REPORT TO CONGRESSON FOOD AID MONETIZATION
August 10, 2001
FOREIGN AGRICULTURAL SERVICEUNITED STATES DEPARTMENT OF AGRICULTURE
TABLE OF CONTENTS
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I. Executive Summary ...............................................................................................1II. Overview of Food Aid Programs............................................................................1III. Challenges Faced....................................................................................................4IV. Monetization Impacts on U.S. Farmers and Program Recipients...........................6V. Reporting, Compliance, and Evaluation.................................................................12VI. Conclusions............................................................................................................13Annex: Review of Selected Literature..........................................................................14Selected Bibliography...................................................................................................15Table 1. U.S. Food Aid Programmed and Monetized Under Various Programs,FY1995-2000.......................................................................................................... 4
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The Conference Report noted that the “conferees recognize the potential for beneficial impact for bothfarmers and recipients from the monetization of commodity sales in international assistance efforts.”
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Interviews were conducted with Private Voluntary Organizations (PVOs), USDA’s Office of the GeneralCounsel, USDA’s Office of Inspector General, the U.S. General Accounting Office, the Office of Management and Budget, commodity associations, exporters, and consultants involved in food aidprograms. Officials from the U.S. Agency for International Development (USAID) Food for Peace andUSDA/FAS’s Export Credits program area also provided key input. Project impacts were assessed throughinterviews and written reports, as neither travel nor independent assessments were conducted.
I. EXECUTIVE SUMMARY
The Conference Report on the Agriculture, Rural Development, Food and Drug Administration, andRelated Agencies Appropriations Act, 2000,
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directed the Foreign Agricultural Service, with theassistance of the Economic Research Service and other appropriate U.S. Department of Agriculture(USDA) agencies, to prepare a report demonstrating the impacts of food aid monetization. This paperis provided in response to that request.
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The paper is divided into six sections. Section I provides a summary of the paper. Section II gives anoverview of U.S. food aid programs and contains a table showing monetization trends since 1996.Section III discusses challenges faced by Private Voluntary Organizations (PVOs) monetizing U.S.commodities, including pre-established freight-rates, shipment delays, local prices below cost recoveryguidelines, undeveloped local markets, coordination with other PVOs, constraints on cross-bordermonetization, and foreign exchange risk. The paper notes that the PVOs have often been successful inovercoming the obstacles they encounter.Section IV discusses the impact of monetization on U.S. farmers and recipient countries. The papernotes that food aid helps expand U.S. exports in the short term and can build the foundation for futuresales. Regarding the impact on recipient countries, the paper notes the dual impacts of improving foodsecurity and fostering economic development. It presents examples from development activities inseveral parts of the world as evidence of the beneficial impact of monetization. Section V discussesreporting and compliance requirements applicable to the PVOs and foreign governments, who areCooperating Sponsors in U.S. food aid programs, and the constraints faced by USDA in evaluatingfood aid monetization. Section VI concludes that the monetization of food aid commodities hasbeneficial food security and development impacts, while contributing to U.S. agricultural exports.
II. OVERVIEW OF FOOD AID PROGRAMS
The United States provides food aid through programs under three authorities: Public Law 83-480(P.L. 480), also known as the Food for Peace Program, Section 416(b) of the Agricultural Act of 1949 (“Section 416 (b)”), and the Food for Progress Act of 1985. In fiscal year 2000, a pilot GlobalFood for Education Initiative was also announced for implementation in fiscal year 2001. This programwill be implemented using the section 416(b) authority. These programs, while administered by the
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