WTO COMMITTEE ON AGRICULTURE
Statement by Manzoor Ahmad
Food and Agriculture Organization of the United Nations
4 December 2008
Agricultural prices have always been volatile, but sharp increases in global agricultural commodity prices during 2006 and 2007 have focused unprecedented attention on the state of food and agriculture at the global, regional and national levels. The impact of soaring food prices has been most severe on net-food importing developing countries (NFIDCs) and Least Developed Countries (LDCs) as the share of food in their total expenditures is much higher than that of industrialized countries.
Since June 2008, international prices of many agricultural commodities have started to fall and early indications do not preclude further declines in the coming months. The FAO Food Price Index (FFPI) that had climbed to a record 219 points in June 2008 had fallen to a nine-month low of 188 points by September 2008. Despite this recent fall in prices, the FFPI is still up 11 points from its value in September 2007 and as much as 51 percent above the level in September 2006.{In October, the FFPI dropped by another 13 percent (or 24 points), falling to its lowest level since August 2007. In October the index averaged 6 percent below October 2007 but still 28 percent above the level in October 2006.}
For LDCs and NFIDCs (Net-Food Importing Developing Countries) combined, food-import expenditures, in value terms, are forecast to reach US$ 22,182 million (as against US$ 9,846 million in 2002/03) or an increase of about 125% over the last five years. In the case of LDCs, the import bill is expected to be US$7,526 million as against US$ 3,644 million or an increase of 106%;and for NFIDCs, imports are expected to reach US$ 14,656 million as against US$ 6,202 million in or an increase of 136% over the last five years. These figures are still provisional because FAO’s food import bill forecasts are conditional on developments in international prices and freight rates.
The high levels of food import bills for the NFIDCs and LDCs are likely to continue for a variety of reasons, including the following:
a)The high world market price of cereals. For example, the July-October 2008 average price of US no.2 hard winter wheat was 91% higher than five years earlier.
b)The increase in the volume of imported foodstuffs. The combined volume of agricultural imports by LDCs and NFIDCs in the marketing year 2008/09 is forecast by FAO to be about 18% greater than that of 2002/03.
c)The huge increase in freight rates. The July-October 2008 average ocean freight rate from U.S. Gulf ports to key import destinations was more than 350% higher than the level of five years earlier.
d)The declining volumes of food aid. Food aid for NFIDCs and LDCs is estimated to account for 5.8% of their total cereal imports in 2008/09, compared to nearly 8.6% five years earlier.
e)The need to replenish stocks and expected increases in utilization despite a favourable global production outlook.
f)The low level of exportable supplies, resulting from utilization outstripping production for several crops in a number of major exporting countries.
However, these are not the only constraints faced by many poor countries to attain food security. Weather-related reduced cereal harvests, and wars and civil strife in several countries (particularly in Africa) could result in severe food shortages in the 2008/09 marketing year and would require emergency food assistance. Among the countries facing reduced cereal harvests, the most seriously affected are:Zimbabwe, Swaziland and Lesotho in Africa; and the Democratic People’s Republic of Korea in Asia. Among the countries affected by war and civil strife, the most seriously affected are Somalia, Ethiopia and the Darfur region of Sudan.
Of course more countries are facing food problems other than those mentioned here. More detailed and up-to-date information can be found in the latest issue of the FAO Crop Prospects and Food Situation Report. This report is the other major publication, besides Food Outlook, produced by the FAO’s Global Information and Early System (GIEWS).
FAO and WFP continue to take steps to improve the methodology of assessing food aid needs. Both organizations are collaborating closely in strengthening emergency needs assessment capacity and on improved methodologies used in Crop and Food Supply Assessment Missions.
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