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 diets.
Declines in agricultural commodity prices slow
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
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 to diversify
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 agricultural
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 market distortions
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 countries.
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