* U.S. would spend less, offset it with more efficient aid
* Biggest shift in U.S. food aid programs since Cold War
* Aid is now funneled through giveaway of U.S.-grown food
* Defenders float a counter-offer to keep food donation
International anti-hunger activists expect the Obama administration to propose major reforms to its food aid efforts in which the United States would donate cash instead of shipping U.S.-grown food to trouble spots around the world.
The White House declined to comment on Friday on its plans. But people who have heard the plans said the administration has discussed the strategy with interest groups and lawmakers and touted it as a way to save money while still keeping the United States the global leader in food aid.
Many anti-hunger groups back the new strategy, but other groups, including domestic producers who sell food to the program, oppose the change.
Several food aid groups said the switch to cash from food donations will be part of the administration's budget proposal next week. Such a switch would be the biggest change in U.S. food aid programs since they were created during the Cold War.
Funding for food aid would drop by roughly 25 percent under the proposal, said activists familiar with the plans. However, cash donations, coupled with purchase of food near the trouble spots, are a speedier and less costly way to deliver assistance, backers of the so-called local purchase approach said.
Up to 45 million people a year are helped through the Food for Peace program, funded at $1.4 billion this year. Food for Peace was created in 1954 to help fight poverty overseas while also unloading domestic farm surpluses. Nowadays, the government buys the food that it donates.
Aid groups say Food for Peace would be mothballed along with the $170 million-a-year Food for Progress program, designed to encourage free markets in agriculture in developing nations. Instead, $1.3 billion would go into State Department accounts for disaster relief and local development.
The State Department also runs Feed the Future, an Obama administration initiative for government and private sector work toward local food security. While most of the Food for Peace funding is spent on emergency hunger relief, up to $450 million a year is earmarked for projects to boost local food production, to reduce the need for ongoing hunger relief.
U.S. funding for food aid and international agricultural development has come under pressure in recent years as deficit reduction has became a paramount goal in Congress.
"We have to look for every efficiency we can," said Eric Munoz of Oxfam America, a prominent supporter of cash donation and local purchase. With lower delivery costs, local purchase "is a doubling of efficiency in our food aid programs," he said.
About half of the cost of U.S. food aid comes in paying to haul the commodities from U.S. ports. As a rule, at least 75 percent of U.S. food aid must travel on U.S.-flagged vessel, which can drive up costs.
A 2012 Cornell University study said local purchase "can often afford valuable cost and times savings." Grain can cost half as much, it said, although processed foods sometimes cost more locally or offered smaller savings.
AID GROUPS DIVIDED
Care, Actionaid, American Jewish World Service and Church World Service join Oxfam in support of cash donation. But U.S. farm groups, shippers and aid groups such as World Vision, International Relief & Development and Planet Aid say food donation is a proven system that should be kept.
"Be wary of claims that great sums will be saved and recipients will be better served by shifting all food aid funds to a flexible cash account," said Ellen Levinson, speaking for a coalition that supports food donation.
Levinson said local purchase has its limits. Food may not be available in the quantity, quality or variety that is needed for massive food programs.
The administration may guarantee U.S.-produced food a share of the revamped program rather than totally end food donation, according to groups on each side of the debate.
Nearly two dozen senators and an array of farm, maritime and aid groups wrote the White House in February to oppose a change in policy. "Food aid programs have enjoyed bipartisan support for 60 years because they work," said one of the letters.