International Agricultural Services

Annual Food Aid Report

U.S. Food Aid:

What Lies Ahead?

2200 Wilson Blvd

Suite 102-251
Arlington, VA 22201 U.S.A. www.interagservices.com
www.interagservices.com
  Table of Contents 
Preface from IAS .............................................................................................. iii
Foreword............................................................................................................ v
Executive Summary .......................................................................................... 1
Chapter 1: Introduction..................................................................................... 2
Historical Perspective ........................................................................................................................ 2
Overview of U.S. Food Aid Programs................................................................................................ 4
Chapter 2: Legislative Impacts on the Future of U.S. Food Aid ..................... 7
Debating the 2007 Farm Bill .............................................................................................................. 7
Defining the Bill Emerson Humanitarian Trust................................................................................... 8
Regulating the Sale of Food Aid Commodities .................................................................................. 8
Chapter 3: Organizational Restructuring and Management Improvement .. 10
Recent Findings from GAO and USDA’s OIG ................................................................................. 10
USDA’s Foreign Agricultural Service ............................................................................................... 11
USDA’s Farm Service Agency ........................................................................................................ 11
USAID’s Food for Peace Office ....................................................................................................... 11
Improvements to Information Technology Systems ........................................................................ 12
Strengthening of Coordinating or Consultative Activities ................................................................. 13
Food Assistance Policy Council ...................................................................................................................... 13
Food Aid Consultative Group .......................................................................................................................... 13
International Food Aid Conference .................................................................................................................. 14
Chapter 4: The Outlook for U.S. Food Aid Programming in FY 2008........... 15
Section 416(b) ................................................................................................................................. 15
Title I ............................................................................................................................................... 16
Title II .............................................................................................................................................. 17
Title III ............................................................................................................................................. 19
Food for Progress............................................................................................................................ 19
Food for Education .......................................................................................................................... 22
Program Summary Overview .......................................................................................................... 24
Chapter 5: Country and Regional Implications ............................................. 25
Chapter 6: Changes to the Food Aid Commodity Menu ............................... 28
Bulk Grains ...................................................................................................................................... 28
Oilseeds .......................................................................................................................................... 28
Pulses ............................................................................................................................................. 29
Processed Commodities ................................................................................................................. 30
Ethanol and Its Effect on Food Aid Prices ....................................................................................... 31
Appendix A—About IAS ................................................................................. 33
Appendix B—List of Reference Sources ....................................................... 35

 Page i 
  Acronyms 
Acronym Full Name
416(b) Section 416(b)
BEHT Bill Emerson Humanitarian Trust
CCC Commodity Credit Corporation
DACO Deputy Administrator for Commodity Operations
EBES Electronic Bid Entry System
FAR Federal Acquisition Regulations
FARES Food Aid Request Entry System
FAS Foreign Agricultural Service
FBES Freight Bid Entry System
FFE Food for Education
FFP Food for Progress
FSA Farm Service Agency
GAO Government Accountability Office
IAS International Agricultural Services, LLC
IT Information Technology
KCCO Kansas City Commodity Office (FSA)
NGO Non-Governmental Organization
OGC Office of General Council
OIG Office of the Inspector General
OMB Office of Management and Budget
PCIMS Processed Commodities Inventory Management System
PL 480 Public Law 480
PVO Private Voluntary Organization
UN United Nations
USAID U.S. Agency for International Development
USDA U.S. Department of Agriculture
WFP World Food Programme
WTO World Trade Organization

© 2007 International Agricultural Services, LLC. All rights reserved.

This report is the exclusive property of International Agricultural Services, LLC. Unauthorized copying
of the content is expressly forbidden. Any use, including reproduction, modification, distribution,
transmission, replication, storage, or display of any part of the content of this report, for commercial or
other purposes, without prior written permission is strictly prohibited.

 Page ii 
Preface from IAS

T
his report was prepared by International Agricultural Services (IAS) in order to
provide an overview of U.S. international food aid programs for the past few years
and to gain insight into what lies ahead. It begins with a short history of these
programs since World War II and continues with an analysis of food aid activities in the
new millennium, including an examination of countries, commodities, and organizations
involved. There is discussion of the new Farm Bill now being crafted and other
commentary about current programs and the future of food aid funding. In the process of
undertaking this study, IAS created a comprehensive food aid database – making use of
the U.S. Government’s procurement data – that enables IAS to undertake customized
analysis and reporting. The questions addressed in this report include: What does the
future hold for U.S. food aid programs? How has the government performed in its
mission to provide food aid to the needy around the world? Where should food aid
groups focus their limited resources?

In preparing this report, detailed research was carried out including many interviews with
representatives of government agencies in charge of food aid programming and delivery,
commodity vendors, food aid interest groups, Members of Congress, and cooperating
sponsors.

We are grateful to George Aldaya, former Director of the Farm Service Agency’s (FSA)
Kansas City Commodity Office (KCCO), and Mary Chambliss, former Deputy
Administrator responsible for Food Aid Programs, Foreign Agricultural Service (FAS),
for their invaluable contributions to this report. We also appreciate the contributions of
Robert L. Walker, former head of the U.S. Department of Agriculture (USDA) team
charged with monitoring the historic $1 billion Russian food assistance program between
1999 and 2001.

We welcome your comments on our report.

Daniel T. Whitehead
International Agricultural Services
April 2007

 Page iii 
Notes on Terminology
Various terms are used by different agencies to describe organizations that carry out food
aid agreements, and they are often used interchangeably; for example, cooperating
sponsor, non-governmental organization (NGO), inter-governmental organization, private
voluntary organization (PVO), and humanitarian aid group. These groups may include
non-profits, for-profit organizations, trade groups, and cooperators. While we understand
that there are real differences between these terms, for the purposes of this study we use
the generic term PVO wherever possible to describe each of these groups in order to
reflect what we believe to be most common practice and to avoid confusion.

Notes on Food Aid Data Sources

Food aid data sources can pose a problem to anyone undertaking a study such as this one.
No centralized repository of food aid data exists in the U.S. Government; each agency –
such as the U.S. Agency for International Development (USAID), FSA, and FAS –
maintains separate and compartmentalized food aid databases. USAID and FAS
databases focus on data relating to proposals from PVOs and planned programming,
while FSA maintains a system for tracking food aid procurements and deliveries. The
FSA database on “contracts awarded for the procurement of food aid” is maintained by
the KCCO, and it was used for the development of the various charts and tables included
in this report because it appears to be the most complete, relevant, and accurate source of
information.

One inconvenience of this approach, however, is that the procurement data is entered
according to the date the procurement contracts with commodity vendors and shippers
were awarded and not the fiscal year in which the food aid agreement was awarded.
Therefore, reports created using the FSA database may not always match precisely with
information maintained and published by other agencies. Additionally, as the data is
based on USDA procurements, purchases of food by foreign governments under the Title
I loan program are not included. The only Title I data included here is in relation to Food
for Progress grant programs that have been funded using Title I authority. What is most
important is that we have attempted to choose one source of data and to then use that data
exclusively and consistently throughout our report.

For more information contact ias@interagservices.com.

 Page iv 
Foreword

A s U.S. international food aid programs enter a new century with 50 years of
experience, there is considerable review and discussion of the future for these
programs. While they have saved millions of lives in all parts of the world,
almost a billion people, many of them children, continue to face food insecurity. It is
estimated that 18,000 children die every day as a consequence of starvation and
malnutrition. The prospects for reducing this number are not good. Facts such as these
combined with the U.S. Government’s budget constraints have led many to reevaluate
these programs, seeking to identify ways to use these resources – often $2 billion a year –
more efficiently and effectively. The reward for such improvements will be more lives
saved and better livelihoods created or maintained.

The timing of the 2007 Farm Bill and the ongoing negotiations at the World Trade
Organization (WTO) have presented the opportunity for such review and discussion on
the future of the several U.S. food aid programs. While the Administration has included
only one proposal in its 2007 Farm Bill plan, the food aid community is considering
several proposals, some of which have already been presented to Congress. In addition,
the Government Accountability Office (GAO), at the request of the majority and minority
leadership of the Senate Agriculture Committee, has prepared a major report on these
programs as currently authorized. The Organization for Economic Cooperation and
Development (OECD), UN Food and Agriculture Organization (FAO), and USDA Office
of the Inspector General (OIG) have all conducted recent studies on food aid. The
Partnership to Cut Hunger and Poverty in Africa also has just released a major study,
Reconsidering Food Aid. All this information will contribute to the dialogue on the future
for food aid.

It is hoped that this paper will add constructively to this ongoing dialogue that aims to
find new and better ways to support food security for the most needy among us.

Mary Chambliss
Former Deputy Administrator
Export Credits
USDA Foreign Agricultural Service

 Page v 
Executive Summary

U
.S. food aid programs that began more than 50 years ago as an outlet
for farm surpluses have evolved over the years into sophisticated and
targeted tools for alleviating the causes of hunger and promoting
economic development. There are now more than seven separate food aid
programs or authorities, although not all of them are currently funded or in
operation.

Management of these programs is shared between USAID and two USDA

agencies: FAS and FSA. USAID and FAS handle the strategic programming
aspects of the programs while FSA carries out the procurement and shipment
of the food commodities. Coordination among all three agencies, and other
stakeholders, has been improving dramatically over the past few years, partly
as a response to findings from several government auditors. USDA and
USAID both have undergone significant organizational changes, including
improved information systems.

The current Farm Bill authorizing these food aid programs will expire at the
end of FY 2007, prompting a recent flowering of ideas on ways to improve
the efficiency of these programs and increase their effectiveness. Among the
ideas discussed are expanding the use of cash resources for local purchases of
food aid in emergencies and an expansion in the amount of food aid being
used specifically for development programs. While there will likely be room
in the future of U.S. food aid programs for local purchases in cases of extreme
emergency, U.S. grown food commodities will continue to be used to meet
the great majority of needs overseas. Domestic support for these programs
depends in part on the benefit they provide to U.S. farmers.

Improvements have also been made recently to the targeting of food needs,
resulting in the creation of a list of priority countries for most food aid
programs. The majority of these priority countries are located in Africa.
Nevertheless, the needs within this targeted list vary greatly, and more effort
should be made to reach these unmet needs.

The biggest challenge to U.S. food aid programs in the next year will be the
high prices for food aid commodities and transport. Rising fuel prices have
increased the cost to transport food aid, while the rush to meet the demand for
corn-based ethanol has pushed up the prices of a whole range of food aid
commodities. These high costs will put even more pressure on food aid
agencies to improve the efficiency of their programs as a way to manage costs
and improve their effectiveness.

 Page 1 
Chapter 1: Introduction

T his paper provides an overview of the U.S. food aid programs that have
saved millions of lives in all parts of the world since their beginning in
1954. It discusses recent trends and provides insights as to possible
future changes. Information on trends or changes was gleaned from
discussions with agency officials, commodity groups or associations, and
congressional offices. It is hoped that this paper will add to the ongoing
discussion of how to improve these programs and ensure their ability to
alleviate the ongoing problem of food insecurity for many in the developing
world.

Historical Perspective
Although humanitarian food aid
has been a part of U.S. foreign For the first 15 years
policy initiatives throughout its
after passage of PL 480,
history, the rapid improvement
food aid accounted for
in U.S. agricultural production
up to 25% of U.S.
after World War II was a major
agricultural exports.
impetus for the development of
current food aid programs. In the
1950s, the Commodity Credit Corporation (CCC), a government-owned
corporation, held large stocks of agricultural products (primarily grain), and
U.S. farmers continued to produce huge surpluses that added to these
inventories. Utilization of these large surpluses to assist foreign countries was
seen as a “win-win” situation. It provided humanitarian assistance to countries
that were experiencing serious food shortages and at the same time it reduced
surplus CCC inventories without flooding or disrupting U.S. markets. Food
aid also provided an outlet for ongoing surpluses that were being removed
from the domestic market by government programs.

PL 480 established the basic structure of the U.S. food aid programs. The
original law included three program titles. Over the years there have been
some changes, and the current language includes three program titles, several
new titles addressing process or administrative aspects of food aid, and
another authorizing a farmer-to-farmer program. Title I continues to address
what is termed program food aid and provides U.S. commodities through
long-term, low-interest loans. Title II provides grant project food aid for
emergency and non-emergency purposes. The current Title III authorizes
government-to-government grant programs to support economic
development.

 Page 2 
The law has been changed regularly with the passage of new farm bills every 5 years, and
at present neither Title I nor Title III are funded.

It has been estimated that for the first 15 years after passage of PL 480, food aid exports
accounted for up to 25% of U.S. agricultural exports, primarily using CCC-owned
inventories. By the mid-1970s, however, CCC stocks had been significantly reduced, and
USDA began to purchase commodities needed for food aid programs from the
commercial market. Since the new millennium, almost 100% of the commodities needed
for food aid have been procured in the commercial market. In addition, food aid’s share
of the export market has significantly diminished, today representing less than 4% of
agricultural exports.

The Food for Progress (FFP) program was authorized by the Food for Progress Act of
1985 and provides for the donation or credit sale of U.S. commodities to developing and
emerging democracies to support democracy and the expansion of private enterprise.
Commodities may be provided using funds appropriated under Title I of PL 480 or
Section 416(b) (subject to availability of surplus stocks), including CCC purchases.

The most recent food aid authority is the McGovern-Dole Food for Education (FFE)
program, which was authorized as part of the 2002 Farm Bill after a successful pilot
program. This program is currently funded with annual appropriations and provides for
the donation of commodities to support school and maternal/child feeding programs in
developing countries. The authority provides commodities, transportation, and cash to
enable necessary administrative and programmatic support. Special attention is given to
the education of girls.

While currently inactive, Section 416(b) of the Agricultural Act of 1949 authorizes the
donation of commodities owned by the CCC for international food aid programs. The use
of this authority has varied greatly over the years; it was reinstated in the early 1980s
after being dormant for many years. Its size depends on CCC surplus stocks. Most
recently in the late 1990s the authority, in combination with CCC charter act authority,
was used to provide substantial commodity donations to many countries including those
of the former Soviet Union. However, with the changes in the farm bill, at present there
are very few, if any, CCC surplus commodities, and this program is expected to remain
inactive.

Although far from meeting all the needs of food deficient countries, these programs have
been significant contributors to international food assistance. According to the World
Food Programme’s 2005 Annual Report, for the period 1996 though 2005 donors
provided 95.9 million Metric Tons (MT) (grain equivalent) for emergency, project, and
program food aid. U.S. food aid programs alone provided more than 50 million MTs of
food aid or approximately 50% of the total.

 Page 3 
Overview of U.S. Food Aid Programs
For 20 years after passage of PL 480
international food aid continued to be The 1990 farm bill
primarily a USDA program with a strong designated improved
agricultural focus. Authorizations and food security in the
appropriations came through the U.S.
developing world as the
Congress agricultural committees, and the
overriding objective.
emphasis was on enhancing U.S.
agriculture and agricultural trade through
humanitarian programs that provided U.S. commodities to food deficient countries or to
people suffering from natural or man-made disasters that disrupted food supplies.
Although food aid was considered part of agriculture, USAID has always been a very
active partner, especially in the programming and actual delivery of food aid and food aid
programs to populations in need. USAID shares responsibility with USDA for the PL 480
titles, and the two organizations have worked closely in improving various aspects of
food aid.

The 1990 Farm Bill significantly changed this emphasis of food aid programs. The bill
designated improved food security in the developing world as the overriding objective.
The legislation included addressing famines and carrying out feeding programs as two of
the uses of food aid, but also included combating malnutrition, alleviating the causes of
hunger, and promoting economic and community development, greatly broadening the
mission for food aid programs. Management responsibility was also better defined, with
USDA given responsibility for Title I, FFP, and the 416(b) programs. Later the
McGovern-Dole FFE program was added to USDA’s food aid program portfolio. USAID
was given sole responsibility for Title II programming and for the Title III grant program.
USDA retained responsibility for the procurement of U.S. commodities used in all
programs, compliance with specifications, cargo inspection, and coordination of food
shipments.

Procurements of commodities are carried out by FSA through its KCCO. Awards are
made on the basis of “lowest landed cost.” This means that freight bids and commodity
bids are solicited at the same time with awards made on the basis of which combination
of freight and commodity results in the lowest overall cost to the final destination. FSA
awards the commodity contract and allocates the various commodities to ports based on
offers or bids received. Actual award or booking of freight is made by USAID or FAS on
behalf of the implementing organization. The United Nations (UN) World Food
Programme (WFP) books the freight for the donated commodities that it receives.

Table 1 provides an overview of U.S. food aid programs.

 Page 4 
 Table 1: Overview of U.S. International Food Aid Programs
Food for Bill Emerson
Food for Education Humanitarian
Program Title I Title II Title III Section 416(b) Progress (FFE) Trust (BEHT)
Governing Legislation PL 480 PL 480 PL 480 Agricultural Act of Food for Progress Farm Security & Farm Security &
1949 Act of 1985 Rural Investment Rural Investment
Act of 2002 Act of 2002
Funding Source Appropriations Appropriations Appropriations CCC (surplus CCC and Title I Appropriations CCC and PL 480
commodities) Appropriations reimbursements
Type of Program Loan Grant Grant Grant Loans or Grant Grant Commodity
(Loan/Grant) reserve
Program Constraints No appropriations Various mandates No Availability of Under CCC, Reserve limited to
for FY 2007 and – see narrative appropriations CCC-owned $15 million for 4 million MT
funds not under program since 1999 so surplus administrative
requested for trends program is agricultural costs and
FY 2008 inactive commodities; $40 million for non-
domestic feeding commodity,
programs have primarily freight
priority costs
Admin Funds Yes Yes Yes No Yes Yes No
Provided?
Program Focus Sale of U.S. Promotion of food Support long- Direct feeding and Private sector Increasing school Commodity
agricultural security, economic term economic barter development of attendance and reserve for global
products with development, and development agricultural sectors literacy rate in food emergencies
long-term loans; emergency in developing and developing
payback in local assistance emerging countries
currency or U.S. democracies
dollars
Commodity Source U.S. commercially U.S. commercially U.S. U.S. surplus U.S. commercially U.S. U.S. commodity
procured procured commercially commodities, procured commercially reserve
procured CCC inventory procured

 Page 5 
 Food for Bill Emerson
Food for Education Humanitarian
Program Title I Title II Title III Section 416(b) Progress (FFE) Trust (BEHT)
Agreement Partners Commodity sales Foreign Foreign Foreign Foreign Foreign Not applicable
to governments or governments and governments governments and governments and governments and
private entities non-emergency – PVOs PVOs PVOs
PVOs; for
emergencies, can
also make
government-to-
government
agreements
Responsible USDA USAID USAID USDA USDA USDA USDA/USAID
Government Agency
(USDA/USAID)
Monetization Yes Yes Yes Yes Yes Yes NA
Permitted?
Funding Type Discretionary Discretionary Discretionary Mandatory Title I discretionary, Discretionary CCC - mandatory
(Discretionary/ CCC mandatory
Mandatory)

 Page 6 
Chapter 2: Legislative Impacts on the Future of
U.S. Food Aid
Debating the 2007 Farm Bill
ll the international food aid programs are authorized in the Farm Bill,

A which currently expires September 30, 2007. Therefore, some action

will be necessary to maintain these authorities. While these programs
are a small part of the Farm Bill there is already extensive discussion of
possible changes, including an Administration proposal discussed below and
recommendations from PVOs and others. Among the subjects being discussed
are changes to the BEHT, expansion of cash to support feeding programs, and
greater protection of development food aid, which has been reduced in recent
years to allow greater funds for emergency food aid. In addition, and at the
request of the Senate Agriculture Committee, GAO has prepared a report
focusing on the costs of current food aid processes and improving efficiency.
In the President’s 2006 budget,
legislative language was “U.S. grown food will
proposed to transfer $300 continue to play the
million from PL 480 to a famine primary role and will be
account, administered by the first choice in
USAID, to locally purchase meeting global needs.”
non-U.S. commodities for use in Secretary Johanns
emergency food aid programs.
Farmers, agribusiness, and some PVOs that use food aid to finance
development projects opposed the proposal, and it was rejected by House and
Senate appropriators. A similar proposal in the FY 2007 budget submission
also was rejected by the appropriations committees. The Administration
included in its FY 2008 budget request authority to use up to 25% of the Title
II funds for such local and regional purchases to meet emergency needs. The
Administration’s 2007 Farm Bill proposal includes the same language. There
is some discussion of a pilot program for this authority to determine if
reactions to disasters can in fact be improved through local or regional
purchases. Such a pilot could be included in either an appropriation bill or the
Farm Bill. While the goal of maximizing the number of people who receive
food aid – often necessary to maintain life – has support from many
concerned, there is also apprehension that such authority would significantly
reduce the long-standing political support for these programs.
Concern has also been raised by various supporters of food aid that PL 480
Title II is not being used to support development as was primarily intended.
Since FY 2003, the “sub-minimum” mandate (discussed further in Chapter 4)
has been waived so emergencies could be dealt with. This has hampered
ongoing and proposed development projects that are intended to deal with the
causes of food shortages and other humanitarian issues.

 Page 7 
With the possibility that emergency needs stemming from conflict and natural events will
increase, this concern is growing. The current and likely future U.S. Government budget
constraints can be expected to add to this debate on how to balance the use of food aid
resources to immediately save lives or to support longer term livelihoods for poor people.

Defining the Bill Emerson Humanitarian Trust

Some groups have proposed that the BEHT be looked at as the vehicle for providing
emergency food assistance. The BEHT is a U.S. grain reserve held by CCC and is
intended for humanitarian use in the event of unanticipated global food emergencies or
when U.S. markets for food aid commodities are tight. The Secretary of Agriculture
administers the reserve and is authorized to hold up to 4 million MT of agricultural
commodities. In case of an international emergency, USAID must submit a release
request to the Secretary of Agriculture. The legislation governing BEHT is not totally
clear on the conditions that must be met for a release. Questions have arisen as to whether
or not available Title II funds have to be used first and whether or not this should include
funds needed to cover the sub-minimum for development projects. CCC officials indicate
that the current BEHT inventory is less than 1 million MT, although reimbursements or
repayments from PL 480 or other sources have created a cash reserve of approximately
$107 million. Authority for the BEHT is up for renewal, and it is expected that Farm Bill
discussions will address the purposes of the trust, conditions for release, and
administration of the trust including the replenishment and reimbursement process and
the definition of an emergency. The position of the Administration, according to
testimony by FAS Administrator Yost before the U.S. Senate Committee on Agriculture
on March 21, 2007, is that cash rather than a commodity reserve provides the ability to
respond quickly to emergency situations and avoids the costs associated with storing
commodities. This position fails to address whether an actual commodity reserve would
be available for release if U.S. markets for food aid commodities were tight.

It is also expected that the various mandates for Title II procurements will be discussed
during 2007 Farm Bill deliberations. In addition, some in Congress are supporting an
increase in the McGovern-Dole FFE program and some in the PVO community are
seeking an increase in the FFP program.

Regulating the Sale of Food Aid Commodities

All the active non-emergency food aid authorities (Title II, FFP, and FFE programs)
allow for monetization (sale) of some portion of the donated commodity in the recipient
country. Generated funds are used to cover the implementing organization’s
administrative costs and/or to fund certain aspects of their development projects. Most
PVOs, agricultural trade organizations, the Administration, and congressional committees
support monetization as a needed tool for food aid programs.

Monetization of donated commodities differs significantly from regular export sales.

Countries receiving food aid often have developing or non-competitive markets,
infrastructure is limited, and there may be significant delays between the sale and export
of the donated commodity, making it difficult to negotiate a sales price that is equivalent
 Page 8 
to the world commercial price. And while the Bellmon Amendment of 1985 requires
PVOs to ensure that local markets or commercial imports are not negatively affected by
the introduction of food aid commodities, these things do occasionally occur. Some
inexperienced PVOs have exacerbated this problem by not doing enough to ensure that
they receive competitive prices for their commodity.

Looking ahead, U.S. food aid programs involving monetized commodities will
undoubtedly be more closely scrutinized by USDA and USAID officials and those
involved with monitoring international trade agreements. Implementing organizations
will need to clearly demonstrate that their commodity sales are carried out in a way that
does not disrupt local markets and do not represent unfair competition to commercial
imports. PVOs can alleviate many of these concerns by subcontracting this task to a well-
respected and reputable monetization agent specialized in these large and risky
transactions.

 Page 9 
Chapter 3: Organizational Restructuring and
Management Improvement
Recent Findings from GAO and USDA’s OIG
he GAO was directed by the Senate Committee on Agriculture,

T Nutrition, and Forestry to complete an analysis of U.S. food aid

programs with emphasis on logistical planning, contracting,
transportation, and program monitoring. The final report was issued in April
2007 as GAO-07-560. The report cites concerns regarding the food aid
funding and planning process that leads to peaks in demand, transportation
costs, legal restraints, delivery delays, inadequate coordination between
stakeholders in tracking food deliveries, and inability of USDA and USAID
to adequately monitor performance by PVOs. It is expected that the final
report will be considered in the 2007 Farm Bill discussions.

The USDA OIG issued an audit

report a year earlier in March
2006 titled Foreign Agricultural “Various challenges
Service Private Voluntary impede the efficiency
Organization Grant Fund and effectiveness of
Accountability. In developing U.S. food aid.”
the report, OIG reviewed the GAO
FAS controls for monitoring
grant implementation for eight PVOs. Although OIG determined that six of
the eight PVOs had generally complied with their agreements, it found some
weaknesses in FAS’ monitoring of PVOs’ compliance with their program
agreements. OIG stated that FAS’ controls did not provide reasonable
assurance that program objectives were met or that funds were spent
appropriately. In the case of one PVO, OIG found that mismanagement of
program funds resulted in the loss of $2.2 million in food aid funding. Lack of
adequate staffing and the inadequacy of an FAS internal information
technology system were contributing factors to deficiencies identified in its
monitoring controls. FAS is taking steps to implement recommendations
contained in the report to improve FAS’ monitoring controls and the
accountability of PVOs. PVOs can expect greater oversight of their programs
in the future.

 Page 10 
USDA’s Foreign Agricultural Service
Until 2006, responsibility for food aid programs in FAS had been spread over three
divisions reporting to the Deputy Administrator, Export Credits. On November 13, 2006,
the FAS Administrator announced implementation of a reorganization plan for the
agency. Responsibility for all food aid programs was placed in the Food Assistance
Division reporting to the Deputy Administrator for Capacity Building and Development.
The newly established division has three branches: Food for Development, School
Feeding and Humanitarian Assistance, and Transportation and Logistics. It is expected
that the new structure will provide a more direct focus on FAS’ food aid programs
including better monitoring of implementing organizations’ compliance with their
agreements.

USDA’s Farm Service Agency

Within the FSA, the Deputy Administrator for Commodity Operations (DACO) has
responsibility for procurement-related activities for all food aid programs. DACO also
manages inventories of CCC-owned commodities and the BEHT. Policy issues and
coordination with the programming offices of USAID and FAS are handled by the
Commodity Procurement Policy and Analysis Division in Washington, D.C. The KCCO
in Kansas City, Missouri, serves as the operational arm for DACO and performs the
issuance of tenders for commodities and freight and awards and contract management
after award. It also assists with development of commodity specifications. Prior to FY
2000, contract activities were carried out under CCC authorities as opposed to complete
compliance with the Federal Acquisition Regulations (FAR). Given that commodity
donation activity had almost completely shifted to procurement through commercial
sources as opposed to utilization of CCC inventories, the USDA Office of General
Counsel (OGC) advised that KCCO needed to bring its activities into compliance with
the FAR as quickly as possible. In September 2005, KCCO reported that all contract
activities were being carried out in accordance with the FAR. KCCO also completed a
reorganization in FY 2006 designed to better use staff skill sets and expertise.
Procurements for international food assistance had been split between the Bulk
Commodity Division that purchased bulk commodities and the Export Operations
Division that purchased processed and bagged commodities and transportation services.
Under the reorganization, all procurement activities for international feeding programs
were moved to the International Procurement Division.

USAID’s Food for Peace Office

In 1995, USAID began to refocus Title II food aid. In a major new policy statement,
Food Aid and Food Security, new geographic and programmatic priorities were
identified. Major changes in Food for Peace programs included giving more priority to
countries where food insecurity was the greatest; improving household nutrition,
especially for children and mothers; and alleviating the causes of hunger by increasing
agricultural production. In addition, greater emphasis was placed on monitoring and
evaluating the impact of food aid programs, including working with PVOs to improve

 Page 11 
their capacity and increase their ability to assess problems and manage programs in the
field. A 2002 assessment of Food for Peace indicated that there had been significant
success in the areas outlined in the policy statement.

In May 2005, the Food for Peace Office issued its strategic plan for 2005 – 2010.
Continuing the basic policies outlined in the 1995 document, it recognized that the
organization had limited resources and endorsed a plan to become more strategic, focus
more of its staff time and attention on a smaller set of strategic countries, and implement
country-specific strategies for enhancing the impact of programs on reducing food
insecurity. As the first step in implementing the new strategy, 15 countries were
identified as the most food insecure countries based on the weighted average of
percentage of children stunted, percentage of population living under $1 per day, and
percentage of population undernourished (see Title II under Chapter 4). The list will be
reviewed periodically to address changing circumstances; in fact, three countries are
expected to be added to the list for FY 2008. The targeting does not affect emergency-
type feeding programs, and implementing organizations are free to submit development-
oriented proposals in non-priority countries.

Food for Peace, recognizing that it normally takes several years to implement and
develop projects so that they can be sustainable with local resources, has generally
provided multi-year agreements in Title II development-type projects. It has also
recognized that different PVOs may bring different skills and capabilities to a specific
project and country and has considered and approved consortium proposals where they
were the most effective way to improve food security.

Improvements to Information Technology Systems

The Processed Commodity Inventory and
Management System (PCIMS) is the USDA is developing an
primary IT system used in foreign and
information system to
domestic food aid procurements. Although
improve the monitoring
this mainframe system has an extensive
and evaluating of food
database and periodic upgrades have been
aid programs.
performed on it, it remains outdated
technology and has deficiencies that make it
difficult to properly track shipments and maintain overall funds control. A contract was
recently awarded for the development of a web-based supply chain management system,
which will replace PCIMS. It will be several years before the system will be
implemented, yet even when implemented it will not by itself provide a consolidated
system that offers adequate executive information and reporting on all aspects of food aid
carried out by USAID and USDA.

As an interim measure, automated procurement tools have been developed and are in use
by KCCO. The Food Aid Request Entry System (FARES) has been in place for several
years and allows implementing organizations to order, or “call forward” their
commodities via the web so the information can be consolidated for future invitations. A

 Page 12 
web-based Electronic Bid Entry System (EBES) was recently implemented that enables
commodity vendors to provide offers via the web in response to invitations that are also
provided via the web. The Freight Bid Entry System (FBES) was also recently
implemented and allows ocean carriers to provide firm fixed bids for the transportation of
commodities. Once the commodity and freight offers are received, a computer program is
used to identify the combination that provides the “lowest landed cost.” Awards are
normally made within 24 hours of the opening of the electronic offers. The introduction
of these new systems is expected to result in millions of dollars in savings to the
government.

In 2004, an interagency study involving FAS, USAID, FSA, and others was authorized
by OMB to identify requirements for a U.S. Government-wide food aid reporting system.
A more complete consolidated database such as this would greatly facilitate reviews of
the effectiveness and impact of the various food aid programs.

Strengthening of Coordinating or Consultative Activities

Food Assistance Policy Council

The Food Assistance Policy Council is chaired by the Secretary of Agriculture or his
designee (normally the Under Secretary for Farm and Foreign Agricultural Services) and
includes senior representatives from USDA, USAID, Department of State, and OMB.
The council serves as a coordinating body to deal with cross-cutting food aid issues.
Issues currently being reviewed by the council are food aid quality, the 2007 Farm Bill,
and challenges facing food aid policy in the WTO discussions.

Food Aid Consultative Group

The Food Aid Consultative Group was established to review and address issues
concerning the effectiveness of USAID regulations and procedures governing food
assistance programs. The group is chaired by the USAID Administrator and includes the
Under Secretary for Farm and Foreign Agricultural Services; the USAID Inspector
General; a representative of each PVO and cooperative participating in food aid
programs; representatives from African, Asian, and Latin American indigenous NGOs
determined appropriate by the USAID Administrator; and representatives from
agricultural producer groups in the United States. The group provides input on changes in
Title 7, Chapter 41, and Subchapter III, which govern USAID food aid programs.

 Page 13 
International Food Aid Conference
In 1999, USDA and USAID held the first formal International Food Aid Conference in
Kansas City, Missouri. The conference brings together individuals and organizations that
have an interest in food assistance programs. Participants include representatives from
foreign countries, PVOs, commodity and transportation vendors and associations, U.S.
Government officials including U.S. politicians, university scientists, and policy and
operations staff from USAID and USDA. The conference has been held annually since
1999 in April or May in Kansas City, Missouri. It has grown from less than 300
participants in 1999 to more than 700 in 2007. The conference provides updates on policy
issues in food assistance and workshops on various operational aspects involved in food
aid programs. It represents an effort by USAID and USDA to provide transparency to
their programs and provides these agencies with an opportunity to gain valuable feedback
from various stakeholders involved in food aid.

 Page 14 
Chapter 4: The Outlook for U.S. Food Aid
Programming in FY 2008
Section 416(b)

T
he Section 416(b) program was authorized by the Agricultural Act of
1949 and provides for overseas donations of surplus commodities
acquired by CCC. Availability of commodities under the 416(b)
program depends on CCC inventories and acquisitions, so programming
varies from year to year. Foreign governments and PVOs may participate in
this program. Commodities donated may be sold in the recipient country and
used to support agricultural, economic, or infrastructure development
programs.

Changes in farm support programs contained in the 1996 and 2002 Farm Bills
almost guarantee that CCC will not build up large inventories of agricultural
commodities. Farmers can still take out what are termed Marketing Loans on
their commodities after harvest, and if at the end of the loan period the market
price is below their loan rate they can, without recourse, allow the
government to take possession of the commodity. However, the Farm Bills
established a Loan Deficiency Payment program to avoid the build-up of
inventories. Under this program, the farmer is provided with a cash payment
based on the difference in current market price and the established loan rate if
he or she markets his or her own crop in lieu of conveying it to CCC. This has
avoided the build-up of large inventories of commodities.

The one exception is the dairy support program, which maintains a floor for
butter, cheese, and non-fat dry milk (NDM) by providing a standard offer to
buy these products at the support price. When dairy prices are depressed, the
government may acquire huge inventories of NDM. This happened in the late
1990s and early 2000s. With the exception of a small amount of wheat in
FY 2003, NDM accounted for all commodities made available under 416(b)
in FY 2003 through FY 2006.

Latin America was the largest recipient over the 4-year period, receiving in
excess of 57,000 MT of dry milk. Given current and expected milk prices and
absent some change in the 2007 Farm Bill, it is anticipated that no significant
quantities of commodity will be available under this authority.

Figure 1 illustrates the size of the Section 416(b) program for FY 2003
through FY 2006.

 Page 15 
 Figure 1: Size of 416(b) over Time (MT)
80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0
2003 2004 2005 2006

Title I
Title I provides for the sale of U.S. agriculture commodities on concessional credit terms
to governments and private entities in developing countries. Repayment for U.S.
agricultural commodities sold under this title can be made in either U.S. dollars or in
local currencies with terms of up to 30 years and a grace period of up to 5 years.
Emphasis had been on facilitating sales to developing countries that had the potential to
become commercial markets, were undertaking measures to improve their food security
and agriculture development, and demonstrated the greatest need for food. The FFP
program can also use Title I funds.

Demand for this program has declined in

recent years as global interest rates have
declined and as most countries have moved A funding request for
from government commodity procurement Title I was not included
and private markets have developed. A in either the 2007 or
funding request for Title I was not included 2008 budgets.
in the 2007 budget and no funds have been
requested in the 2008 budget. Because Title
I funds have been a major source of funding for the FFP program, it will be limited to
what can be provided under CCC authority. The current constraint under that authority is
a ceiling of $40 million that can be spent on transportation expenses; this dollar ceiling
overrides the tonnage floor of 400,000 tons, which is also in the law. (See Food for
Progress narrative for additional information.)

 Page 16 
Title II
Title II, which is by far the largest U.S. international food aid program – recently funded
at well over a billion dollars a year – provides for the donation of U.S. agricultural
commodities to meet emergency and non-emergency food needs including support for
food security goals. Donations of agricultural commodities to meet emergency needs may
be provided to governments and PVOs and inter-governmental organizations such as the
UN World Food Programme. Non-emergency assistance may be provided only through
PVOs.

Development food aid can be used to directly supplement the diet of young children and
pregnant and lactating mothers and in food-for-work programs that mobilize poor
people’s labor to build local commercial and agriculture infrastructure. Donated
commodities can also be monetized in recipient countries to support basic health projects,
nutrition education, agricultural extension and training, and local capacity building.

Emergency food aid uses donated U.S.

commodities to assist vulnerable groups In the last 5 years, the
who, because of natural or man-made amount of food aid
disasters and/or prolonged civil strife, going to meet
require food assistance to survive the emergencies around the
emergency and begin the process of world has doubled.
recovery. Categories of beneficiaries
include internally displaced persons,
refugees, newly resettled or new returnees, and vulnerable resident populations.

The USAID Food for Peace Office is responsible for programming Title II food aid.
Fifteen countries were identified in 2005 as the most food insecure countries based on the
weighted average of percentage of children stunted, percentage of population living under
$1 per day, and percentage of population undernourished. Afghanistan, The Democratic
Republic of Congo, and Guinea are expected to be added for FY 2008.

For FY 2008, 18 priority countries have been identified:

 Afghanistan  Guatemala  Mauritania

 Bangladesh  Guinea  Mozambique
 Burkina Faso  Haiti  Niger
 Chad  Liberia  Sierra Leone
 Democratic  Madagascar  Uganda
Republic of Congo  Malawi  Zambia
 Ethiopia

 Page 17 
Proposals for non-emergency food aid programs were previously due 120 days prior to
the beginning of the fiscal year and USAID was “encouraged” to approve projects prior
to the beginning of the fiscal year. USAID will initiate a new calendar schedule
beginning this year for FY 2008 non-emergency proposals. In the past, agreements were
awarded subject to funds availability, which was not usually known until the end of the
fiscal year. This year, USAID would like to award programs based on known available
funding, so the deadline for submissions has been pushed back to the beginning of the
following fiscal year. This year, USAID advises that guidelines for FY 2008 Title II non-
emergency proposals will be published in May or June 2007, and it is expected that
proposals will be due in October or November 2007. USAID is still encouraged to
approve projects within 120 days.

Under the mandates contained in the governing legislation, Title II is to provide

2.5 million MT for emergency and non-emergency food aid. There is also a mandate that
1.8 million MT be used for non-emergency food aid. This is termed the sub-minimum.
Due to emergencies, this requirement has been waived in recent years. In addition, 75%
of the sub-minimum is to be “value added,” which means it must be bagged, fortified, or
processed. In addition, 15% of the sub-minimum is to be monetized, although it is
estimated that 60% to 70% of the sub-minimum, or non-emergency food aid is monetized
in order to carry out programs in recipient countries.

Title II has consistently accounted for more than 70% of the total commodities (MT)
procured in each of the last 4 years. Bulk grain represents the largest share of total
commodities procured under the program, although processed commodities consistently
accounted for approximately 30% of the commodities procured.

Over the last 4 years, more than 60% of the total commodities procured for the Title II
program were shipped to Africa.

In an effort to be able to respond to emergencies in a more timely manner, USAID

implemented a pre-position concept several years ago whereby commodities are
warehoused near a port facility. Using this concept, USAID has found that it saves
several weeks and in some cases months in responding to emergency situations. Pre-
position sites have been maintained at Lake Charles, Louisiana, and at Dubai, UAE. The
program has been very beneficial and is expected to continue; however, the U.S. pre-
position site will shift from Lake Charles, Louisiana, to Houston, Texas, and the off-U.S.-
shore site will be moved from Dubai to Djibouti.

Figure 2 illustrates the size of the Title II program for FY 2003 through FY 2006.

 Page 18 
 Figure 2: Size of Title II over Time (’000 MT)
4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0
FY03 FY04 FY05 FY06

Title III
Title III authorized the USAID Administrator to donate U.S. agricultural commodities to
foreign governments. Proceeds from the sale of these commodities within the recipient
country could be used to support long-term economic development. While it was
modestly funded in the past, the program has been inactive for a number of years. It is not
expected to become active and may be a candidate for deletion in the 2007 Farm Bill.

Food for Progress

The FFP program was authorized by the
Food for Progress Act of 1985 and provides Without Title I funds to
for the donation or credit sale of U.S. supplement it in the future,
the Food for Progress
commodities to developing and emerging
program will be limited to
democracies to support democracy and the
what can be provided
expansion of private enterprise. The under existing CCC
program may be carried out using Title I authority.
appropriated funds or through mandatory
CCC authorities. Under its authorities, CCC may procure commodities for the program
with the limitation that CCC expenditures for non-commodity expenses (normally freight
charges) in connection with the procurements may not exceed $40 million and not more
than $15 million may be used for administrative costs. Because the cash authorized by
this legislation is limited to administrative costs, FFP programs often include
monetization. The funds derived from monetization can be used to provide necessary
programmatic support to the feeding activities, or in cases of 100% monetization the
funds may be used for economic development activities primarily in the agricultural or
rural sectors. No Title I funds were appropriated in FY 2007 and none have been
requested for FY 2008; therefore, given the limit on administrative funds and the
 Page 19 
 prohibition on using this pool of funds for program activities, implementing organizations
will need to look to monetization to provide the cash needed to carry out program
activities. The estimated spending level for FY 2007 is $161 million, and for FY 2008 it
is $163 million. In recent years FAS has made an initial announcement of awards, and as
the proposals are finalized and firm costs determined it has been able to make additional
awards later in the fiscal year.
Multi-year agreements up to a maximum of 3 years may be authorized. However,
implementation of successive years is subject to a favorable review of the program’s
progress and the availability of funding. FAS will also consider proposals involving the
shipment and monetization of commodities in one year with activities carried out in
multiple years.
FFP projects focus on private sector development of agricultural sectors such as
improved agricultural techniques and marketing systems, farmer education, expanded use
of processing capacity, development and introduction of new foods, and/or development
of agriculturally related business.
Priority countries for FY 2008 were designated based on the following factors: (1)
countries with per capita income below $3,465 based on World Bank statistics; (2)
countries with a greater than 20% prevalence of undernourishment based on FAO
statistics; and (3) countries with positive movement toward freedom, including political
rights and civil liberties.1
For FY 2008, 31 priority countries have been identified. Changes from the 2007 priority
list include the removal of the Democratic Republic of Congo and the Philippines and the
addition of the Dominican Republic, Guatemala, Namibia, Haiti, and Papua New Guinea.
FY 2008 priority countries are as follows:
 Afghanistan  Guatemala  Namibia
 Armenia  Guinea-Bissau  Nicaragua
 Bangladesh  Haiti  Niger
 Bolivia  Honduras  Papua New
 Burundi  Kenya Guinea
 Central African  Liberia  Senegal
Republic  Madagascar  Sierra Leone
 Djibouti  Malawi  Sri Lanka
 Dominican  Mali  Tanzania
Republic  Mongolia  Yemen
 Ethiopia  Mozambique  Zambia
 The Gambia

1
Derived from the Freedom House rankings

 Page 20 
 Proposals for FY 2008 are due no later than June 29, 2007, and FAS plans to make
awards by December 2007 or January 2008. Proposals are evaluated on the basis of
agricultural focus (25%), ability to quantify program impact (15%), proposal quality
(30%), commodity management and appropriateness (10%), and organizational capability
and experience (20%). Estimated impact is considered in the final selection of
competitive proposals.

For FY 2007, 14 proposals (2 using Title I funds) have been approved. It is estimated that
these proposals will procure commodities totaling only 160,920 MT, the lowest figure in
the last 5 years. During FY 2006 more than 620,000 MT of commodities were procured
for FFP programs in 28 countries. Similar amounts were provided in FY 2003 and
FY 2004. Procurements were also low in FY 2005 when 271,000 MT were procured and
shipped to 16 countries. Bulk grains represented more than 50% of the procurements
made for FFP in FY 2005 and FY 2006 with oilseeds representing approximately 30% of
the procurements for the same periods.

Figure 3 illustrates the size of the FFP program for FY 2003 through FY 2007.2

Figure 3: Size of FFP over Time (’000 MT)

700

600

500

400

300

200

100

0
FY03 FY04 FY05 FY06 FY07

2
Figures for FY 2007 are planned.

 Page 21 
 Food for Education
The McGovern-Dole FFE program was authorized by the 2002 Farm Bill following a
successful pilot program. The FFE program helps support education, child development,
and food security for some of the world’s poorest children. Emphasis is on improving
school attendance and increasing the literacy rate, especially for females. PVOs and
foreign governments may participate in this program. Direct cash grants can be
provided3; however, proposals must also include donated commodities because the
intention of the authorizing legislation is to provide nutritional food in food insecure
countries along with improved education. Donated U.S. commodities may occasionally
be monetized in the recipient country to generate proceeds to support school feeding and
nutrition projects. Multi-year and consortium agreements may be authorized.

Priority countries for FY 2008 have been established based on the following criteria: (1)
per capita income below $3,465 based on World Bank statistics, (2) greater than 20%
prevalence of undernourishment based on FAO statistics, and (3) adult literacy rates
below 75%. Priority countries must also be a net food importing country, demonstrate
government support for education, and be free of civil conflict that could impede
implementation of the program.

For FY 2008, 29 priority countries have been identified. Changes from the FY 2007
priority list include the removal of Laos, Guinea-Bissau, and the Sudan and the addition
of Guatemala, Haiti, and Papua New Guinea:

 Afghanistan  Guatemala  Pakistan

 Angola  Guinea  Papua New Guinea
 Bangladesh  Haiti  Rwanda
 Burundi  Kenya  Senegal
 Cambodia  Liberia  Sierra Leone
 Cameroon  Madagascar  Tanzania
 Central African  Malawi  Togo
Republic  Mali  Yemen
 Chad  Mozambique  Zambia
 Democratic Republic  Niger
of Congo
 Ethiopia

FY 2008 proposals are due no later than July 31, 2007, and FAS plans to approve
proposals in December 2007 or January 2008. Evaluation of proposals is based on the
following: (1) need for the program (12%); (2) graduation/sustainability (15%); (3)
proposal quality, which includes implementation, costs, and situational analysis (38%);

3
FFE cash grants can be used for many activities beyond just project administration and some have suggested to Congress
that the FFE model should be looked at for Title II.

 Page 22 
(4) appropriateness of the commodities to be used and the overall monetization plan
(15%); and (5) experience and organizational capacity factors (20%).
Eleven proposals were approved for FY 2007, and it is estimated that commodities
totaling more than 88,000 metric tons will be procured. This included funding for five
multi-year projects that had been approved in previous fiscal years. During FY 2006
more than 130,000 MT were procured and shipped to 16 countries in support of this
program. This was down from the 181,000 MT procured in FY 2004. In the first year of
the program (FY 2004), bulk grains represented 35% of the commodities procured;
however, in FY 2006 procurements shifted to processed commodities (33%) and oilseeds
(35%) with bulk grains accounting for only 20% of the total procured under the program.
The shift to processed commodities was likely a result of implementing organizations
using cash grants with less reliance on monetization of bulk grains to generate needed
program funds.
Authorized funding for the program has been approximately $100 million annually for
FY 2003 through FY 2007, and the President’s FY 2008 budget request includes
$105 million for this program. FY 2008 funds totaling $41 million have already been
committed to multi-year projects approved in previous fiscal years, leaving $64 million
for new projects. Reviews of the program have been very positive and all indications are
that it will continue at least at the same level as in previous years. The 2007 Farm Bill
discussions are not expected to propose any significant changes in the program, although
some in Congress are proposing to increase it and to fund it through the CCC.

Figure 4 illustrates the size of the FFE program for FY 2004 through FY 2006.

Figure 4: Size of FFE over Time (’000 MT)

200

180

160
100

140

120

100

80

60

40

20

0
FY04 FY05 FY06

 Page 23 
Program Summary Overview
The variety of food aid authorities provides the necessary flexibility for dealing with
changing world events. As trends change, so too does the mix of food aid programs on
offer. Figures 5 and 6 illustrate the change in relative size among food aid programs
between FY 2003 and FY 2006. In FY 2003, 416(b) was a relatively small but significant
food aid tool, but due to economic subsidy changes in the United States, by FY 2006 its
share had been reduced to nothing. The two figures also illustrate the enduring
importance of Title II.

Figure 5: Relative Sizes of Programs in FY 2003

2%

20%

78%

416(b) FFP Title II

Figure 6: Relative Sizes of Programs in FY 2006

0%
5%

23%

72%

416(b) FFE FFP Title II

 Page 24 
Chapter 5: Country and Regional Implications

I n looking at country trends and attempting to identify reasons for these

trends it is necessary to look at what has happened in the food aid arena
for the past 7 to 10 years. Africa has always been a heavy recipient of
food aid, especially under the Title II program. According to USDA and
USAID officials, however, prior to FY 2000 India was also a large recipient,
receiving more than 30% of the total Title II funds. One PVO carried out a
child development program in concert with the Indian government for most of
the 1990s. It is estimated that at
its high point, the program was
operating at more than 20,000 Africa has received
locations throughout India. more than 50% of all
There were also large direct food aid procured over
feeding and food distribution the last 4 years.
programs operating in the
country. These programs were
heavy users of corn-soy blend and packaged vegetable oil. In 2001 an agency
of the Indian government raised concerns about the fact that vegetable oil was
manufactured from GMO soybeans. Some shipments were stopped at the port
of entry and other shipments had to be rerouted. Although U.S. agencies
provided significant evidence that the vegetable oil did not represent a health
hazard, it became obvious that the Indian governmental agency was not
willing to accept this conclusion. At about the same time, India donated
significant amounts of wheat in response to a food crisis in the region,
demonstrating that although there were populations within India that needed
food assistance, the country as a whole had become a net exporter of food and
should be able to find the resources to assist its own population. Therefore,
some Title II resources that had been programmed for India were shifted to
other parts of the world including Iraq and Afghanistan in 2002 and 2003.
Commodity donations were also used to deal with severe food crises in North
Korea and in Africa through donations to the WFP.

When the Soviet Union collapsed the FFP program was used to assist
countries that had once been a part of it. With the fall of communism, the
infrastructure broke down in many of these countries and stipends for retired
workers were either reduced or ended. In response to the crisis, increased
funds were provided for Title I and the FFP programs, and USDA took the
leadership role for U.S. food aid to this region. In addition, surplus
commodities were provided through the 416(b) program.

 Page 25 
In 1999, USDA reports indicate that more than $800 million in food assistance was
provided to the “Newly Independent States” through Title I (more than $400 million),
Food for Progress (more than $200 million), and 416(b) (more than $270 million). This
dwarfed the $240 million (primarily Title II) provided to Africa in the same year. As
these Newly Independent States were able to rebuild their infrastructures and stabilize
food production, funding for Title I and FFP was reduced rather than shifted to other
regions.

More recently, in response to emergencies and the overwhelming need, Africa has
received more than 50% of all food aid procured over the last 4 years. Under the Title II
program, African countries received 1.4 million MT in FY 2003, 1.8 million MT in
FY 2004, 2.7 million MT in FY 2005, and 1.5 million MT in FY 2006. Latin America
and Asia have also received significant Title II procurements, with more than 200,000
MT procured and shipped to Latin America and nearly 300,000 MT to Asia in FY 2006
alone (see Figure 7). With priority countries established for the FFE, FFP, and Food for
Peace programs, absent some dramatic change in the factors or emergencies in other
regions we expect that Africa will continue to receive the highest percentage of food aid,
with Asia and Latin America together accounting for much of the remainder.

Flows of food aid under the FFE and FFP programs have varied slightly from year to
year, at least partially due to the large number of priority countries in relation to funds
available and the variety of projects that can be approved. Although the intent of
prioritization is to target areas of greatest need, awards are necessarily made based on
proposals received even though the needs may be greater in another country for which no
proposal was received. Figure 8 illustrates that the top 10 recipient locations made up
more than 50% of all shipments worldwide during FY 2003 through FY 2006.

Figure 7: Share of Food Aid by Region, FY 2003 to FY 2006

0% 10% 20% 30% 40% 50% 60% 70% 80%

Africa

Asia

Europe

Latin America
2003
Middle East 2004
2005
Pre-position 2006

 Page 26 
 Figure 8: Largest Recipients of Food Aid, FY 2003 to FY 2006
0% 5% 10% 15% 20%

Ethiopia
Sudan
Southern Africa Region
Eritrea
Kenya
Uganda
Afghanistan
Pre-Positioned
Bangladesh
0% Haiti

Recent analysis conducted by IAS revealed that large regional volumes of food aid can
mask inequalities within those regions. The study revealed that more than a dozen
priority countries have in fact been significantly underserved by U.S. food aid during the
last few years, including many places in Africa, when shipments are compared to the size
of the population in dire need. Efforts should be made by PVOs and the U.S. Government
in the coming years to specifically target these neglected countries.

 Page 27 
Chapter 6: Changes to the Food Aid Commodity
Menu
Bulk Grains

A
lthough bulk grains represent a smaller proportion of food aid than
they did in earlier years when the emphasis of food aid programs
tended toward aiding American agriculture, they still far exceed other
commodities. Bulk grains accounted for more than 40% of total food aid
procured in FY 2003, more than 50% in FY 2004, more than 60% in
FY 2005, and more than 50% in FY 2006. Wheat has been the commodity of
choice for food aid programs; U.S. wheat is widely accepted and can be used
effectively for monetization and in food-for-work programs in most if not all
recipient countries. However, sorghum deliveries have increased dramatically
since 2003 as a percentage of all bulk shipments, with eastern Africa being
the primary destination. Figure 9 shows the percentage of total bulk grains by
type for FY 2003 through FY 2006.

Figure 9: Percentage of Total Bulk Grains by Type, FY 2003 to FY 2006

0% 20% 40% 60% 80% 100%

Corn

Wheat

FY 2003
Bulk Rice
FY 2004
FY 2005
Sorghum
FY 2006

Oilseeds
Vegetable oil, bulk and packaged, has represented approximately 6% of the
commodities procured in each of the past 4 years. Fortified soybean or
vegetable oil has become a staple in emergency and non-emergency feeding
programs. It also represents a high-value commodity that can be effectively
used in monetization or distributed directly in food aid programs.

 Page 28 
Periodically, issues have been raised regarding the use of GMO soybeans in the
production of vegetable oil, as in the case of India discussed above; however, in most
cases USDA and USAID, with the assistance of the American Soybean Association, have
been able to deal with these concerns, and it is expected that vegetable oil will continue
as a significant component of food aid. Figure 10 illustrates the percentage of total
oilseeds by type for FY 2003 through FY 2006.

Figure 10: Percentage of Total Oilseeds by Type, FY 2003 to FY 2006

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Vegetable Oil

Soybean Meal
FY 2003

Soybeans FY 2004
FY 2005

Soy Protein FY 2006

Pulses
Pulses (beans, lentils, and peas) have also represented approximately 6% of the annual
procurement commodities for food aid over the past 4 years. Significant quantities are
procured for Latin America, but they are also used in feeding programs in Africa. Pulses
are normally bagged in the United States so they are counted as part of the “value added”
mandate for Title II. From available data, it does not appear that significant quantities are
monetized. Figure 11 illustrates the percentage of total pulses by type for FY 2003
through FY 2006.

 Page 29 
 Figure 11: Percentage of Total Pulses by Type, FY 2003 to FY 2006
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Peas

Beans
FY 2003
FY 2004
FY 2005
Lentils
FY 2006

Processed Commodities
The procurement of processed commodities has fallen by more than 40% since 2003.
This likely reflects the growing importance of emergency food aid shipments, which tend
to be shipped in bulk. Corn-soy blend, fortified cornmeal, corn-soy milk, and wheat-soy
blend are products that are manufactured primarily for the food aid market. These
products were developed in response to a need for highly nutritional products that could
be used in emergency situations and in feeding programs for vulnerable populations in
food deficient countries. Because processed products are more or less specialized
products there are a limited number of vendors, making it difficult for the industry to
respond to spikes that may occur in times of emergency.

Flour has also represented a significant portion of the commodities purchased for food
aid although the tonnage has declined dramatically from the 265,000 MT procured in
2003. In talking to industry representatives, it appears that in the past U.S. flour was a
highly viable commodity for monetization programs. However, during the past 10 years,
flour mills have been built in even the poorest developing countries. As a result,
monetizing wheat provides a more suitable alternative to flour for implementing
organizations. Figure 12 illustrates the percentage of total food aid by commodity type,
including processed, for FY 2003 through FY 2006.

 Page 30 
 Figure 12: Percentage of Total Food Aid by Commodity Type, FY 2003 to FY 2006
0 500,000 1,000,000 1,500,000 2,000,000 2,500,000

Bulk Grains

Oilseeds

FY 2003
Pulses FY 2004
FY 2005
Processed FY 2006

Ethanol and Its Effect on Food Aid Prices

Significant amounts of corn and corn products are used in food aid programs. Bulk corn
represented 9% of the bulk grains used for food aid in 2006, and Corn-soy blend and corn
meal products represented more than 37% of the total processed commodities procured in
FY 2003 through FY 2006. Corn ethanol
production has dramatically increased
over the past few years driven by the rise Ethanol-fueled expectations
in fuel prices. Corn futures have been up, of higher corn prices
reflecting the increased demand for corn. contributed to record
However, American farmers have reacted corn plantings in the
in their traditional manner and have United States last year.
increased plantings to more than 90
million acres while the predictions had
been that plantings would be 88.5 million acres. It is difficult to predict what the long-
term effect will be on food aid programs. Some have predicted that there will be a shift to
corn production from soy beans, cotton, and pulses and in some areas from rice and
wheat. Others have indicated that the demand for corn for ethanol may be a temporary
situation as other, less expensive products are used to produce ethanol. In the short term,
however, increased prices for corn will have a direct effect on corn and corn products
used in food aid programs and could have an indirect effect on the prices of other
commodities.

Although there has been increased emphasis on nutrition in feeding programs,

implementing organizations should attempt to obtain a commodity mix that will meet the
recipients’ needs but which will also be as economical as possible. This generally means
a heavy emphasis on whole grain products with complements of vegetable oil and pulses

 Page 31 
to provide a more balanced diet. In every case, where monetization is planned PVOs must
look at market opportunities for commodities as well as the expected return.

The United States continues to be the largest provider of food aid in the world, currently
providing more than one-half of all global food assistance. Although there have been
significant changes in the emphasis of the food aid programs, commodities used, and
regions served, donation of U.S. commodities has remained a mainstay of the programs.
This has maintained broad political support from a variety of interest groups. Commodity
groups generally support the programs because they provide a market for their members’
products. Rural politicians support the programs in part because they are looked on as
supporting their farmer constituents. More liberal politicians tend to support the programs
because of the humanitarian aspects, while faith-based organizations and other non-
profits may support the programs because they enable them to serve the neediest of the
poor. Efforts should continue to be directed at maintaining this broad support as changes
in the program are advocated or considered.

The programs also face many challenges. It is undoubtedly due to the dedication of the
limited agency staff involved and of the implementing organizations that these programs
have run as efficiently and effectively as they have. However, given the GAO and OIG
audits it is obvious that the U.S. agencies involved must improve their internal processes
including their information technology systems in order to avoid further criticism from
these oversight organizations.

 Page 32 
Appendix A—About IAS
Helping You Manage the Business of Food Aid
IAS provides a number of solutions to PVOs that can add value to their mission and
impact the lives of those who depend on them. We specialize in performing critical
strategic and logistical tasks so that PVOs can stay focused on their work.

Customized Research and Analysis

We leverage the experience of our network of food aid professionals to provide insight
into the business of food aid: where PVOs should focus their limited resources, which
proposals should receive the most consideration, and which commodities would be most
appropriate. Food aid donors often change priorities and administrative requirements
from year to year, so to stay ahead of the trends PVOs need a global perspective. Our
consultants have spent their careers in food aid and put their knowledge to work for our
clients.

Proposal Development
Our annual food aid report is a key resource for our clients, and our comprehensive food
aid database enables IAS to undertake customized reporting and strategic analysis of
specific countries and programs. We provide research and content for proposal
development efforts, and our knowledgeable experts will critically review proposals to
assist our clients in meeting donors’ highest evaluation standards.

Monetization
Over the last decade monetization has become a key source of funding for PVOs, and
donors pay close attention to sales plans during the proposal evaluation phase. IAS is a
trusted monetization agent that specializes in generating the maximum amount of
program funds from a grant of food aid commodities. Our clients regularly receive a
premium for their commodities. We can do this consistently because of our global
network of contacts with commodity processors, buyers, and officials.

Logistics
Our network of contacts allows us to quickly react to issues such as phytosanitary barriers
that can delay shipment and ultimately your program. IAS coordinates with forwarders
on behalf of our clients to ensure that freight tenders are in order. Where sales have been
negotiated, we monitor the delivery of export documents to the bank to guarantee full
payment on the letter of credit.

 Page 33 
Program Management
Our professionals can be engaged to perform essential program administrative tasks such
as project backstopping and reporting to donors. We believe strongly in making certain
that key decision-makers are aware of our clients’ successes. IAS resources may be
engaged as necessary, allowing PVOs to focus on their core competencies and minimize
overhead expenses.

Monitoring and Evaluation

Monitoring is an ongoing requirement of every project, and our professionals have
managed some of the largest food aid monitoring efforts. But monitoring is only the first
step in a full evaluation of the impact and effectiveness of food aid. As food aid donors
focus more attention on this area in the future, the most successful PVOs will be those
that can demonstrate results. IAS works with our clients to develop appropriate
performance indicators from the start and ensures that they meet their targets.

Finally, our goal is to ensure that our clients are compliant with all appropriate donor
regulations, because this is the single most important criterion for winning follow-on
work. We do this by professionally and transparently managing all aspects of the
monetization of commodities.

 Page 34 
Appendix B—List of Reference Sources
“U.S. Food Aid Programmes, 1954 – 2004: A Background Paper for the OECD DAC
Working Party on Aid Effectiveness.” Riley, Barry (2004)

Testimony by FAS Administrator Yost to the U.S. Senate Committee on Agriculture,

March 21, 2007

Transcript of Remarks by Secretary of Agriculture Mike Johanns to the International

Food Aid Conference, Kansas City, Missouri, April 18, 2007

Foreign Assistance, U.S. Agencies Face Challenges to Improving the Efficiency and
Effectiveness of Food Aid, Testimony regarding draft GAO report by Thomas Melito,
Director, GAO, International Affairs and Trade, March 21, 2007

Congressional Research Service, Previewing a 2007 Farm Bill, CRS Report for Congress,
January 3, 2007, Joe Richardson, Domestic Social Policy Division, CRS

USDA 2007 Farm Bill Proposals

Foreign Agricultural Service, Private Volunteer Organization Grant Fund Accountability,

Report No. 07016-1At, March 2006, USDA, Office of Inspector General, Southeast
Region

Office of Food for Peace, Bureau for Democracy, Conflict, and Humanitarian Assistance,
Strategic Plan for 2006-2010, May 2005, www.usaid.gov

“Reconsidering Food Aid: The Dialogue Continues.” Emmy B. Simmons, Final Report,
February 2007

Report to Congress on Food Aid Monetization, August 10, 2001, Foreign Agricultural
Service, USDA

Agency for International Trade Information and Cooperation, “Food Aid and the Doha
Negotiations on Agriculture,” November 2005, www.acici.org

USAID, “Celebrating Food for Peace, 1954-2004: Bringing Hope to the Hungry.” (2004)

U.S. Government (1985). Food Security Act of 1985, Title XI, Food for Progress Act

U.S. Government (1990). Public law 101-624, Subtitle A, Agricultural Trade

Development and Assistance Act of 1954, November 1990

USDA, FAS (2004) Global Food for Education Report.

www.fas.usda.gov/excredits/gffei.html

USAID, Food for Peace (2005) PL 480 Title II, Program Policies and Proposal Interim
Guidelines, March 14, 2005, www.usaid.gov
 Page 35 
www.interagservices.com
www.interagservices.com