Food Aid: Why Local and Regional Procurement Is Better (Updated)

USFoodAid
US Food Aid (Source: Explore.org).

A few weeks ago in my food policy seminar, we discussed food aid. Paarlberg (2011), whose discussion of food aid informs much of the first half of this post, defines food aid as the international shipment of food through noncommercial channels as a gift.

Though almost 60 percent of food aid is delivered by the United Nations’ World Food Programme, the US remains a major provider of food aid. The delivery of food aid by the US is not without its fair share of problems. Among the most decried features of the US food aid program are that

  1. US food aid has to be purchased in the United States, and
  2. US food aid has to be shipped on US-flagged vessels.

As a consequence of those two rules, 65% of US spending on food aid is spent on administrative and transportation costs.

Local and Regional Procurement

In the second half of his presidency, George W. Bush tried to allocate a small percentage of the food aid budget to local procurement, i.e., to purchases of food aid in or around the countries where people need it, but Congress refused. The good news, however, is that things are changing, and that local and regional procurement (LRP) is on the rise.

And it looks like LRP of food aid is a much better proposition than purchasing food aid in the US. In a pair of forthcoming papers in World Development, Cornell researchers find that (i) LRP improves response time during emergencies, and (ii) food aid recipients seem to prefer food aid rations that are locally procured.

In the first paper, Erin Lentz and her coauthors find that

Procuring food locally or distributing cash or vouchers results in a time savings of nearly 14 weeks, a 62 percent gain. Cost-effectiveness varies significantly by commodity type. Procuring grains locally saved over 50 percent, on average, while local procurement of processed commodities was not always cost-effective.

In the second paper, William Violette and his coauthors find that

[R]ecipients of locally procured rations are generally more satisfied with the commodities they receive than are recipients of US-sourced foods. This pattern is especially pronounced among less-well-off recipients.

In other words: LRP means food aid that is generally cheaper and quicker to get to target populations, and those target recipients like the food aid rations they receive under LRP more than food aid rations purchased in the US.

There are good political economy reasons why the US food aid program is the way it is and has only been changing at an excruciatingly slow pace. In case you are interested in this topic, the definitive work is the book Food Aid After Fifty Years, by Chris Barrett (who is a coauthor on the two papers above) and Dan Maxwell.

Update: Here is the introductory essay for that special issue of World Development, by Lentz et al.

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3 comments

  1. David McKenzie

    Nice summary Marc. What about the argument that in the short-run the local market has a relatively inelastic supply to offer, so buying food in the local market pushes up prices and crowds out other buyers. Obviously this is good for local sellers, but may harm buyers not eligible for food aid. I don’t know this literature well, so don’t know in how many cases the supply of food is an issue after disasters (e.g. a tsunami wipes out many stocks of food, destroys crops etc.) vs the issue is just lack of income for people to buy a plentiful local supply?

  2. Marc F. Bellemare

    Thanks for your question, David. What you highlight is certainly a concern, which is why certain decision tools have been developed to help policy makers decide whether to dispatch food aid rations from the US, procure locally, or simply give cash transfers. See this document, for example, in particular the discussion in section 4.

  3. Chris Barrett

    Nice post, Marc. Thanks for highlighting these issues. They’re becoming considerably more important at the moment since it appears that the Obama administration’s budget proposal will include a wholesale move of US food aid from its traditional programs (PL480 Title II and Food for Progress, both authorized and funded through USDA, although Title II is actually administered by USAID) into USAID programs through the foreign relations appropriations process, which would enable unrestricted use of LRP and eliminate the tying of US food aid to procurement in and shipment from the US.

    David raises a great question about the market price impacts of food aid procurement. Another paper in that same forthcoming special section of World Development, by Garg et al., offers the first reasonably rigorous evidence on this question. (Full disclosure: I am a co-author on the study.) Using monthly time series data from markets for six different commodities in seven countries where LRP operations took place, (from the concluding section) “For the most part, we find no economically or
    statistically significant relationship between food prices and local
    food procurement or distribution activity, although there
    are a few anomalous cases of non-trivial price changes associated
    with LRP. These cases are more often associated with
    food distribution than with food procurement. Similarly we
    find that in general distribution either lowers or has no effect
    on local retail prices.” The paper is online at http://www.sciencedirect.com/science/article/pii/S0305750X13000247 .