Food aid – good, better, best

Kudos to the US Government for giving food aid to Ethiopia. This is good:

USAID has provided an additional 87,910 metric tons of emergency food aid, valued at approximately U.S. $50 million, to the Joint Emergency Operational Plan in response to the Ethiopian Government’s January 2009 appeal. This emergency food aid will provide a full ration to 1.18 million beneficiaries for four months in 72 woredas in the most severely impacted regions – Afar, Amhara, Oromiya, Somali, Southern Nations, Nationalities and Peoples, and Tigray Regions and in Dire Dawa Administrative Council.

That’s good, but it could better.

The US imports food aid to Ethiopia.  It is bought from American farmers and shipped by boat to Djibouti, then brought by road to where it is needed in Ethiopia.  The cost of all this works out at $568 per metric tonne.  Here in Addis Ababa, today’s market price of wheat is $489 per metric tonne.  It is cheaper out of the capital.  So America’s generosity could buy 16% more wheat if it were bought locally.  From that difference alone, another 190,000 people could be given a full ration of food for four months.  Furthermore, buying the food locally would increase the incomes of farmers either in Ethiopia or in neighbouring countries and the improve livelihoods of other parts of the economy (e.g. haulage companies) needed to make the agriculture market work.  Their livelihoods, which are undermined by imported food aid, would be improved if the food were bought locally.  If there is sufficient supply response among local farmers (which there probably would be) so it does not have to be imported, then the generous aid would also provide $50 million of much needed foreign currency for Ethiopia.

This is not possible at the moment because American legislation requires that food aid be bought in the US, that  50 percent of commodities be processed and packed in the US before shipment, and that 75 percent of food aid managed by USAID and 50 percent of the food aid managed by the US Department of Agriculture be transported in “flag-carrying” US-registered vessels. The result is that only 40% of money spent on food aid by the US actually goes towards buying food; the rest goes to US transport companies.

Buying the food locally would be better, but best of all might be something even more radical.  Why not give the money itself to people who are hungry? Amartya Sen’s groundbreaking study of famine, Poverty and Famines: An Essay on Entitlement and Deprivation, published in 1981, which included analysis of the famine in Wollo, Ethiopia, in 1973, begins with these words:

Starvation is the characteristic of some people not having enough food to eat. It is not the characteristic of there being not enough food to eat.

People are usually hungry because they are too poor to buy food. (They are often reduced to this poverty by the failure of their own harvest. But that does not mean that there is not enough food for them.) If we give them money (or vouchers, if we really have to) they can buy food locally. Food growers elsewhere will grow food, and traders will bring it to them. It will be the food they prefer and know how to eat (NB this often means not wheat).  This will not only help to protect people from starving, it will support local and regional food producers, and other local businesses.

US food aid is all in bags labelled “From the American People”.  It is a generous thought, but it might be less misleading if it were labelled “From the American People, mainly to the American People”.

16 comments on “Food aid – good, better, best”

  1. I think cash transfer are starting to really gain support – some good case studies coming out lately. Here’s hoping donors grab onto the idea.

  2. The waste is worse elsewehere ($1000 per ton food aid reaching places where it’s under $200 per ton).

    I was in a meeting recently with someone who called it “the reverse of alchemy”/

    Ben

  3. Does anybody know any studies that have been done about the exact conditions under which cash transfers are more appropriate than food aid? I’ve seen general discussion, and everybody seems to agree that, where markets are disrupted, cash is a bad idea, but I haven’t seen any research about how field managers can distinguish between appropriate and inappropriate conditions.

  4. You can certainly take the USG to task for using the $50m figure to overstate their generosity, since as you quite rightly point out that amount of good that’s done is less than this since some of the benefits go back to US farmers. But focusing on the distinction between tied and untied aid is ultimately a distraction from more important issues. If the US government gives $50m in tied aid, then what’s happening is that the US is not having to pay the full cost of that aid, since some of the benefits come back to its farmers. So the relevant comparison isn’t $50m in tied aid vs. $50m in untied aid… it’s $50m in tied aid vs. ($50m minus the benefits that went to US farmers) in untied aid, since from the US’s perspective the real cost of $50m in tied aid is less than $50m.

    The much more important issue is the actual level of resources that are being commited, and not whether they take the form of tied aid or untied aid.

  5. I’m not sure I follow- if food aid is being given to people who can’t otherwise afford food, how can it be putting local farmers out of business? I know that targeting is not always perfect and this can have some effect on prices, but if food aid is really putting local farmers out of business then the food aid must be going to people who would otherwise be buying food, rather than people who would otherwise not have food. In that case, isn’t it clear that food aid was an inappropriate policy response, and the tied vs. untied issue is secondary?

    For what it’s worth, I tend to agree with you that giving people cash is probably the best response of all (although you also have to think about whether elected officials in the US would be able to find much support for that). But the tied vs. untied issue gets way more attention that it deserves, considering how relatively unimportant it really is.

  6. Isn’t this the truth about most humanitarian aid?
    Take ECHO, Dfid, AUSaid. A lot of humanitarian aid funds are spend, not in the least developed countries, but in developing countries which can become potential markets for us, or provide us with cheap products & labor.
    I can recommend to read; the Bottom Billion, by Paul Collier. I don’t agree with everything in his book, but it puts global funds in a different perspective (at least for me).

  7. While I agree with your general point, it seems odd that no one has pointed out that $489 is only the price of the next metric tonne of wheat. You don’t say how many tonnes we are talking about, but surely the price would quickly escalate if that much extra wheat was being bought. That is assuming the market has sufficient quantity to meet demand anyway. If cash transfers was used instead, I don’t see that the problem would be solved – more money chasing the same amount of wheat.

    All of this said, buying locally this year would ease the situation next year, whereas imports would exacerbate the situation.

  8. Paul asks a cogent question. There does not seem to be that much evidence yet, but it is not entirely absent either. A reasonable overview article: Farrington, John and Slater, Rachel,Introduction: Cash Transfers: Panacea for Poverty Reduction or Money Down the Drain?. Development Policy Review, Vol. 24, No. 5, pp. 499-511, September 2006. Available at SSRN: http://ssrn.com/abstract=925058 or DOI: 10.1111/j.1467-7679.2006.00344.x

    In 2006, Development Policy Review had a mini-special on cash transfers with some interesting articles as well.

    Interestingly, much of the evidence in literature seems to deal with experiences in Ethiopia.

  9. What’s worse is the so called ‘monetisation’ whereby surplus US cooking oil, milk powder etc. is dumped via US NGOs and the proceeds used for ‘development’ work (is it Title I or Title II?). I managed some ‘monetisation’ proceeds to support dairy farm development in Bosnia. The proceeds came from dumped US milk powder that a consortium of US NGOs flogged in Bosnia. And all that in a market dominated by german UHT. Owen, ask around about the case taken by the Addis Ababa Chamber of Commerce against the us government wrt cooking oil dumped that way. Was maybe six years ago….. Case didn’t get very far.

  10. Unfortunately, there is no harvest of wheat, so cash would not be any use at this moment in time.

    A new strain of wheat rust, a fungal infection that destroys crops, are spreading across Africa, Asia and the Middle East threatening food supply fro hundreds of millions of people.

    Wheat is the world’s most common crop and provides a fifth of calories ingested by people around the world.

    Researchers are scrambling to craft a strategy to prevent mass crop destruction.

    Therefore, 25,000 metric tons of wheat is being shipped between 8,000 tons and 12,500 at a time.

    This is two shipments of wheat per month for a period of five to ten years.

    This wheat is coming from the Ukraine to South Africa, then this will distributed into the Democratic Republic of the Congo, for the CONGOLESE AID PROGRAM, which has a division of funding done through Kinshasa.

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Owen Barder

Owen is Senior Fellow and Director for Europe at the Center for Global Development and a Visiting Professor in Practice at the London School of Economics. Owen was a civil servant for a quarter of a century, working in Number 10, the Treasury and the Department for International Development. Owen hosts the Development Drums podcast, and is the author Running for Fitness, the book and website. Owen is on Twitter and