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

A

 Page v 

Executive Summary
.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.

U

 Page 1 

Chapter 1: Introduction
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.

T

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 Progress
Food for Progress Act of 1985 CCC and Title I Appropriations Loans or Grant Under CCC, $15 million for administrative costs and $40 million for noncommodity, primarily freight costs Yes Yes

Program
Governing Legislation

Title I
PL 480

Title II
PL 480

Title III
PL 480

Section 416(b)
Agricultural Act of 1949 CCC (surplus commodities) Grant Availability of CCC-owned surplus agricultural commodities; domestic feeding programs have priority No

Food for Education (FFE)
Farm Security & Rural Investment Act of 2002 Appropriations Grant

Bill Emerson Humanitarian Trust (BEHT)
Farm Security & Rural Investment Act of 2002 CCC and PL 480 reimbursements Commodity reserve Reserve limited to 4 million MT

Funding Source Type of Program (Loan/Grant) Program Constraints

Appropriations Loan No appropriations for FY 2007 and funds not requested for FY 2008

Appropriations Grant Various mandates – see narrative under program trends

Appropriations Grant No appropriations since 1999 so program is inactive

Admin Funds Provided? Program Focus

Yes Sale of U.S. agricultural products with long-term loans; payback in local currency or U.S. dollars

Yes

Yes

No

Promotion of food Support longsecurity, economic term economic development, and development emergency assistance

Direct feeding and Private sector barter development of agricultural sectors in developing and emerging democracies U.S. surplus commodities, CCC inventory U.S. commercially procured

Increasing school Commodity attendance and reserve for global food emergencies literacy rate in developing countries

Commodity Source

U.S. commercially U.S. commercially procured procured

U.S. commercially procured

U.S. commercially procured

U.S. commodity reserve

 Page 5 

Program
Agreement Partners

Title I

Title II

Title III
Foreign governments

Section 416(b)
Foreign governments and PVOs

Food for Progress
Foreign governments and PVOs

Food for Education (FFE)

Bill Emerson Humanitarian Trust (BEHT)

Commodity sales Foreign to governments or governments and private entities non-emergency – PVOs; for emergencies, can also make government-togovernment agreements USDA USAID

Foreign Not applicable governments and PVOs

Responsible Government Agency (USDA/USAID) Monetization Permitted? Funding Type (Discretionary/ Mandatory)

USAID

USDA

USDA

USDA

USDA/USAID

Yes Discretionary

Yes Discretionary

Yes Discretionary

Yes Mandatory

Yes

Yes

NA CCC - mandatory

Title I discretionary, Discretionary CCC 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, 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.

A

In the President’s 2006 budget, “U.S. grown food will legislative language was continue to play the proposed to transfer $300 primary role and will be million from PL 480 to a famine the first choice in account, administered by meeting global needs.” USAID, to locally purchase Secretary Johanns non-U.S. commodities for use in 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 wellrespected 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, 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.

T

The USDA OIG issued an audit report a year earlier in March “Various challenges 2006 titled Foreign Agricultural impede the efficiency Service Private Voluntary and effectiveness of Organization Grant Fund U.S. food aid.” Accountability. In developing GAO the report, OIG reviewed the 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 emergencytype feeding programs, and implementing organizations are free to submit developmentoriented 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)
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.

T

 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 A funding request for declined and as most countries have moved Title I was not included from government commodity procurement 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 Bangladesh Burkina Faso Chad Democratic Republic of Congo Ethiopia       Guatemala Guinea Haiti Liberia Madagascar Malawi       Mauritania Mozambique Niger Sierra Leone Uganda Zambia

 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 nonemergency 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. Preposition 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. preposition 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 Without Title I funds to Food for Progress Act of 1985 and provides supplement it in the future, for the donation or credit sale of U.S. 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 Armenia Bangladesh Bolivia Burundi Central African Republic Djibouti Dominican Republic Ethiopia The Gambia            Guatemala Guinea-Bissau Haiti Honduras Kenya Liberia Madagascar Malawi Mali Mongolia Mozambique           Namibia Nicaragua Niger Papua New Guinea Senegal Sierra Leone Sri Lanka Tanzania Yemen Zambia

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

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)
200 180 100 160 140 120 100 80 60 40 20 0 FY04
 Page 23 

FY05

FY06

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
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 Africa has received operating at more than 20,000 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.

I

 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 Middle East Pre-position 2003 2004 2005 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

Lentils

FY 2005 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 Ethanol-fueled expectations over the past few years driven by the rise of higher corn prices in fuel prices. Corn futures have been up, contributed to record reflecting the increased demand for corn. corn plantings in the However, American farmers have reacted United States last year. in their traditional manner and have 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 longterm 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 nonprofits 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

Sign up to vote on this title
UsefulNot useful