The effects of untying Canadian food aid on the price sensitivity of commodity procurement decisions

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Biney, Jereme Keren
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Ninety percent of Canadian food aid donations were tied to domestic procurement sources until 2005. Procurement restrictions were reduced to 50% in 2005 and were eliminated in 2008. Implementing agencies are now free to procure commodities of their choice in locations of their choice. This study investigates whether the untying of Canadian food aid procurement in 2008 has made procurement decisions more responsive to changes in the relative prices of wheat, maize, and rice in Canadian cereal food aid baskets. It applies a pooled empirical model with regional fixed effects to regional price data and data on Canadian government-funded food aid shipments to five recipient regions. The results are mainly counterintuitive, which is partly attributable to a number of data and model limitations. Consequently, this study does not provide empirical evidence of cereal commodity substitution after the untying of Canadian food aid in 2008. However, there is still reason to believe that donor agencies substitute between cereal food aid commodities, especially after the elimination formal procurement restrictions. Further research is however needed to generate empirical evidence for this.
Canadian food aid, Untied aid, Food assistance