The Conference, at its Fourth Session, recommended that, in preparation for the next session of the Conference, the Council should direct attention to (a) identifying the main problems and policy issues which arise out of the documentation, (b) preparing a short list of items for Conference discussions, and (c) giving guidance to the Conference on these issues.
In conformity with this recommendation, the Council appointed a Preparatory Committee to formulate findings concerning the world food situation and outlook. This Committee, which met in Washington, 7–11 November 1949, reviewed the documentation* and submitted a report to the Council. On the basis of the work of the Preparatory Committee, the Council has the honor to submit to the Conference the following report, which it hopes will facilitate the annual review.
* The documentation includes the whole or parts of the following:
The State of Food and Agriculture 1949 (C49/9)
Food and Agricultural Targets and Outlook for 1950/51 (C49/23)
Pre-Conference Regional Meeting Report for Latin America (C49/I/5)
Pre-Conference Regional Meeting Report for Near East (C49/I/6)
Pre-Conference Regional Meeting Report for Far East (C49/I/7)
Pre-Conference Regional Meeting Report for Europe (C49/I/8)
Situation and Outlook analyses prepared as working documents for each of these four meetings.
World Commodity Problems (C49/10)
Trends in International Trade in Agricultural Commodities (CL 6/4)
I. Situation Highlights
According to the picture presented by the documentation, total world agricultural production has regained prewar levels but, population having increased about 10 percent, the supplies available per person are still below prewar.1 At the projected rate of progress it is estimated that for the world as a whole the supply per person will not reach prewar levels for some six or seven years. (C49/23, page 9, tables 3 and 4).
The composition of the food supply is nutritionally inferior to prewar lower production of protective foods not being compensated for by higher production of grains, potatoes, and sugar. The supply of protective foods will take even longer to recover than that of energy foods.
1 The agricultural production index is computed as described in the Appendix to The State of Food and Agriculture - 1948.
The Second World War caused not only greater destruction but also far greater dislocation than the First World War. While considerable progress has been made in recovery from the effects of destruction, the dislocation has raised problems of so formidable and intractable a kind as greatly to retard the expansion of food production.
While agricultural production in the Far East and Europe has not yet fully recovered to the prewar level, production in North America expanded greatly to meet the larger home market and the urgent needs of war-damaged countries. Up till now this new high level of production has been maintained. The expansion was based largely on increased per acre yields but also, in the case of wheat, on increased harvested area. (The State of Food and Agriculture 1949, pages 52 and 53)
Consumption disparities between nations have become magnified. Some of the best-fed nations have become better fed, some of the worst-fed nations are worse fed. The proportion of the world's population in countries with an average daily diet of 2,000 calories or less has increased from about one-fifth to about one-third. At the other end of the scale, three of the four countries outside Europe which were above the 3,000 calorie level prewar have increased both their calorie and their protein intake per person.
Nevertheless in a number of countries the consumption disparities between income groups have been reduced. The level of consumption of the lowest income groups has improved, compared with prewar, because of (a) increased food supply, or (b) augmented purchasing power, or (c) rationing, special food distribution programs, food subsidies and like measures.
In the international trade situation, the most significant feature is the massive increase in the share of the United States and Canada in world exports. Their share in world food exports has risen in the past ten years from less than one-seventh to about two-fifths of the total. The United States share in world exports of bread grains rose from about one-tenth before the war to close on one-half since the war.
The volume of food exports of the rest of the world (other than the United States, Canada, and Cuba) has fallen some 40 percent and is recovering only slowly. In some of these countries war damage has still to be made good, while in others internal civil disorders have retarded the resumption of production for export. Many are underdeveloped countries in which industrialization is promoting a needed increase in food consumption, leaving a smaller surplus for export.
While the world is relying more heavily on dollar countries for both agricultural and industrial goods, the means of paying for them have decreased. Many of the food-deficit countries have lost important direct sources of dollar earnings. Moreover, a large part of the dollars formerly earned by them from the underdeveloped countries are no longer available, since many of these latter countries are either just balancing their dollar trade or in some cases even running dollar deficits in connection with their industrial development.
Out of all this has grown a situation of inherent instability in which even the present inadequate consumption levels of the food-deficit areas are precariously held. This basically unstable position has been maintained thus far by (a) depletion of the gold and dollar reserves of soft currency countries, and (b) loans and gifts by the United States on an unprecedented scale (CL 6/4 - Appendix Table 6).
Any sudden fall in the dollar earning of the food-deficit countries or in the volume of United States gifts and loans might precipitate a food shortage in those countries and a surplus disposal problem in North America. Experience early in 1949 showed how sensitive those dollar earnings (particularly those from the United States merchandise imports) are to any fall in United States industrial activity and consumer purchasing power.
Thus the future of the expanded agricultural production in North America becomes an increasingly important and urgent practical problem. In the face of extremely low consumption levels and exchange difficulties in other areas, means must be devised to assist the maintenance of a high level of efficient agricultural production in North America and a large volume of agricultural exports. At the same time, efficient production in the soft currency area must also be maintained and expanded where possible.
II. Current Policies of Governments
Government agricultural policies are an important force shaping the world food and agriculture situation. The following paragraphs bring out some of the common tendencies in these policies (as reported in the documentation) in order that each government, developing its policy separately in the light of all the factors confronting it, may give proper weight to the collective impact of the agricultural policies of all the members of FAO.
A number of countries report the continuation or initiation of programs for improving the diet of vulnerable groups and poorer classes. Many more governments need to give attention to this matter, especially in countries where over-all food supplies will for some time remain inadequate and where, therefore, the most effective utilization of them acquires particular importance.
Most countries with relatively inadequate per caput consumption envisage an expansion of their agricultural production, but apparently in most cases not an expansion of sufficient magnitude to remedy substantially their nutritional problem in the near future.
Most underdeveloped countries envisage reduced imports and expanded exports of food and agricultural products, even where food consumption is low. This is related to their desire to have the maximum possible quantity of foreign exchange available for purchases required in connection with industrialization and general economic development and to their general inability to export any large quantity of products other than food and raw materials.
Regional meetings in Latin America, the Near East, and the Far East emphasized that many governments may have to give greater attention to (a) production of more nutritionally valuable foods for domestic consumption, (b) diversification from one or two export crops to a wider variety of products, (c) devoting more land to the production of crops, such as roots and tubers, having a higher calorie output per acre than bread grains, (d) development of extension and other government services for agriculture, and (e) policies of soil conservation and improvement.
The majority of the more developed countries have policies designed to reduce food imports and expand food production. Most though not all of these countries are driven to these policies by their balance of payments and other postwar difficulties. The reports of the regional meetings at Singapore, Rome, and Beirut indicated that the persistence of international disequilibrium may push some countries further along the road toward self-sufficiency at increasing economic cost.
A few of the more developed countries with actual or imminent agricultural surpluses have initiated action to reduce their output of export agricultural products. Thus some countries, such as the United States, are embarked upon a policy of restriction of the output which they cannot sell while underfed countries are restricting imports which they need but cannot buy.
In the light of the reported agricultural “programs” of various countries there appears an important commodity dilemma, namely, that for most farm products the intentions to export substantially exceed the intentions to import. Assuming implementation of the programs and the maintenance of present agricultural prices and other economic factors, this situation might arise for bread grains, coarse grains, rice, sugar, fats and oils, and fish. By contrast projected exports might be less than projected imports of coffee, lumber, and wood pulp.
III. Questions for Particular Consideration
How to bring about the necessary expansion of agricultural production in underdeveloped countries
The attainment of desirable nutritional standards on a durable basis in the underdeveloped countries of the world must be achieved by the full mobilization of the agricultural resources of these countries for the expansion of production. The primary responsibility for achieving this must rest on national governments and national action.
Such expansion of agricultural production cannot be achieved and sustained in many countries without simultaneous balanced development of industry with a view to stimulating purchasing power.
In connection with agricultural expansion, the extended technical assistance program recently commended by the Economic and Social Council and the General Assembly of the United Nations acquires special significance. More than any other program of international aid, this one can transform the lives of hundreds of millions of disadvantaged peoples. To take full advantage of the program, governments of underdeveloped countries will need to examine the difficulties which impede the expansion of food production and prepare projects for overcoming them. In the preparation and execution of such projects - including notably agricultural extension services, better use and conservation of soils, and improvement of crop and livestock production - technical assistance can be of very great value.
In many of these countries governments may need to divert to agriculture a larger proportion of their available financial resources. Drainage or irrigation works, land clearance or afforestation, livestock improvement and mechanization all require large sums of money. So do equally important items which indirectly benefit agriculture such as the improvement of transportation and of storage facilities. Because the capacity of the low income countries to save is low and the need for capital investment high, domestic capital will need to be supplemented in many cases by foreign capital. In some cases the availability of foreign loans for the purchase of production goods will enable more of a country's foreign exchange to be used for the purchase of needed consumer goods including food.
To expand agricultural production, greater attention needs to be given to the problem of the transfer of population, including temporary agricultural workers, from areas where labor is surplus to areas where labor is scarce.
How to maintain and expand high levels of agricultural production and consumption in the face of the current financial disequilibrium and balance of payment difficulties
Unless a concerted effort is made to restore trade and payments equilibrium, the persistence of present difficulties threatens to reverse the trend toward freedom from want of food. It would compel some of the largest surplus-producing countries to restrict their agricultural output and deficit countries to expand their production at any cost. Solution of these difficulties must be sought in two directions.
The first line of attack comprises all measures which increase the dollar earnings of deficit countries, including
the maintenance of a high level of industrial activity and consumer purchasing power in the dollar area, particularly the United States, thus sustaining among other things the level of imports;
appropriate action by the hard currency countries to increase their imports from the soft currency areas;
an increase in the competitive power of soft currency products in hard currency markets by a further reduction in cost and adjustments in quality; and
the maintenance of an economically sound relationship of prices (and also costs) between soft and hard currency countries.
These measures for achieving more balanced international economic relationships presuppose the maintenance and, where possible, the expansion of economically efficient production in the soft currency area, expansion of the exchange of goods between the countries of that area, and avoidance of policies of self-sufficiency in products which could be so exchanged. Further, they assume necessary modifications of national commercial and fiscal policies with a view to stimulating the importation and consumption of agricultural products.
The second line of attack is to encourage a large and regular flow of investment from the hard to the soft currency area. While international loans for development purposes are generally speaking more urgently required in low income areas, the balance of payment effects are favorable whatever parts of the soft currency area obtain such loans.
At the same time as steps are being taken to deal with the balance of payments problem, serious consideration should be given to current national agricultural price policies and to appropriate price adjustments reflecting technological improvements:
to promote more rapid economic recovery in the devastated countries;
to discourage uneconomic agricultural production; and
to secure maintenance of a high level of output in areas of greatest relative productivity.
It cannot be foreseen how successful these various measures vigorously undertaken will be in restoring trade and payments equilibrium. To the extent that they fail, the countries which now rely heavily on dollar sources for supplies of food and other products would be forced to greater self-sufficiency by expanding production, even at high cost, within their own territories or in other parts of the soft currency world. Such expansion generally must be initiated well before the products are required because of time involved in consummating agricultural development projects, especially in hitherto untried areas. It would involve considerable new investment, in many instances in projects of relatively low productivity.
Even if the proposed remedial measures ultimately succeeded in closing the dollar gap, this would take time, and meanwhile agricultural surpluses threaten to emerge in the hard currency area. If restriction of production cannot be advocated, both for humanitarian and economic reasons, other policies will have to be considered. Various measures to stimulate a larger internal consumption might dispose of some of the surpluses. Some might be transferred to other needy countries through special forms of financing either by unilateral action or multilaterally with the consent of all interested parties.
The various measures here discussed might together contribute powerfully to the achievement of a viable equilibrium in the world pattern of trade and payments and of production of the products traded. The great difficulties of the situation make it necessary, however, for these corrective measures to operate in the presence of the numerous other measures (such as import quotas, exchange controls, bilateral trade agreements, export subsidies, gifts, price or income supports, and measures of rural social policy) by which governments deal with the inescapable short-run problems associated with major dislocations. To employ these other measures to prevent immediate catastrophe and yet to apply them with sufficient restraint not to inhibit progress toward the organization of a world of multilateral trade and convertibility - a world in which the pervasive price mechanism is allowed to play a useful role - calls for the most understanding cooperation of governments in an effort to fit their policies together into a pattern that will best serve the common good.
Annex - Arrangements for Future Program Reviews
If the policies and measures outlined in this report are adopted, more governments ought to be (a) establishing production, consumption, and trade targets, and (b) formulating action programs for attaining those targets. This will have the secondary advantage of enabling a more complete world picture to be presented at future review sessions.
In order to improve the preparations for the annual review of targets and programs, the pre-Conference meetings recommended that governments (a) report more fully and promptly to FAO, (b) more generally conform to the established model for presentation of data in order to facilitate greater comparability, and (c) make fuller use of FAO advisory experts in program planning, in establishing statistical services and cognate matters.
It is important that governments' reports be prepared sufficiently far in advance to permit a full exchange of data between all member governments. Forward targets should preferably refer to a consumption year beginning at least 12 months after the annual review in question. For example, if the Conference were to meet in February 1951 the targets ought to refer to the consumption year 1952/53.
Opportunity should be provided for detailed examination and discussion of the targets and programs three to four months before the annual Conference session. This examination might usefully include a consideration not only of future targets but also of progress made in achieving the targets presented the previous year.