Local and Regional Procurement of Food Aid: Preliminary Findings and Lessons Learned from US Programs Christopher B. Barrett and Miguel I. Gómez, Cornell University LRP Learning Alliance USDA Local And Regional Food Aid Procurement Pilot Project Lessons Learned Workshop, Nairobi, Kenya, September 19-22, 2011

2 A group of 4 PVOs working together and with Cornell University to establish a common, rigorous framework for M&E of local and regional procurement (LRP) of food aid under the USDA LRP pilot program and the USAID Emergency Food Security Program. Materials on Learning Alliance web site at The LRP Learning Alliance Introduction

Motivation for Framework  Integrate reporting requirements of USDA and USAID  Gather data needed to generate rigorous evaluation of LRP performance along multiple dimensions: timeliness, cost effectiveness, price/price volatility impacts, recipient satisfaction, smallholder supplier impacts  Enable direct comparison across LRP project modalities and regions and with other forms of food aid (e.g., traditional transoceanic food aid) to inform policy deliberations  Common database to manage data across projects  Foster improved PVO market monitoring and analysis Motivation for Global Framework The Global Framework

4 Data Collection and Analysis Tools  Constructed eight forms to collect data systematically  Data collected to analyze evaluation topics  USDA required - Historic supply, demand and price movements; do no harm; reasonable market rate; timeliness; product quality and safety; cost; government interference  Additional topics - Producer price stimulus; supplier behavioral change; volumes; and food production shocks  Trained PVO personnel on price data collection methods and basic price analysis techniques. Materials available on Learning Alliance web site.  Can help establish when/where/whether LRP makes sense and what to monitor and key impacts on which to focus. The Global Framework

5 Preliminary Findings on LRP Impacts Impacts: Preliminary Findings To date, we have sufficient data to do analyses on some dimensions for six different programs: 1) Bangladesh (Land O’Lakes USDA LRPPP cereal bars from chickpeas, peanuts, puffed rice, sesame seeds, etc.) 2) Burkina Faso (CRS USDA LRPPP cowpeas,millet,veg oil) 3) Guatemala (CRS USDA LRPPP beans, CSB, white maize) 4) Kyrgyzstan (Mercy Corps USAID EFSP cash transfer) 5) Niger (Mercy Corps USDA LRPPP cowpeas, maize, millet and vouchers for salt and veg oil) 6) Zambia (Land O’Lakes USDA LRPPP beans, CSB, maize meal, veg oil) 4 more to come: CRS Mali and Niger, WV Kenya and Uganda

6 Timeliness of Deliveries Method  Compare event histories of LRP and transoceanic (USAID or USDA) deliveries to the same country up to 6 months before or after an LRP purchase.  Compare the time it takes from initiating procurement (IFB, tender release, etc.) until delivery to terminal warehouses. Impacts: Preliminary Findings

7 Difference between shipments from US and LRP (date of invitation until final warehouse delivery) Huge, statistically significant gains in timeliness. (And gap will increase as more data come in.) Timeliness of Deliveries Impacts: Preliminary Findings

8 Delivered Commodity Cost Method  Same comparison group as timeliness: LRP and transoceanic (USAID or USDA) deliveries to the same country up to 6 months before or after an LRP purchase. Now we match by commodity.  Compare the cost of commodity, ocean freight and ITSH of LRP and transoceanic USAID or USDA shipments. Impacts: Preliminary Findings

9 Impacts: Preliminary Findings For processed products and beans, often little or no cost savings from LRP. But for cereals and some pulses very large (and stat. sig. savings). Simple average savings = 20.9% over comparable commodities shipped from US to same (or neighboring) country during same half year. 53.9% for cereals! Delivered Commodity Cost

10 Recipient Satisfaction  In Burkina Faso, Guatemala and Zambia, in addition to the LRP program, there existed a MYAP region delivering similar products during the same period.  We ran household surveys to assess recipients’ satisfaction with food aid commodities received along various dimensions and costs of meal preparation.  Rated preferences on specific attributes of the commodities they received on a scale of 1 (low) to 5 (high)  Stated preparation needs from 1 (much more) to 5 (much less)  Comparing LRP recipients vs. MYAP recipients gives us insights on preferences and perceptions of recipients, relative to transoceanic commodities (e.g., MYAP). Impacts: Preliminary Findings

11 Recipient Satisfaction Sample multivariate ordered logit regression results Impacts: Preliminary Findings Note: Zambia method measures relative to equiv. commodity available in local markets. Others use absolute measures.

12 Recipient Satisfaction Sample multivariate ordered logit regression results Impacts: Preliminary Findings Note: Zambia method measures relative to equiv. commodity available in local markets. Others use absolute measures.

13 Recipient Satisfaction Estimated multivariate ordered logit models to control for potentially confounding factors. Results very similar to straight bivariate comparisons of LRP vs. MYAP. Core results: -Almost all food aid recipients satisfied with products on all dimensions. -But LRP recipients consistently most satisfied. This holds across countries and commodities. -But recipients’ preparation costs of LRP commodities often higher... partly due to commodity differences? Impacts: Preliminary Findings

14 Impacts on Smallholder Suppliers  In Burkina Faso, used same matched MYAP/LRP zone technique to survey smallholder cowpea producers, comparing those supplying the LRP with otherwise identical ones in MYAP zone selling just into regular market system.  Assess impacts relative to control group (LRP cowpea suppliers vs. cowpea farmers in MYAP region)  Behavioral impacts – investments, improved storage, management practices (e.g. use of improved seed), use of credit  Profitability impacts - self-reported improvements in profitability, farmgate price, transaction costs, time and distance travelled Impacts: Preliminary Findings

15 Impacts on Smallholder Suppliers Relative to previous year (intended and/or actual) participants: had a better understanding of quality standards for cowpeas. decreased travel time and distance traveled selling cowpeas by (stat. sig.) average margins of 52% and 91%, respectively. received 49% higher cowpea prices and 41% higher revenue, on average. enjoyed greater profitability in cowpea sales no more likely to use improved farm management practices direct LEAP participants adopted improved storage practices (such as storing cowpeas in double- or triple-lined bags) due to their involvement in the program. Impacts: Preliminary Findings

16 Impacts on Food Price Levels  Does LRP drive up food prices for farmers and/or consumers?  Developed a statistical model to estimate the effect of LRP on food prices in local markets, controlling for a range of other factors that influence prices: inflation, climate (temp/precip) shocks, transport costs, seasonality, world market prices, WFP LRP activities in subject and neighboring countries, etc.  Spatial effects – when the price of one commodity in a location changes as a result of the procurement (or distribution) in another location  Intertemporal effects - when the price of a commodity at a location changes as a result of and earlier procurement  Not strictly causal estimates due to potential for omitted relevant variables (e.g., government policies). But pretty good. Impacts: Preliminary Findings

17 Regression estimates of LRP’s market price impacts Impacts: Preliminary Findings Impacts on Food Price Levels

18 For most commodities and countries, there is no economically or statistically significant impact on prices. For the few for which there is some impact, it can be either positive or negative, even within the same country (e.g., Zambia) or for the same commodity (e.g., maize and maize meal across Niger and Zambia). The possibility of significant induced price effects underscores the importance of market monitoring. The relative infrequency of such effects suggests that LRP can be undertaken effectively when well designed and monitored. Any price effects typically vanish within two months. Impacts: Preliminary Findings Impacts on Food Price Levels

19 Impacts on Food Price Volatility  Does LRP increase food price volatility in recipient country markets?  Used the same statistical model to estimate the effect of LRP on food price volatility, measured as the standard deviation of local market prices, again controlling for a range of other factors that influence prices: inflation, climate (temp/precip) shocks, transport costs, seasonality, world market prices, WFP LRP activities in subject and neighboring countries, etc.  Again, not strictly causal estimates due to potential for omitted relevant variables (e.g., government policies). But pretty good. Impacts: Preliminary Findings

20 Impacts on Food Price Volatility Impacts: Preliminary Findings Regression estimates of LRP’s market price volatility impacts Market price volatility impacts negligible, short-lived, uncommon.

Local purchase offers big gains in timeliness, at least 60% (14 weeks) quicker delivery than shipments from the US. In cereals and pulses, there are considerable cost savings (~50% for cereals). Locally purchased processed products (e.g., incaparina, vegetable oil), however, are often more expensive. Recipients routinely prefer locally purchased commodities along any of multiple dimensions, although preparation time and costs of LP commonly greater. 21 Summary of Preliminary Findings Impacts: Preliminary Findings

In Burkina Faso, smallholder suppliers enjoyed high prices and revenues and lower transactions costs. For most commodities/countries, we find no economically or statistically significant impact on prices. But it does happen, which underscores the importance of market monitoring. Any price effects typically vanish within two months. Market price volatility impacts are uncommon and when they occur, small and short-lived. 22 Summary of Preliminary Findings (2) Impacts: Preliminary Findings

General  Rigorous M&E of LRP programs necessary to assess benefits and limitations and to communicate w/ policymakers/stakeholders.  LRP Learning Alliance critical for credible LRP assessment and potentially helpful for capacity building. But imposes real added efforts (and costs) on all participants.  Reporting requirements were somewhat onerous  Due to different objectives across LRPs  Attempts to streamline CU,USDA and USAID data reporting requirements are challenging  Failed effort at establishing a common database 23 Lessons Learned

Data collection and analysis  Cornell did not use all primary data generated (esp., prices)  Quality of primary data was often poor.  Coverage is typically of short duration, making it difficult to establish effects of LRP independent of other factors.  Most countries have reasonably long, good quality commodity price series available from secondary sources (Ag ministries, Stat agencies, GIEWS, FEWS, etc.)  PVOs can access, monitor and analyze secondary data more effectively than at present. Lower cost, higher quality. General problem of market info as a “club good”. 24 Lessons Learned (2) Lessons Learned

Policy  A critical question: What is the purpose of an LRP?  Multiple possible multiple objectives: reduce cost or delays, help small farmers, greater recipient satisfaction.  The objective(s) drive whether LRP makes sense, what to monitor, and what impacts to monitor.  There may be important tradeoffs among objectives. Need to consider such potential tradeoffs explicitly.  Ex ante response analysis is needed to establish whether/ where/when LRP makes sense. Yet little or no incentive exists to undertake serious response analysis under present program structures. And PVOs have little capacity to do good response analysis, especially individually. 25 Lessons Learned Lessons Learned (3)

 Overall, US PVOs’ LRP programs appear to substantially improve timeliness and reduce costs of food aid distribution, while generating increased recipient satisfaction with rations and some evidence of gains to smallholder suppliers, all without any consistent evidence of causing harm via significant price or price volatility effects.  LRP not justified in all cases, but successful on most counts so good reason to push for it to become a broader option.  Couple an expanded LRP option with response analysis to choose the right tool for the task and some sort of consortium M&E platform to reduce costs of high quality of M&E. 26 Conclusions

Thank you for your time, attention and comments! 27