Food Aid and Food Security

February 1995

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Preface Executive Summary Introduction Food Security Measures to Improve Food Security Food Aid Food Aid Policy Agenda Food Aid Management Objectives Program and Management Policy Conclusions Wednesday, 11-Jul-2001 16:48:36 EDT     IV. Food Aid Title II and Title III of P.L. 480--the food aid programs USAID administers directly--total nearly $1 billion per year. Food aid is a very flexible resource and can be used to support improved food security in a variety of ways. However, food aid is also a specialized resource which requires careful consideration of programming circumstances and careful management. A. The Nature of Food Aid Food aid is a resource transfer which can be conveyed in kind or monetized. In past, food aid has served a wide range of U.S. government purposes: surplus commodity disposal, relief aid and diverse development interventions. It has proven flexible enough so that it can be used in a variety of forms: balance of payments support, local currency for projects, or in directed feeding programs. In many cases, food-aid sales transactions within the recipient country have, in their own right, been an important development tool, helping to strengthen markets and encouraging policy change. U.S. private voluntary organizations (PVOs) manage more than half of USAID administered food aid. Drawing on their own resources and management capacity, PVOs provide a unique and invaluable capacity to manage local, community-based programs which directly reach the poor. Local currency generated from the sale of food commodities provides an important complementary resource the PVOs can reinvest in activities designed to improve food security. Special Strengths: One of the obvious strengths of food aid is its immediate application in feeding people--either as part of a humanitarian relief effort, as part of a recovery strategy or as part of a broader development effort. In situations where food-as-food is critical to humanitarian or development progress, food aid is the preferred USAID resource. Food aid can also enhance the effectiveness of other development programs such as nutrition education, family planning, child survival, and community development projects. This can be accomplished either through directed feeding or through "monetization" to generate local currency. An historic advantage of food aid was it was "cheap" in terms of costs to the U.S. foreign assistance budget. For nearly four decades, food aid helped dispose of U.S. domestic agricultural surplus. It provided real benefits to American farmers, and reduced storage and handling costs to the U.S. government. However, with the onset in the late 1980s of new agricultural policies designed to reduce surpluses, (now embodied as well in the Uruguay Round of GATT), surplus commodities have and will continue to decline precipitously. No longer can food aid be considered a cheap resource for development and relief. The budget for food aid is now equally subject to the constraints which confront the overall U.S. foreign assistance budget. A dollar spent on food aid is a dollar not spent on "development assistance" and vice versa. Special Considerations: Food aid also has several distinct characteristics which must be carefully considered when USAID missions and PVOs decide to use food as a development tool--and as humanitarian relief assistance. Food aid should be managed so that it supports local agricultural production. This may require special efforts to utilize local markets for the distribution of food and careful timing of deliveries. Otherwise, the introduction of food aid can disrupt local agricultural markets, depressing prices and discouraging local farm production. Commodity selection is also important. Food aid may prove counterproductive if the commodity is unacceptable to local preferences and, in extreme cases, can also distort local consumption patterns, with long-term consequences for local agricultural markets. Food aid can also be expensive to deliver and manage. Shipping costs, including U.S. cargo preference and any necessary inland transportation, add to the costs of delivering U.S. commodities. Proper monitoring of the commodities themselves to guard against waste and diversion is essential and can be costly. Monetization of food aid requires managing the conversion of food into local currency and then acceptable oversight of the disposition of the local currency. All these costs must be carefully weighed against the benefits in considering alternative approaches to accomplishing assistance objectives. In most cases, food aid requires complementary investments to achieve maximum impact, and USAID missions and the PVOs need to ensure those resources will be available as food is delivered. Even with narrowly stated objectives, such as nutritional improvement in poor children, sustainable development is so complex a process that complementary interventions are necessary. These interventions can be financed with monetization, other local currency sources, or dollar funding. However, they all have their own costs and require significant management commitment. In developing food aid programs, it is important to capitalize on the special strengths of food aid. To do so requires full consideration of the special circumstances which influence the costs and effectiveness of these programs. B. FOOD AID PROGRAMS While food security is the umbrella policy goal for all food aid programs, each of the USG food aid programs has different characteristics. Title I P.L. 480 Title I export credit programs develop foreign markets for U.S. farm products. This government-to-government assistance is provided on a concessional loan basis and entails untargeted food distribution through normal commercial channels. Title I is managed by USDA. Title II Development Programs Title II development programs provide food aid grants which are implemented by PVOs or the World Food Program. Activities include pilot programs for small-holder agriculture, supporting market liberalization through policy change, nutrition and other child survival programs, community development such as water and sanitation and environmental restoration, or small scale infrastructure development. A portion of Title II commodities can also be monetized by PVO partners to fund complementary development interventions to enhance the impact of food programs and contribute to food security. Emergency Programs Title II is also used for direct feeding activities to respond to short-term, unanticipated food shortages. Emergency programs may be implemented by PVOs, WFP or on a government-to-government basis. Increasingly, emergency feeding is a component of relief efforts in complex emergencies involving political conflict. (Sometimes these "emergencies" can last for several years.) Food aid is sometimes monetized to fund complementary activities such as distribution, repackaging, and wet feeding in refugee camps. Emergency feeding is usually managed by PVOs or the World Food Program. World Food Program The World Food Program (WFP) is a UN Agency. It is the principal multilateral channel for food aid. It provides food aid used in feeding programs of the UN High Commissioner for Refugees. WFP also manages both development and emergency feeding programs for bilateral donors, including the U.S. The U.S. makes a biennial pledge of assistance to WFP (currently $300 million) to cover both commodity and transportation costs for WFP development and refugee projects. Emergency food aid channeled through WFP is committed in response to appeals for emergency food for disaster relief. Direct contributions to WFP for management have so far been minimal. Title III Title III of P.L. 480 funds government-to-government grants for development activities. Title III programs normally include policy reform conditions and frequently generate local currencies for development projects. Because Title III commodities most often enter untargeted commercial distribution systems, Title III Agreements may contain commitments by the host government to foster the availability and accessibility of basic foods to the most disenfranchised households. In May of 1994, USAID approved Title III guidance which states that beginning in 1995 priority will be given to countries where there is the greatest food need, and that the focus of new Title III programs will be on policy reforms and activities directly affecting or improving food production and consumption, including nutrition. Section 416(b) This program is administered by USDA. Section 416(b) of the Agricultural Act of 1949 provides for overseas donation of surplus agricultural commodities acquired by the Commodity Credit Corporation (CCC) as part of its price support activities. Over the years, this program has provided commodities worth hundreds of millions of dollars to meet emergency needs and for developing countries, most recently in the new independent states of the former Soviet Union. However, CCC-owned inventories have been declining as domestic farm programs have brought supply into closer relationship to demand, and availability of resources for future commodity donations under this authority will be much less than in the past. Food for Progress This program is administered by USDA. The Food for Progress Act of 1985 authorizes USDA to provide a maximum of 500,000 metric tons of commodities on a grant or credit basis, using (a) funds appropriated to Title I, Public Law 480; (b) the inventories which are available for section 416(b) use; or (c) funds available to CCC, for needed commodities which are available neither under P.L. 480 nor from CCC inventory. To the extent that CCC funds are used for commodities from the latter two categories, not more than $30 million may be spent annually for noncommodity costs. The grants and credits are to go to developing countries that are engaged in economic policy reforms, particularly within the food and agriculture sectors, and for emerging democracies. Food for Progress assistance is intended to cushion the effects of structural economic adjustment or other domestic economic shocks which may affect food security. Direct Dollar Procurement Under special circumstances, USAID may also utilize dollar appropriations for direct procurement of food. The International Disaster Assistance account is used for local food procurement in emergencies. Under the Freedom Support Act, USAID manages a small food aid program ($38 million in FY 1994) for countries of the former Soviet Union.

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