Transcript Food Aid Lecture - The Cornell University Dyson School of

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
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.
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 >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) …
Daily Macronutrient Availability Per Person
(shaded areas below minima)
140
Protein (grams)
120
10.3%
70.3%
16.6%
2.9%
100
80
60
40
20
1000
1500
2000
2500 3000
Calories
3500
4000
Data source: FAO Food Balance Sheets
… concessional food flows have potential to fill the gap.
Basics of Food Aid
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
Three Types of Food Aid:
Millions of metric tons
Global Food Aid Flows By Type
20.0
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.
15.0
10.0
Emergency
Project
5.0
0.0
1980 1985 1990 1995 2000
Source: WFP
Program
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.
The Rise of Emergency Food Aid
Figure 2-1: U.S. Food Aid Programs, 1980-2003
3000
$ millions
2500
2000
1500
1000
500
0
1980
Data sources: USDA, GAO
1985
1990
1995
2000
Section 416(b)
Other (Title III, Food for Progress, IFEP, etc.)
PL 480 Title II
PL 480 Title I
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.
Basics of Food Aid
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
Food Aid: A Donor-Driven Resource
U.S. Food Aid Shipments to Russia
(as compared against Peru)
Millions of metric tons
2.5
2.0
Russia
1.5
1.0
0.5
Peru
0.0
1990
1991
1992
1993
Data source: WFP INTERFAIS database
1994
1995
1996
1997
1998
1999
2000
2001
United States Food Aid Flows
18
60
US year-end wheat stocks
(right axis)
16
14
12
40
10
30
8
6
20
4
2
50
10
Total US food aid flows
(lefthand axis)
0
1961
Data source: USDA
1971
1981
1991
0
2001
Y ear-en d U S w h eat s to ck s (m n to n s )
U S fo o d aid (m n to n s w h eat eq u iv .)
US food aid remains largely driven by domestic
farm and foreign policy concerns …
Data source: World Food Programme database
GAO: $35 mn/year excess spending, 120 day delay
NAMA protests over WFP purchases in Central Asia
Feb-03
Jan-03
Dec-02
Nov-02
Oct-02
Sep-02
Aug-02
Jul-02
Jun-02
May-02
Apr-02
Mar-02
Feb-02
Jan-02
Dec-01
3000
Nov-01
4000
Oct-01
5000
Operation Anaconda
Northern Alliance takes Mazar-e-Sharif
Taliban falls
Kandahar falls
Siege of Tora Bora
Hamid Karzai sworn into office
Terrorist attacks on NYC/ Washington
6000
Sep-01
Aug-01
Two month centered moving average volume (metric tons)
Food Aid: A Donor-Driven Resource
Daily food aid flow s into Afghanistan
August 2001-February 2003
2000
1000
0
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 selfinterest
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
Food Aid: A Donor-Driven Resource
A v er age s hipping r ates ( U S $/ton)
So who does benefit?
80
120
100
80
US-flag
60
Foreign-flag
40
20
0
1991-93
1999-2000
FY2001 416(b) and Food for Progress Shipments:
Freight Forwarders
70
2%
60
14%
Approved Title II Monetization Rate
50
Wilson Logistics
BKA Logistics
8%
40
43%
Fettig & Donalty
Panalpina
30
Other 8
20
Forw arder not reported
13%
10
Target Title II Monetization Rate
0
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
% Title II non-emergency food aid shipments
i) Small number of food vendors
(11% procurement premium)
ii) Very small number of shippers
(78% cargo preference premium)
iii) NGOs (resources, esp. monetized)
140
20%
Food Aid Management: Five Key Issues
1. Targeting
- “Leakage” to nontargeted individuals in
the household, region (errors of inclusion)
Table 3.1 Targeting: Inclusion and Exclusion of
Groups
- Missing intended beneficiaries (errors of
exclusion)
- Tough question: Is food aid curative or
preventive?
Food insecure
Food secure
Targeted
1. Successful
targeting
2. Inclusion
error
(Leakage)
Not Targeted
3. Exclusion error
(Under-coverage)
4. Successful
targeting
Consequences of targeting errors:
Figure 5: Food Aid Targeting in Northern Kenya
1.0
Inclusion: - ~35% avg. added consumption
- producer/labor supply disincentives
- added costs
Exclusion: - low humanitarian impact
0.8
0.6
1000
0.4
500
0.2
0
0.0
0
20000
40000
60000
80000
Total Household Income (Ksh)
100000
Probability of Food Aid Receipt
- int’l trade/dom. sales displacement
Value of food aid receipts (KSh)
1500
Food Aid Management: Five Key Issues
2. Timing
10
200
Wheat prices ($/ton)
- Aid should flow countercyclically to stabilize food
availability … it doesn’t
12
8
150
6
100
4
50
- Food aid flows budgeted on
monetary not physical basis
- Delivery lags are great
2
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
0
19
82
19
80
0
Prices are for US number 1 hard red w inter w heat, fob Gulf of Mexico. Sources: IMF, WFP
Figure 8.1: U.S. Title II Emergency Shipments
0.020
Late/low deliveries are a
form of exclusion errors
0.015
0.010
High pro-cyclical
deliveries are a form of
inclusion errors
0.005
0.000
0
50
100
150
200
Delivery Lags (days from call forward to port delivery)
250
Wheat food aid flows (tons)
250
Food Aid Management: Five Key Issues
3. Disincentive effects
Figure 9-3: Real ($) Sorghum Prices Southern Somalia-1998-2003
- Product price effects
0.35
Belet Weyne
Price in US Dollars
0.30
- Labor supply disincentives
- Government policy effects
given persistence
0.25
Baar-Dheere
0.20
Luuq
0.15
Xudur
0.10
0.05
Baidoa
0.00
98 l-98
99 l-99
00 l-00
01 l-01
03 l-03
04 l-04Average
05 l-05
02 l-02
nnnnnnnnJu
Ju
Ju
Ju
Ju
Ju
Ju
Ju
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
P ro b a b ility o f fu tu re P L 4 8 0 re c e ip t
Month
Figure 9-4: Assessed Requirements and Deliveries
Figure 8.2: Persistent Food Aid Flows
25,000
20,000
1.00
Metric Tons
15,000
10,000
5,000
0.80
0
Single spells
J A S O N D J F M A M J J A S O N D
All spells
1999
2000
0.60
0
10
20
Years PL480 receipt to date
30
Requirement (Mt)
Distribution (Mt)
Food Aid Management: Five Key Issues
3. Incentive effects
Positive Incentives:
- Factor prices/availability (e.g., seed, fertilizer, assets)
- Risk effects
- Labor supply/availability
Figure 4: Estimated Impulse Response Functions
1986-2000 Subsample
1.0
Volume (kg per capita)
0.8
0.6
Food production per capita
0.4
0.2
0.0
-0.2
-0.4
0
1
2
3
4
5
6
7
Food aid per capita
-0.6
Years since food aid shock
8
9
10
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
Shipping
premium,
20.9%
Open mkt
shipping,
26.9%
Destination
market cost,
47.0%
Source
country
procurement
premium, 5.2%
European program food aid, $1.33/$1 food
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 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
Direct distribution
Almost all
~50%
Almost none
Monetization
Almost none
~50%
Almost all
Humanitarian
(Life protecting)
Safety Nets
(Asset
protecting)
Cargo Nets
(Asset building)
Mode of
distribution
A More Effective Global Food Aid Regime
Type of Food Aid:
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
When local
purchase/triangular
transactions are
inappropriate
When local
purchase/triangular
transactions are
inappropriate
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
Mode of
distribution
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).
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