Department of Agricultural, Food, and Resource Economics Food Security Group

IDWP 87. Cynthia Donovan, Megan McGlinchy, John Staatz, and David Tschirley. 2006. Emergency Needs Assessments and the Impact of Food Aid on Local Markets

EXECUTIVE SUMMARY:
In humanitarian emergencies, the highest priority is to save lives, but the decision on how to
respond may have longer term consequences for households and for the markets where
households derive income and purchase goods. This desk study is designed to assist WFP
and other humanitarian agencies in understanding markets as they relate to emergencies,
particularly the assessment of the impacts of emergencies and food aid deliveries on local
commodity markets. In this work, we will focus on the impact of actual food commodity
distribution on commodity markets, one of the most common emergency response
alternatives. However, the report widens the debate to assist humanitarian agencies in seeing
the link between actions taken by and with households and individuals during and after an
emergency, the effects those actions have on markets, but also effects that market structure
and performance may have in mitigating food insecurity. Understanding of market dynamics
will help to build better emergency responses, such that the responses can actually strengthen
markets’ capacity to avoid food crises in the future, when alleviating food insecurity in the
present.

The debate on the potential negative effects of food aid on local commodity markets, the
“disincentive effects” of lower producer prices in recipient countries since the 1960s.
Researchers have developed increasingly sophisticated quantitative methods to assess
potential commodity market disincentives. This research indicates that large amounts of food
aid delivered into markets or for free distribution without any targeting of households were
the main sources of disincentive effects, particularly when the food aid commodity chosen
was also produced locally and the delivery coincided with local harvests. Even where
negative market effects were identified, however, longer term effects were often found to be
beneficial. Thus the ex-post analysis suggests that targeting, particularly the timing of
shipments into markets , has tended to be the problem, not necessarily a poorly done
emergency needs assessment (ENA).

This report reviews current methods to conduct ENA with the aim of improving them. While
using the WFP ENA as the main case to evaluate, the report seeks to be useful for other
agencies in their assessments after an emergency. The market component in existing ENA
frequently focuses on prices, price changes, and household purchasing power, ignoring the
aspects related to market structure that would identify the potential of the market to meet
needs. There is an underlying assumption that households without effective demand
(purchasing power) will need to receive free food distributions to meet their needs. The
report presents a brief summary of the fundamentals of demand and supply related to food aid
distributions and their potential effects on the prices. The relationships between shocks,
markets, and responses are then drawn.