By Stephanie Nebehay

GENEVA, June 7 (Reuters) - Hundreds of thousands of badly malnourished children with limited access to hospital care, could be given life-saving treatment at home with a locally-made peanut butter based food, U.N. aid agencies said.

Malnutrition kills at least an estimated 1 million children each year -- an average of one child every 30 seconds.

Worldwide, an estimated 20 million children under the age of five suffer from acute malnutrition, most of them in south Asia and sub-Saharan Africa, according to the agencies which called for more community-based treatment. The high-energy food, a paste-like composition of peanuts, milk, sugar and vegetable oil, costs as little as $3 per kg when produced locally. It requires no refrigeration or added water.

"When implemented on a large scale, and properly combined with hospital treatment for children with complications, community-based management of severe acute malnutrition could prevent the deaths of hundreds of thousands of children each year," the U.N. aid agencies said.

The joint statement was issued by the World Health Organisation (WHO), the World Food Programme (WFP), the U.N. Children's Fund (UNICEF) and U.N. System Standing Committee on Nutrition.

Acute malnutrition is defined by a very low weight for height, visible severe wasting or by the presence of nutritional oedema of the feet.

Many poor families do not have access to hospitals where malnourished children traditionally receive special milk-based diets, the agencies said.

But community health workers or volunteers can easily identify the children suffering from severe acute malnutrition by measuring mid-upper arm circumference.

About three-quarters of children with the condition -- those who have a good appetite and no medical complications -- can be treated at home with the fortified foods, they said.

"It is urgent that this approach, along with preventive action, be added to the list of cost-effective interventions being used to improve nutrition and reduce mortality," said WHO director-general Margaret Chan.

The foods are not water-based, meaning that bacteria cannot grow in them, and they can be used in areas where good hygiene is lacking, according to the statement.

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