FAO's last commodity projections were made in 2000, covering the period from 1993-95 to 2005. The current projections, covering the period from 1998-2000 to 2010, were carried out mainly in 2002 and in the first half of 2003.
These projections are not intended to constitute a forecast of what will happen in the future, but instead a description of what may happen under a specific set of assumptions and circumstances. The most important assumptions concerning agricultural and trade policies are:
A - Demographic and macroeconomic assumptions
The "baseline" scenario uses the United Nations Population Division's "medium variant" for country population growth. United Nations data is also used for estimating the level and growth of urban and rural population, for projecting the impact of urbanization on changing consumption patterns, especially in developing countries. The Gross Domestic Product (GDP) growth macroeconomic assumptions are based mainly on World Bank and IMF long-term economic forecasts supplemented where necessary with data from other sources.
B - Policy assumptions
Policy assumptions underlying the projections are based on full compliance with all bilateral and multilateral agreements affecting agriculture and agricultural trade that are known at the time of preparing the projections.
In particular, the baseline projections for the European Union (EU-15) incorporate policy changes adopted as a part of the reform of the Common Agricultural Policy adopted in the framework of Agenda 2000.
The impact of the agreed EU enlargement to the ten Central and Eastern European candidate countries has not been taken into account in the "baseline scenario". However, the trade agreements that have been concluded by the EU, notably with the least developed countries (LDCs) and with the ten Central Eastern European Countries (CEEC) countries are discussed, whenever relevant, in the individual commodity chapters. They mainly concern the EBA initiative with duty-free and quota-free market access on all products except arms, originating in the LDCs and the "double-zero" agreements.
By contrast, the implications of the new US Farm Bill, the Farm Security and Rural Investment Act of 2002, as well as other national policy reforms have been incorporated in the present market projections. They assume full compliance with the internal support, market access and export subsidy provisions of the Uruguay Round Agreement on Agriculture (URAA). Thus, subsidized exports are expected not to exceed the annual URAA limits, whereas imports under current and minimum access are fully incorporated in the analysis. In addition, the URAA commitments are assumed to remain unchanged over the 2002-2010 period.
The transformation to market economies is assumed to continue in the countries of the former Soviet Union and other transition economies.
C - Technology and productivity changes
These are estimated to continue as estimated and/or assumed on the basis of historical data, adjusted by analyst judgement. Generally, the further introduction of genetically modified products is anticipated to be limited, and is not deemed to significantly affect markets during this period.
Commodity and country coverage
Like the 2005 projections, the current work has been undertaken utilizing the FAO's World Food Model, which simultaneously covers the cereal/livestock/fats and oil complex. Commodities covered outside the World Food Model include sugar, tropical beverages, fruits and agricultural raw materials.
The projections have a worldwide coverage. The World Food Model framework provides projections for 146 individual countries and country aggregates that generally include small countries and territories (Annex Table 1). Aggregate data for the EU relates to the 15 Member States treated as a group. To assess the impact of the projections outcome on the most food-insecure countries, special groupings were used in the World Food Model (Annex Table 2).
The main variables projected in the study are (i) the demand (final and for intermediate uses), production and net trade balances for each commodity and country; and (ii) key agro-economic variables, i.e. for crops (area and yield) and for livestock products (animal numbers - total stocks and off-take rates) and yields per animal.
A significant part of the total effort was devoted to the construction of a consistent set of historical and base year data. For the supply and demand analysis, the overall quantitative framework for the projections is based on supply/utilization accounts (SUAs) showing the sources and uses of agricultural commodities in homogeneous physical units for any year. The different commodities are aggregated into commodity groups using average export unit values as weights for the relevant periods. The compound growth rates for heterogeneous commodity groups shown in this study are computed from the value aggregates thus obtained.
The framework of the World Food Model
The World Food Model is interactive (i.e. allowing for the simultaneous determination of commodity supply, demand, trade, stock levels and prices) and dynamic (i.e. allowing for the outcome of one year or a sequence of years to influence the outcome of future years). Fundamentally it is a price equilibrium model, which means that commodity price is determined at the level where world supply is equal to world demand and all variables are simultaneously determined.
The model consists of a set of demand, supply and stock equations for each commodity and each country with the levels of production and demand determined by factors including population and income growth rates, income elasticities, own and cross-price demand and supply elasticities, demand and supply shift variables and various assumptions about economic trends and policies. However, price assumes a central role in the model, because it enters in the determination of all supply and demand equations for all countries and all commodities. Domestic prices are linked to world prices, which in turn are determined by world demand and supply. In equilibrium the difference between supply and demand for each country or country group represents net trade, while the world total of such differences is by definition equal to zero. The model incorporates resource constraints and provides for changes in fertilizer prices, crop conditions and livestock and crop farming technologies, as well as expert judgement.
Basic foodstuff production scenarios largely assumed the continuation of trends in area, livestock numbers and crop and animal yields, as modified by the interaction of prices generated through a market clearing mechanism and checked for technical feasibility. It assumes, with no exceptions, a continuation of current national and international policies affecting production, consumption and trade. It also assumes "normal weather", that is, the absence of any particular climatic condition, either favourable or unfavourable, which could affect yield or harvested area.
Elasticities and parameters used in the equations are mainly from estimates made by FAO, supplemented by the elasticity database of the United States Department of Agriculture SWOPSIM model and the Organisation for Economic Co-operation and Development's (OECDs) MTM model. All parameters are held constant during the projection period.
A technical description of the World Food Model specifications is included in Annex 2.
The projections for the commodities not included in the World Food Model, namely sugar, tropical beverages, fruit and agricultural raw materials were made using methodologies, ranging from detailed econometric commodity models to supply and demand projections based on past trends supplemented by expert judgements of commodity specialists. In a number of cases, the projections were prepared jointly or in cooperation with international commodity bodies and international commodity experts.
Annex Table 1 - Country coverage and classification used in the World Food Model
DEVELOPING ECONOMIES (112)
North Africa (5)
ALGERIA, EGYPT, LIBYA, MOROCCO, TUNISIA
sub-Saharan Africa (42)
Benin, Burkina Faso, Cape Verde, Côte d'Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, Togo, Angola, Cameroon, Central African Republic, Chad, Congo, Democratic Republic of the Congo, Gabon, Sudan, Burundi, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Mozambique, Rwanda, Somalia, United Republic of Tanzania, Uganda, Zambia, Zimbabwe, Botswana, Lesotho, Namibia, Swaziland, other African developing countries.
LATIN AMERICA AND THE CARIBBEAN (LAC) (25)
Central America (7)
Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama
The Caribbean (6)
Cuba, Dominican Republic, Haiti, Jamaica, Puerto Rico, Trinidad and Tobago
South America (12)
Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Uruguay, Venezuela, other Latin American developing countries
Near East (14)
Afghanistan, Cyprus, Islamic Republic of Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Saudi Arabia, Syria, Turkey, United Arab Emirates, Yemen, other Near East developing countries
South Asia (6)
Bangladesh, Bhutan, India, Nepal, Pakistan, Sri Lanka
Southeast Asia (16)
Cambodia, China (Mainland), China Hong Kong SAR, Taiwan Province of China, Indonesia, the Democratic Peoples Republic of Korea, the Republic of Korea, Lao Peoples Democratic Republic, Malaysia, Mongolia, Myanmar, Philippines, Singapore, Thailand, Vietnam, other Asian developing countries
Fiji, Papua New Guinea, Samoa, other Pacific developing countries
INDUSTRIALIZED ECONOMIES (11)
North America (2)
Canada, United States
EU15, Norway, Switzerland, other West European countries
Australia, New Zealand
Other industrialized countries (3)
Japan, South Africa, Israel
ECONOMIES IN TRANSITION (23)
Eastern Europe (8)
Albania, Bulgaria, Hungary, Poland, Romania, the Czech Republic, Slovakia, former Yugoslavia
Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Republic of Moldova, Russian Federation, Tajikistan, Turkmenistan, Ukraine, Uzbekistan
Baltic States (3)
Estonia, Latvia, Lithuania
Annex Table 2 - Special country groupings used in the World Food Model
LOW-INCOME FOOD-DEFICIT COUNTRIES (83)
North Africa (2)
Sub-Saharan Africa (41)
Angola, Benin, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, the Congo, Democratic Republic of the Congo, Côte d'Ivoire, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Nigeria, Rwanda, São Tomé and Principe, Senegal, Sierra Leone, Somalia, Sudan, Swaziland, the United Republic of Tanzania, Togo, Uganda, Zambia.
LATIN AMERICA AND THE CARIBBEAN (7)
Central America (3)
Guatemala, Honduras, Nicaragua
South America (2)
Near East (3)
Afghanistan, Syrian Arab Republic, Yemen
South Asia (7)
Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka.
South East Asia (7)
Cambodia, China, Indonesia, Democratic Peoples Republic of Korea, Lao Peoples Democratic Republic, Mongolia, Philippines
Kiribati, Papua New Guinea, Samoa, Solomon Islands, Tuvalu, Vanuatu
ECONOMIES IN TRANSITION (10)
Albania, Armenia, Azerbaijan, Bosnia and Herzegovina, Macedonia FYR, Georgia, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan
LEAST DEVELOPED COUNTRIES (49)
Angola, Benin, Burkina Faso, Burundi, Cape Verde, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Rwanda, São Tomé and Principe, Senegal, Sierra Leone, Somalia, Sudan, United Republic of Tanzania, Togo, Uganda, Zambia.
LATIN AMERICA AND THE CARIBBEAN (1)
Afghanistan, Bangladesh, Bhutan, Cambodia, Laos, Maldives, Myanmar, Nepal, Yemen
Kiribati, Samoa, Solomon Islands, Tuvalu, Vanuatu
NET FOOD-IMPORTING DEVELOPING COUNTRIES (21)
North Africa (3)
Egypt, Morocco, Tunisia
Sub-Saharan Africa (5)
Botswana, Côte d'Ivoire, Kenya, Mauritius, Senegal
LATIN AMERICA AND THE CARIBBEAN (11)
Central America (1)
Barbados, Cuba, Dominican Republic, Jamaica, Trinidad and Tobago, Saint Kitts and Nevis, Saint Lucia, St. Vincent and the Grenadines
South America (2)
South Asia (2)
Pakistan, Sri Lanka