May 21, 2013

Commentary - Stretching the Food Aid Dollar by Building Strong Local Markets

This post is part of a series produced by The Chicago Council on Global Affairs, marking the occasion of its annual Global Food Security Symposium in Washington, D.C., which will be held on May 21st. For more information on the symposium, click here. Follow @globalagdev and #globalag on twitter to join the conversation on May 21st.

Jon Halverson
Vice President of Land O'Lakes International Development

Floods, typhoons and droughts. Market fluctuations and inflation. Unhealthy government transitions and local political flare-ups. Disease-ridden crops and tainted water sources. All of these shocks can devastate any country, but for nations combatting poverty, food insecurity and malnutrition, disasters often precipitate acute food security outbreaks that result in suffering and loss of life. 

The U.S. Administration’s proposed food aid reforms will focus on combatting extreme vulnerability by strengthening disaster-prone communities through market development before emergencies happen. Under a pilot program in Bangladesh, Land O'Lakes International Development discovered that it is possible to deliver sustainable market-driven results in a country that faces recurrent shocks by building local capacity and making business linkages.

In 2010, we launched a one-year program called the Local and Regional Procurement (LRP) Pilot in Bangladesh. Funded by the U.S. Department of Agriculture (USDA), Land O'Lakes worked with two local processors – Olympic and PRAN – to develop a cereal bar using locally-grown ingredients. The program paired the processors with Bangladeshi farmers, helping them to develop mutually beneficial business partnerships: Olympic and PRAN found a source for high quality ingredients, while farmers secured a dependable market for their goods.  

The cereal bars, which were produced for a school feeding program in three extremely poor sub-districts of Jamalpur District, was the first of its kind to be developed in Bangladesh. By using sesame seeds, puffed rice, chickpeas and peanuts, nearly 100,000 schoolchildren and teachers in 441 schools enjoyed eating the new product that matched local tastes.

Reducing Cost, Speeding Up Delivery

Before the LRP began, we were working in Bangladesh leading a school nutrition program that relied on monetization to source ingredients. The program fed more than 260,000 students in nearly 1,000 schools with milk and biscuits, and witnessed a dramatic increase in attendance – as high as 95 percent.  

The difference between the former school nutrition program and the LRP, however, was not just in the sourcing of ingredients. Our LRP initiative produced the cereal bars for about eight cents per bar, compared to the 20 to 26 cents cost for milk and biscuits. The program also began distributing the snacks rapidly to schools. Under most monetization programs, it takes about one year to distribute snacks to schools. With the LRP pilot, Land O’Lakes saw bars reach students in less than two months

Cereal Bars Create Lasting Commercial Opportunity

When we helped form a supplier-buyer relationship between farmers and processors under the LRP pilot, two unintended consequences evolved. First, the processors, who realized that they could meet an unmet market opportunity, decided to invest with their own capital in new equipment that produced higher quality bars.

Second, we checked in with Olympic and PRAN in November 2012, more than a year after LRP closed, to see if they were still producing the cereal bars. Indeed, they were not only producing the bars, but they were selling 2.5 million bars commercially each month. Both processors also continue to  source from local farmers. Olympic has expanded their product line to six varieties of cereal bars, which use different ingredients depending on the season. They have also begun constructing a new plant to meet market demand more efficiently. 

Meeting Development Objectives with Food Aid Reform

The success of the Bangladesh pilot offers a unique incentive to other emergency local and regional procurement initiatives to make significant steps to capacitate local processors and strengthen value chains. By building strong business relationships that last beyond the life of the program, we see other opportunities for such programs to succeed in countries like Bangladesh that
are highly prone to shocks. If another disaster strikes this nation of 167 million people, this cereal bar could play an integral role in feeding those affected. Unlike other emergency rations that may require water, the bar is ready-to-eat and would prevent contamination with water-borne illnesses that often arise during disasters. Land O'Lakes sees the value that such LRP efforts can bring to countries like Bangladesh, and supports steps that will help meet development objectives through food aid reforms and ultimatley make populations more resilient in the face of future shocks.

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Land O’Lakes, Inc. (www.landolakesinc.com) is a national, farmer-owned food and agricultural cooperative with annual sales of $14 billion. The nation’s second-largest cooperative and number 194 on the Fortune 500, Land O’Lakes does business in all 50 states and more than 60 countries. Operating as a not-for-profit division of the cooperative, since 1981, Land O'Lakes International Development has improved the quality of life for millions of people in 76 nations through more than 275 projects worldwide that are generating economic growth, improving health and nutrition, and alleviate poverty by facilitating market-driven business solutions.

Bio for Jon Halverson

Jon Halverson joined Land O'Lakes in June 2012. As Vice President for International Development, Jon provides the strategic, business and administrative leadership for the division. He has more than 20 years of experience managing international business development, developing sustainable business models and leading executive teams in strategy development and implementation. His international experience includes both living and working overseas. During his 14 years at Cargill, he was responsible for strategy development, international mergers and acquisitions, as well as post-acquisition integration. In Africa, he successfully spearheaded more than 70 food and agriculture investments and led a business development process that generated more than $38 million in sales. In 2009, Jon founded both the Africa Middle Market Fund and Frontier Markets Consulting. Before joining Land O'Lakes, Jon served as the Managing Director for both organizations. In addition to his work experience, Jon has a Bachelor of Arts degree from Wheaton College and a Masters of Business Administration from Regis University.

About

The Global Food and Agriculture Program aims to inform the development of US policy on global agricultural development and food security by raising awareness and providing resources, information, and policy analysis to the US Administration, Congress, and interested experts and organizations.

The Global Food and Agriculture Program is housed within the Chicago Council on Global Affairs, an independent, nonpartisan organization that provides insight – and influences the public discourse – on critical global issues. The Council on Global Affairs convenes leading global voices and conducts independent research to bring clarity and offer solutions to challenges and opportunities across the globe. The Council is committed to engaging the public and raising global awareness of issues that transcend borders and transform how people, business, and governments engage the world.

Support for the Global Food and Agriculture Program is generously provided by the Bill & Melinda Gates Foundation.

Blogroll

1,000 Days Blog, 1,000 Days

Africa Can End Poverty, World Bank

Agrilinks Blog

Bread Blog, Bread for the World

Can We Feed the World Blog, Agriculture for Impact

Concern Blogs, Concern Worldwide

Institute Insights, Bread for the World Institute

End Poverty in South Asia, World Bank

Global Development Blog, Center for Global Development

The Global Food Banking Network

Harvest 2050, Global Harvest Initiative

The Hunger and Undernutrition Blog, Humanitas Global Development

International Food Policy Research Institute News, IFPRI

International Maize and Wheat Improvement Center Blog, CIMMYT

ONE Blog, ONE Campaign

One Acre Fund Blog, One Acre Fund

Overseas Development Institute Blog, Overseas Development Institute

Oxfam America Blog, Oxfam America

Preventing Postharvest Loss, ADM Institute

Sense & Sustainability Blog, Sense & Sustainability

WFP USA Blog, World Food Program USA

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