ABSTRACT
More attention has been given to its possible adverse effects on agricultural production than to any other aspect of food aid.1 Indeed, it may be that the subject has received too much attention relative to the other corollaries of food aid.2 Much of the literature continues the discussion of the price effect of food aid considered in the previous chapter, and attempts to quantify the fall in production that will follow from adverse price movements. There has been some suggestion that the supply of food has a negative price elasticity such that farmers reduce supplies when prices rise because they have fixed cash needs which they are able to satisfy with smaller deliveries when price levels are high.3 However, the consensus is that, in India at least, farmers are responsive to price changes and elasticities are positive but low (around 0.2 for the relevant commodities).4 Although there is widespread agreement that a fall in prices will lead to some fall in production, there is no such agreement over the likely scale of the production drop, or on whether the adverse effects of food aid can be mitigated by measures which reduce the price fall, such as differentiated markets, or which encourage farmers to switch to other crops. One literature survey concludes that ‘The concept of disincentives to domestic agricultural production has validity. However, it can be accentuated or circumvented by the price and production policies of the recipient countries.’5 The important issue is therefore, how often do recipient governments adopt such desirable policies?
