Food Aid and Biofuels: The Effects of Biofuel Policies on Procurement and Delivery

The food-aid community almost unanimously condemns policies that encourage crop production for fuel. Both food-aid donors and recipients are concerned that biofuels will increase foodgrain prices and leave donors unable to meet commitments. The effects of biofuel-induced higher cereal prices on food-aid recipients are complicated functions of several factors, each of which must be considered in an analysis of the effects of biofuel policies. These factors include the level of biofuel-induced price increases, changes in relative commodity prices, donor-recipient relationships and the sources from which food aid is procured. This article analyses the effects of biofuel policies on the food-aid supply chain and concludes that the more reliant a recipient is on emergency (vs. programme and project) food aid, the smaller will be biofuel-related decreases in shipments. Also, the larger is the share of maize (relative to wheat and rice) in a recipients’ food-aid basket, the more detrimental will be the impact of higher foodgrain prices. Movements toward local and regional food-aid procurement are unlikely to significantly insulate food-aid shipments from biofuel-related price increases.

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JEL Codes:
O13; Q18; Q42

 Record created 2017-04-01, last modified 2019-08-26

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