The impact of food aid on maize prices and production in Swaziland

Abstract

The objective of the study was to provide empirical evidence on whether food aid leads to depressed domestic maize prices and reduced maize production in subsequent years in Swaziland. The lack of empirical evidence has often resulted in premature negative conclusions about the impact of food aid on Swaziland's maize industry. The study used secondary national data from 1985 to 2006. Variables used in the statistical analysis included quantity of cereal food aid; quantity of commercial maize imports; quantity of locally produced maize; official maize producer price; open market maize producer price; fertilizer price; fuel price; rainfall; and total area planted to maize. The impact of food aid was measured using the reduced form market equilibrium model consisting of maize quantity and maize producer price functions, estimated simultaneously through the two-stage least squares (2SLS) method. Analytical results revealed that food aid received by Swaziland does not lower prices of domestic maize and has no significant negative effect on the quantity of maize produced in subsequent seasons.