A consensus has emerged on food aid policy, acknowledging the importan
ce of short-run relief considerations, while emphasizing that such pol
icy must be driven by a long-run, developmental perspective. This requ
ires explicit attention to the effects of food aid on food markets, Ye
t it has long been clear that short-and long-run objectives of food ai
d may conflict, This tension stands in high relief in Mozambique, one
of the most food aid-dependent countries in the world, This paper exam
ines the factors determining the effects of yellow maize food aid on m
arkets for yellow maize and white maize (the staple crop) in Mozambiqu
e. The paper finds that: (a) food aid has helped fuel the growth of a
competitive small scale milling industry and informal marketing system
; (b) yellow and white maize are substitutes in consumption; and (c) c
ontinued availability of yellow maize food aid at prices well below im
port parity will depress incentives for producers and traders to inves
t in the white maize production and marketing system. This paper prese
nts recommendations for reforming the monetized food aid program and c
oordinating it more effectively with emergency aid. Copyright (C) 1996
Elsevier Science Ltd.