Chapter 6


distortions and disincentives on local food production. This, however, only applies under two
essential conditions:

1) The commercial food imports and programme food aid together do not exceed an
 existing market supply/import deficit. This condition point to the problem of and the
 need for a careful assessment of the "Usual Marketing Requirements" (UMRs) fixed
 by donors in food aid agreements with recipient countries. UMRs are set to ensure that a
 country maintains specified levels of commercial food imports when it receives food
 aid.

2) Programme food aid being monetised and channelled into the food market is not sold at
 "dumping prices", hence does not depress the local market prices below "reasonable"
 price levels. Depending on the situation, reasonable price levels are determined by
 regional production costs and/or shadow world market prices.

If one, or both, of the above conditions do not apply, programme food aid would likely have
adverse effects on the level of domestic food production and supplies. In Figure 6.1, such
disincentive effects of food aid deliveries would induce a market price below the level p and
a corresponding reduction of the level of local food production below the volume A. As a
result, an actual demand deficit would be reduced, but the production and the market supply
deficits would increase, with likely negative implications for long-term food security.

Such disincentive effects may also occur if the government of a recipient country is, through
abundant food aid supplies, enabled or even encouraged to keep the producer prices for food
artificially low, and/or to neglect the agricultural and food sector as a whole (policy
disincentive of food aid).

2.5.2 Relief and project food aid to mitigate demand deficits

A demand deficit (R-B) results from the fact that people have insufficient income, hence
purchasing power, to express their essential food needs as effective market demand. Such a
situation requires, as already discussed in Chapter 5, primarily targeted approaches of
employment and income generation in favour of the poor and vulnerable groups and/or direct
food transfers. These are classical fields of relief and project food aid.

Although relief and project food aid are thought to cover the food deficits of food insecure
households, the sale of relief and FFW rations by the beneficiaries is a common phenomenon.
This could be an indication of poor targeting. There are, however, also many other reasons
for such behaviour, e.g. immediate cash needs or the need or preference for other types of
food commodities, etc. (see Box 6.3). Such factors may cause the recipients of relief and
project food aid to sell part of the rations received, in spite of the fact that their household
food requirements are not fully met.


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