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Abstract

I estimate the effect of US international food aid procurement on price in the domestic US market where food aid commodities must be procured. This analysis is relevant to two outstanding questions: 1. Why do US farmers support current US food aid policy with regard to domestic sourcing? and 2. Does domestic food aid procurement displace commercial trade? I consider three commodities, green peas, yellow peas, and lentils, for which US food aid procurement comprises a significant share of demand and where market analysts suggest that US food aid is an important price driver. Using a bivariate vector autoregression model of prices and procurement quantities, I estimate the response of US prices, relative to a global price benchmark, to shocks to US food aid procurement. In general, price response is limited in magnitude, relatively short-lived, and only significantly different from zero in the case of yellow peas.

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