Food Aid After Fifty Years: Recasting Its Role Chris Barrett, Cornell University and Dan Maxwell,...

Food Aid After Fifty Years:Recasting Its Role

Chris Barrett, Cornell Universityand

Dan Maxwell, CARE

Department of Applied Economics and ManagementCornell University

April 15, 2004

Basics of Food Aid

Key Distinctions/Definitions

Food Assistance Programs (also “food-related transfers”): any intervention to address hunger and undernutrition (e.g., food stamps, WIC, food subsidies, food price stabilization, etc.).

Food Aid: - international concessional flows in the form of food or of cash to purchase food in support of food assistance programs.

Key distinction: international sourcing of concessional resources tied to the provision of food, whether by a donor or to a recipient.

A Quick History of Modern Food Aid:

-Began in 1954 with Public Law 480 (PL480) in the U.S. The U.S. and Canada accounted for >90% of global flows through early 1970s, when the UN’s World Food Programme became a major player.

-Peaked at 22% of global aid flows in ’65, now <5%

- Food Aid Convention agreed 1967, guides policies of 22 nations and EU, monitored through the Consultative Sub-Committee on Surplus Disposal.

- Rise of WFP since mid-1970s, decline of US PL 480. Move to multilateralism. EU/Canada move to cut program food aid and to decouple from domestic farm programs.

- Emergence of SSA and CEE/FSU as focal points and of CPEs and emergency food aid in 1980s/90s

- Modest rise of triangular transactions/local purchases since 1984.

Basics of Food Aid

Relative to international standards, ~30% of the world’s nations suffer macronutrient availability shortfalls relative to international standards (2350 Kcal/55 g protein/day per capita) …

… concessional food flows have potential to fill the gap.

Basics of Food Aid

Daily Macronutrient Availability Per Person(shaded areas below minima)

20

40

60

80

100

120

140

1000 1500 2000 2500 3000 3500 4000Calories

Pro

tein

(g

ram

s)

10.3%

2.9%16.6%

70.3%

Data source: FAO Food Balance Sheets

Food aid accounts for little in the way of annual flows of food …

… and the share is declining, especially relative to commercial trade.

Basics of Food Aid

Program : subsidized deliveries of food to a central government that subsequently sells the food and uses the proceeds for whatever purpose (not necessarily food assistance). Program food aid provides budgetary and balance of payments relief for recipient governments.

Project : provides support to field-based projects in areas of chronic need through deliveries of food (usually free) to a government or NGO that eithers uses it directly (e.g., FFW, MCH, school feeding) or monetizes it, using the proceeds for project activities.

Emergency/Humanitarian: deliveries of free food to GO/NGO agencies responding to crisis due to natural disaster or conflict.

Global Food Aid Flows By Type

0.0

5.0

10.0

15.0

20.0

1980 1985 1990 1995 2000

Mill

ions

of m

etric

tons

Emergency

Project

Program

Source: WFP

Basics of Food Aid

Three Types of Food Aid:

The Rise of Emergency Food Aid

Figure 2-1: U.S. Food Aid Programs, 1980-2003

0

500

1000

1500

2000

2500

3000

1980 1985 1990 1995 2000

$ m

illio

ns

Section 416(b)Other (Title III, Food for Progress, IFEP, etc.)PL 480 Title IIPL 480 Title IData sources: USDA, GAO

In 1979-80, Title I expenditures were roughly twice those on Title II. By 2002-3, Title II had more than tripled in nominal terms and had become nearly ten times larger than Title I.

The geography of food aid flows has changed over time, although US remains dominant.

Basics of Food Aid

Suddenly food aid is a big issue again:

• FAC expired and is presently on short-term extensions – US prepared to scrap it entirely. – Its efficacy has collapsed (less than 5% reported through CSSD in 2000-1).

• WTO negotiations – Europeans view US food aid as an export subsidy. – US has put Titles I/III PL 480 on the table in trade negotiations.

• GMO disputes– India, Zambia, Zimbabwe

• Recent crises/near-crises – Ethiopia 2003 ($500 mn US food aid; $5 mn ag dev’t assistance)– S. Africa: 2002-3 (HIV and drought and Zim/Angola)

• NGO financing– OMB/USAID battle over monetization, NGO dependence

Basics of Food Aid

US food aid remains largely driven by domestic farm and foreign policy concerns

…

0

2

4

6

8

10

12

14

16

18

US

fo

od

aid

(m

n t

on

s w

hea

t eq

uiv

.)

0

10

20

30

40

50

60

Year-

en

d U

S w

heat

sto

ck

s (m

n t

on

s)

1961 1971 1981 1991 2001

United States Food Aid Flows

Total US food aid flows(lefthand axis)

US year-end wheat stocks(right axis)

Data source: USDA

U.S. Food Aid Shipments to Russia(as compared against Peru)

0.0

0.5

1.0

1.5

2.0

2.5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Mil

lio

ns

of

met

ric

ton

s

Data source: WFP INTERFAIS database

Peru

Russia

Food Aid: A Donor-Driven Resource


Daily food aid flow s into AfghanistanAugust 2001-February 2003

0

1000

2000

3000

4000

5000

6000A

ug-0

1

Sep-

01

Oct

-01

Nov

-01

Dec

-01

Jan-

02

Feb-

02

Mar

-02

Apr

-02

May

-02

Jun-

02

Jul-0

2

Aug

-02

Sep-

02

Oct

-02

Nov

-02

Dec

-02

Jan-

03

Feb-

03Tw

o m

on

th c

ente

red

mo

vin

g a

vera

ge

volu

me

(m

etri

c to

ns)

Nor

ther

n Alli

ance

take

s M

azar

-e-S

harif

Ter

rorist

atta

cks

on N

YC/

Was

hing

ton

Tal

iban

falls

Kan

daha

r fa

llsSi

ege

of T

ora

Bor

a

Ope

ratio

n Ana

cond

a

Ham

id K

arza

i sw

orn

into

offi

ce

Data source: World Food Programme database

GAO: $35 mn/year excess spending, 120 day delay

NAMA protests over WFP purchases in Central Asia

A few key myths:

Myth 1: American food aid is primarily about feeding the hungry

Myth 2: Food aid is an effective form of support for American farmers

Myth 3: American food aid is no longer driven by self-interest

Myth 4: Food aid is wholly additional

Myth 5: Food aid builds long-term commercial export markets

Myth 6: Cargo preference laws effectively support the U.S. maritime industry

Myth 7: NGOs are a forece for change in food aid


So who does benefit?i) Small number of food vendors

(11% procurement premium)ii) Very small number of shippers

(78% cargo preference premium)iii) NGOs (resources, esp. monetized)0

20

40

60

80

100

120

140

Avera

ge s

hip

pin

g r

ate

s (

US

$/ton)

1991-93 1999-2000

US-flag

Foreign-flag

FY2001 416(b) and Food for Progress Shipments: Freight Forwarders

43%

20%

13%

8%

14%2%

Wilson Logistics

BKA Logistics

Fettig & Donalty

Panalpina

Other 8

Forw arder not reported


0

10

20

30

40

50

60

70

80

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002%

Tit

le I

I n

on

-em

erg

ency

fo

od

aid

sh

ipm

ents

Target Title II Monetization Rate

Approved Title II Monetization Rate

1. Targeting

- “Leakage” to nontargeted individuals in the household, region (errors of inclusion)

- Missing intended beneficiaries (errors of exclusion)

- Tough question: Is food aid curative or preventive?

Consequences of targeting errors:

Inclusion: - ~35% avg. added consumption

- int’l trade/dom. sales displacement

- producer/labor supply disincentives

- added costs

Exclusion: - low humanitarian impact

0 20000 40000 60000 80000 100000

Total Household Income (Ksh)

0.0

0.2

0.4

0.6

0.8

1.0

Pro

ba

bili

ty o

f F

oo

d A

id R

ec

eip

t

Va

lue

of

foo

d a

id r

ec

eip

ts (

KS

h)

Figure 5: Food Aid Targeting in Northern Kenya

0

500

1000

1500

Food Aid Management: Five Key Issues

Table 3.1 Targeting: Inclusion and Exclusion of Groups

Food insecure Food secure

Targeted 1. Successful targeting

2. Inclusion error (Leakage)

Not Targeted 3. Exclusion error(Under-coverage)

4. Successful targeting

2. Timing

- Aid should flow counter-cyclically to stabilize food availability … it doesn’t

- Food aid flows budgeted on monetary not physical basis

- Delivery lags are great

Late/low deliveries are a form of exclusion errors

High pro-cyclical deliveries are a form of inclusion errors


0

50

100

150

200

250

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

Wh

ea

t p

ric

es

($

/to

n)

0

2

4

6

8

10

12

Wh

ea

t fo

od

aid

flo

ws

(to

ns

)

Prices are for US number 1 hard red w inter w heat, fob Gulf of Mexico. Sources: IMF, WFP

0 50 100 150 200 250

Delivery Lags (days from call forward to port delivery)

0.000

0.005

0.010

0.015

0.020

Figure 8.1: U.S. Title II Emergency Shipments

3. Disincentive effects

- Product price effects

- Labor supply disincentives

- Government policy effects given persistence


0.60

0.80

1.00

Pr

ob

ab

ilit

y o

f f

utu

re

PL

48

0 r

ec

eip

t

0 10 20 30

Years PL480 receipt to date

Single spells All spells

Figure 8.2: Persistent Food Aid Flows

Figure 9-3: Real ($) Sorghum Prices Southern Somalia-1998-2003

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

Jan-

98

Jul-9

8

Jan-

99

Jul-9

9

Jan-

00

Jul-0

0

Jan-

01

Jul-0

1

Jan-

02

Jul-0

2

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Month

Pri

ce i

n U

S D

oll

ars

Belet Weyne

Baar-Dheere

Luuq

Xudur

Baidoa

Average

0

5,000

10,000

15,000

20,000

25,000

Metric Tons

J A S O N D J F M A M J J A S O N D

1999 2000

Figure 9-4: Assessed Requirements and Deliveries

Requirement (Mt) Distribution (Mt)

3. Incentive effects

Positive Incentives:

- Factor prices/availability (e.g., seed, fertilizer, assets)

- Risk effects

- Labor supply/availability


Figure 4: Estimated Impulse Response Functions1986-2000 Subsample

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

0 1 2 3 4 5 6 7 8 9 10

Years since food aid shock

Vo

lum

e (

kg

per

cap

ita)

Food production per capita

Food aid per capita

4. Procurement ModalitiesRole for local purchases/triangular transactions

Efficiency of US Procurement:$1.00 food costs $2.13

European program food aid, $1.33/$1 food

Destination market cost,

47.0%

Shipping premium, 20.9%

Source country

procurement premium, 5.2%

Open mkt shipping, 26.9%


5. MonetizationGenerates more cash resources for NGOs, much like program food aid did for governments. But …

- Efficiency problems compounded: • $1 of cash costs US gov’t $2.66• plus NGO staff time/hassle/cost of capital

- No targeting of food distribution• disincentive effects maximized• additionality minimized• timing becomes more complicated (Bellmon compliance)


Recasting Food Aid

Decision Tree For Appropriate Response To Humanitarian Emergencies

Are Local Food Markets Functioning Well?

Yes No food aid. Instead provide cash transfers or jobs to targeted recipients.

No

Is There Sufficient Food Available Nearby To Fill The Gap?

Yes Provide food aid based on local purchases/triangular transactions.

No Provide food aid based on intercontinental shipments.

Figure 10-2: Recasting Food Aid Sources, Modes of Distribution and Uses

Current Global Food Aid Regime

Type of Food Aid: Humanitarian Project Program

Share of total flows

Percentage ~45% ~20% ~35%

Sources Local/Triangular

10-20% ~5-10% Very little

Donor nation markets or stocks 80-90% 90-95% Almost all

Mode of distribution

Direct distribution Almost all ~50% Almost none

Monetization Almost none ~50% Almost all

A More Effective Global Food Aid Regime

Type of Food Aid: Humanitarian(Life protecting)

Safety Nets(Asset protecting)

Cargo Nets(Asset building)

Share of total flows

Percentage 65-75% 10-20% 5-10%

Sources Local/Triangular

Where market analysis indicates appropriate Where market analysis indicates appropriate

Where market analysis indicates appropriate

Donor nation markets or stocks

When local purchase/triangular transactions are inappropriate



Mode of distribution

Direct distribution Almost all Almost all Almost all

Monetization Only in rare cases (price spike control) Limited: only in support of market development goals

Limited: only in support of market development goals

Ultimately, the only justification for food aid lies in three key roles.

(1) Short-term humanitarian assistance to food-insecure populations.

(2) Provision of longer-term safety nets for asset protection.

(3) Limited, targeted “cargo net” interventions for asset building among chronically poor/vulnerable populations where food aid is relatively efficient.

In each case, -use food aid if and only if a problem of food

availability and market failures underpin lack of access to food.

-Monetization rarely appropriate.- food is merely one resource to employ (and often

not the most necessary or best).

Conclusions

Thank you for your time, attention and comments!

Draft book chapters are available for reading and comment at

http://aem.cornell.edu/faculty_sites/cbb2/foodaid.html

Food Aid After Fifty Years: Recasting Its Role Chris Barrett, Cornell University and Dan Maxwell,...

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