WASHINGTON and ROME and GENEVA, February 15,
2005, /PRNewswire/CropChoice.com: The long-term
downward trend in agricultural commodity prices threatens
the food security of hundreds of millions of people
in some of the world's poorest developing countries
where the sale of commodities is often the only source
of cash, says a new report released today by the UN
Food and Agriculture Organization (FAO).
According to The State of Agricultural Commodity Markets
2004 (SOCO 2004), many farmers and exporting countries
still find themselves trapped by their dependency --
producing and exporting more, but earning less than
they did in the past.
SOCO 2004 also says that lower prices for basic foods
enable many poor food importing countries and their
consumers, especially in urban areas, to meet their
food needs at lower cost and to gain access to nutritious
Declines in agricultural commodity
While the overall trend in commodity prices has been
downward from the late 1990s through 2001, the report
shows that prices on world markets have rebounded, or
at least leveled off, over the past two years. However,
not all commodities have performed the same. There have
been rebounds in cereals, oil crops, dairy products,
fibers and raw materials, while horticultural product
prices remained more sensitive to market balance and
meat prices were disrupted by animal disease outbreaks.
Price recovery has been far more fragile for tropical
beverages, sugar and bananas, according to the report,
which points out that these are some of the very commodities
on which the poorest countries are most dependent for
their export earnings.
Some developing countries manage
Commenting on SOCO 2004, Hartwig de Haen, FAO Assistant
Director-General, Economic and Social Department, said:
"The long-term downward trend in commodity prices
along with increased productivity and production of
major agricultural export commodities have divided developing
countries into two distinct groups. On the one hand,
we have the developing countries that have managed to
become less dependent on one or two agricultural commodities,
some shifting production into high value export crops.
"On the other hand," Mr. de Haen added, "the
Least Developed Countries, or LDCs, where usually small
producers account for the bulk of agricultural production
and exports, have been unable to mobilize the investment
and training required to shift to new crops. They also
have difficulties meeting the high quality standards
and strict delivery deadlines of the major supermarket
chains in the developed countries."
The dangers of depending on a few
Many developing countries rely on exports of a small
number of agricultural commodities, even a single commodity,
for a large share of their export revenues. This concentration
leaves them exposed to unfavorable market or climatic
conditions. A drought or a drop in prices on the international
markets can quickly drain their foreign exchange reserves,
stifle their ability to pay for essential imports and
plunge them into debt, the report warns.
As many as 43 developing countries depend on a single
commodity for more than 20 percent of their total revenues
from merchandise exports. Most of these countries are
in sub-Saharan Africa or Latin America and the Caribbean
and depend on exports of sugar, coffee, cotton and bananas.
Most suffer from widespread poverty.
Commodity dependence made worse by
Because many of these countries depend on agricultural
commodity exports to finance food imports, a decline
in the prices of exports relative to the prices of imports
can threaten food security. However, the report acknowledges
that the same downward pressure on commodity prices
may also reduce the food import bills of developing
The report warns that "these problems are exacerbated
by market distortions, arising from tariffs and subsidies
in developed countries, tariffs in developing countries
and the market power in some commodity supply chains
of large transnational corporations."
The report urges the elimination of market distortions,
and warns that high agricultural tariffs and producer
subsidies in developed countries limit market access
and depress commodity prices.
While markets for agricultural products in developing
countries are the fastest growing, the report warns
that they are also generally heavily protected.