanking Secretary Vilsack, the University of Minnesota and the advisory group to the Freeman Lecture. Ever the politician to issue a challenge, she remarked that in Secretary Vilsack, the USDA has leadership to regain what had been lost during the previous administration.

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Can food reserves address global hunger?

Posted October 7, 2009

Almost since the beginning of time, people have put food away in times of plenty to ensure they have food in times of need. Many countries, including the United States, have utilized food reserves over the years for a number of reasons like addressing hunger, stabilizing food prices and ensuring a fair return to farmers.

Now, as global hunger has surpassed one billion people, and the global cereal stocks/to use ratio has tightened, there is talk at the international level of food reserves. At the G-8 meeting in July, leaders agreed to explore: "The feasibility, effectiveness and administrative modalities of a system of stockholding in dealing with humanitarian food emergencies or as a means to limit price volatility need to be further explored." These sentiments were further supported at the G-20 meeting in Pittsburgh last month.

In light of this interest, IATP and Action Aid are co-sponsoring an open briefing, "Food Reserves: Facing the Hunger Challenge" in Washington, D.C., on October 15. Representatives from Brazil, Canada, West Africa, Mexico and the United Kingdom will meet with U.S. agriculture experts to discuss:

  • past experiences with food reserves at the country and regional level;
  • what role international institutions might play within a food reserve system;
  • the opportunities and pitfalls of a strategic grain reserve in the U.S.

We hope you can join us. Watch the below video with IATP's Alexandra Spieldoch to learn more about the food reserve meeting.

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