Food Aid Lecture

1
Food Aid After Fifty Years Recasting Its Role
Chris Barrett, Cornell University and Dan
Maxwell, CARE Department of Applied Economics
and Management Cornell University April 15,
2004  
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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.

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Basics of Food Aid

• 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 gt90 of
  global flows through early 1970s, when the UNs
  World Food Programme became a major player. 
• Peaked at 22 of global aid flows in 65, now lt5
• 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.
•  

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Relative to international standards, 30 of the
worlds nations suffer macronutrient availability
shortfalls relative to international standards
(2350 Kcal/55 g protein/day per capita)
Basics of Food Aid
concessional food flows have potential to fill
the gap.
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Food aid accounts for little in the way of annual
flows of food
Basics of Food Aid
and the share is declining, especially relative
to commercial trade.
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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.
Three Types of Food Aid
 
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The Rise of Emergency Food Aid
 
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.
8
The geography of food aid flows has changed over
time, although US remains dominant.
Basics of Food Aid
9

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
  devt assistance)
• S. Africa 2002-3 (HIV and drought and
  Zim/Angola)
• NGO financing
• OMB/USAID battle over monetization, NGO dependence

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US food aid remains largely driven by domestic
farm and foreign policy concerns
Food Aid A Donor-Driven Resource
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Food Aid A Donor-Driven Resource
GAO 35 mn/year excess spending, 120 day
delay NAMA protests over WFP purchases in Central
Asia
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Food Aid A Donor-Driven Resource

• 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

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So who does benefit?
Food Aid A Donor-Driven Resource

• i) Small number of food vendors
• (11 procurement premium)
• ii) Very small number of shippers
• (78 cargo preference premium)
• iii) NGOs (resources, esp. monetized)

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Food Aid Management Five Key Issues  

• 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
• intl trade/dom. sales displacement
• producer/labor supply disincentives
• added costs
• Exclusion - low humanitarian impact

Table 3.1 Targeting Inclusion and Exclusion of Groups Table 3.1 Targeting Inclusion and Exclusion of Groups 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
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Food Aid Management Five Key Issues  
2. Timing - Aid should flow counter-cyclically to
stabilize food availability it doesnt - 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
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Food Aid Management Five Key Issues  

• 3. Disincentive effects
• - Product price effects
• Labor supply disincentives
• Government policy effects given persistence

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Food Aid Management Five Key Issues  

• 3. Incentive effects
• Positive Incentives
• Factor prices/availability (e.g., seed,
  fertilizer, assets)
• - Risk effects
• - Labor supply/availability

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Food Aid Management Five Key Issues  

• 4. Procurement Modalities
• Role for local purchases/triangular transactions
• Efficiency of US
• Procurement
• 1.00 food costs 2.13
• European program food aid, 1.33/1 food

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Food Aid Management Five Key Issues  

• 5. Monetization
• Generates more cash resources for NGOs, much
  like program food aid did for governments. But
• Efficiency problems compounded
• 1 of cash costs US govt 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)

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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.
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Figure 10-2 Recasting Food Aid Sources, Modes of Distribution and Uses Figure 10-2 Recasting Food Aid Sources, Modes of Distribution and Uses Figure 10-2 Recasting Food Aid Sources, Modes of Distribution and Uses Figure 10-2 Recasting Food Aid Sources, Modes of Distribution and Uses Figure 10-2 Recasting Food Aid Sources, Modes of Distribution and Uses
Current Global Food Aid Regime Current Global Food Aid Regime Current Global Food Aid Regime Current Global Food Aid Regime Current Global Food Aid Regime
Type of Food Aid Type of Food Aid Humanitarian Project Program
Share of total flows Percentage 45 20 35
Sources Local/ Triangular 10-20 5-10 Very little
Sources Donor nation markets or stocks 80-90 90-95 Almost all
Mode of distribution Direct distribution Almost all 50 Almost none
Mode of distribution Monetization Almost none 50 Almost all
A More Effective Global Food Aid Regime A More Effective Global Food Aid Regime A More Effective Global Food Aid Regime A More Effective Global Food Aid Regime A More Effective Global Food Aid Regime
Type of Food Aid 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
Sources Donor nation markets or stocks When local purchase/triangular transactions are inappropriate When local purchase/triangular transactions are inappropriate When local purchase/triangular transactions are inappropriate
Mode of distribution Direct distribution Almost all Almost all Almost all
Mode of distribution Monetization Only in rare cases (price spike control) Limited only in support of market development goals Limited only in support of market development goals
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Conclusions
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).
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Thank you for your time, attention and comments!
Draft book chapters are available for reading and
comment at http//aem.cornell.edu/faculty_sites/cb
b2/foodaid.html