The Value, Cost, and Efficiency of American Food Aid

Theoretical frameworks were developed to estimate the value to recipient countries of food aid relative to untied cash aid, the cost to the donor country, and the social gain realized by channeling surplus productive capacity in the agricultural sector into food aid rather than reducing production. On the basis of these frameworks, the value, cost, and social gains associated with U. S. food aid during 1964–1966 were estimated. The value to recipient countries of food was estimated to be 80 percent of its world market value. The present value of repayments, interest payments, and transportation costs payable by food aid recipient countries was found to exceed the actual value of food aid under the prevailing dollar credit programs. Hence, a net transfer of resources from developing countries to the United States was found to occur. The cost to the United States of maintaining food aid programs during 1964–1966 was estimated to be approximately equal to the cost of reducing production by a similar amount, using voluntary land retirement programs. It was found that evaluation and pricing of U. S. food aid on the basis of the prevailing export prices results in a considerable overstatement of the actual value to the recipient countries and causes unduly high repayment obligations.