FAO/GIEWS - Food Outlook March/April 1997

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Intergovernmental Group on Grains,
27th Session, Rome, 5-7 February 1997

The Intergovernmental Group on Grains held its 27th Session at FAO Headquarters in early February 1997. It was attended by delegates from some 70 countries, including all major grain exporting and importing countries, as well as by representatives from several intergovernmental and non-governmental organizations. The Group reviewed developments in world grain markets in 1995/96 and examined the short-term outlook for the 1996/97 season. It noted that only stocks held by major exporters for crop years ending in 1997 were likely to increase due to larger crops and reduced exports. It was concluded that while the global supply situation had improved in 1996/97, including the increase in global carryover stocks, the grains market was likely to remain tight during the remainder of the season.

Among the topical issues discussed, the Group assessed the transmission of international price movements to domestic markets in 1995/96 and reviewed responses of selected importing and exporting countries to the rise in world prices. The Group stressed that apart from high international grain prices transmitted to the domestic markets, there had been a number of other factors responsible for domestic price increases in importing countries during the 1995/96 season, including currency depreciation, smaller harvests and low stock levels. It was noted that in countries where the transmission of the rise in international prices was strong, producers responded by increasing plantings. The Group encouraged the Secretariat to undertake further studies on price transmission, including an analysis of underlying factors, such as market fundamentals and policy measures.

Another subject discussed related to factors contributing to price instability. The steep price rise in 1995/96 followed by a sharp fall in the first half of 1996/97 had raised the question of whether these events were of a short-term nature, implying that prices were to return to greater stability, as was experienced during the early nineties, or whether the world could be entering a new phase of greater price instability. The Group recognized that the continued low level of stocks had been the most important explanation for the price surge of 1995/96, while the subsequent recovery of global production during 1996/97 had been the main factor in the downturn in prices. It agreed that the current grain market was still in a transitional state, characteristic of an adjustment path towards a new market environment.

The Group also reviewed the adequacy of FAO’s benchmark 17-18 percent cereal stocks-to-utilization ratio. The results of the analysis by the Secretariat were inconclusive with respect to modifying the existing level of the stocks-to-utilization ratio. The Group supported the continuation of the monitoring of cereal stocks in light of the mandate of the World Food Summit Plan of Action.

The Group also discussed matters related to the Common Fund for Commodities. In an attempt to facilitate project preparation between sessions of the Group, the Group set up a Sub-group to act on its behalf in matters pertaining to the Fund, except in supervisory functions. The Group also agreed to extend its Terms of Reference to include roots, tubers and pulses exclusively for purposes of sponsoring projects to the Common Fund and endorsed a cassava development strategy. The Group also approved five new projects to be submitted to the Fund, three on cassava and two on grains.

Finally, an informal symposium was organized to discuss changes in the efficiencies of cereal ocean transportation and port handling in the past two decades. The seminar, which was open also to representatives from the private sector, focused on the impact of recent and expected changes in seaborn transport and port facilities on food security of grain importing developing countries.

For more details on the 27th Session, please contact:

Mr. Myles Mielke
Secretary, Intergovernmental Group on Grains
Commodities and Trade Division, FAO of the UN
Facsimile: 0039-6-5225-4495; Telephone: 0039-6-5225-3480, E-Mail: Myles.Mielke@fao.org

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