A Market Analysis and Decision Tree Tool for Resource Transfers: Cash, Local Purchase, and/or Imported Food Aid? Prepared for the International Food Aid Conference Bob Bell, Director of Food Resource Coordination Team, CARE-USA Erin Lentz, Technical Adviser, CARE-USA April 2008

The Perfect Storm Food prices - rising Energy prices - rising Transport costs - rising Climate change - increasing vulnerability and decreasing resilience Who suffers? –1 billion people live on less than $1.00 per day –211 million in sub-Saharan Africa live on less than $0.75 per day (IFPRI, Oct 2007)

The Perfect Storm: One of CARE’s responses A new look at resource transfer options* –If food aid: When? Where? Why? –If local purchases: When? Where? Why? –If cash: When? Where? Why? Resource transfer options - Decision Tree Framework –Understanding markets’ roles in addressing food security can lead to designing better social transfer schemes in programs *Does not apply to monetization

Why the form of transfer matters Getting the form of transfer right helps livelihoods… –Households sell food aid - often at a deep discount - to purchase what they need –Yet, when markets are not functioning, cash is of limited value. … and minimizes harm to markets –Impact on markets depends on: Total amount distributed Targeting efficacy Seasonality Type of transfer Functioning of local market

Objective of Market Analysis Links identified need with appropriate response –Evidence-based to support decision- makers Program design Policy reform Developing new approaches as a consortium with other NGO’s and WFP –Seeking 3 day, 3 week, 3 month analytical – response design timeframes

6 How do Managers / Programmers Make Decisions: Situating Response Analysis within the Programming Cycle

7 Decision Tree Framework 1. Are local Food markets functioning well? Yes Target cash transfers or jobs to target recipients not food aid No 2. Is there sufficient food aid available nearby to fill the gap Yes Provide food aid via local purchase or triangular transaction NoProvide food aid via Trans-oceanic shipment

Q1. Are local markets functioning well? 1a. Are food insecure households well connected to local markets? 1b. How much additional food can traders supply at or near current costs? 1c. How will local demand respond to transfers? 1d. Do local food traders behave competitively? 1e. Do food insecure households have a preference over the form/mix of aid they receive?

Q2. Is There Sufficient Food Available Nearby To Fill The Gap? 2a. Where are Viable Prospective Source Markets? 2b. Will Agency Purchases Drive up Food Prices Excessively in Source Markets? 2c. Will Local or Regional Purchases Affect Producer Prices Differently than Transoceanic Shipments?

Resource Transfer Choices or Combinations Will Make a Difference Cash transfers and vouchers to support purchasing power and local markets, quickly Local procurement to energize local markets and use local food products Cash and local purchases to strengthen local food chains and support smallholders Food aid to support people during combined availability and market failures

Thanks for your time!