I. CURRENT AGRICULTURAL SITUATION - FACTS AND FIGURES
1. CROP AND LIVESTOCK PRODUCTION
World crop and livestock production in 1998 is estimated to have expanded at a very modest rate of only 1.1 percent, the lowest since 1993. This unfavourable outcome is to a large extent the result of a decline in output in the developed countries, estimated to be 1 percent. However, the performance of the developing countries as a group was also relatively disappointing during 1998. Their agricultural production expanded by only 2.6 percent, lower than the already relatively modest rate of 2.9 percent in 1997, although this slowdown follows a series of high rates, in the range of 4 to 5 percent, recorded from 1993 to 1996.
Estimates of agricultural production in 1999 are still provisional, but point to an expansion in global crop and livestock production of roughly the same limited order of magnitude, 0.9 percent, in 1998. For 1999, however, while the developed country performance appears to have improved slightly relative to 1998, the developing country group appears to have experienced a further deceleration in the rate of increase of crop and livestock production. If the provisionally estimated rate of expansion of 1 percent for the developing countries were to be confirmed, 1999 would be the third consecutive year of noticeable slowdown, representing the lowest recorded rate of growth in agricultural production in the developing countries since 1972.
A major factor behind the slower growth of output in developing countries is the worsening performance of the Far East and the Pacific developing region. Production growth in this region slowed to only 1.8 percent in 1998. Bad weather conditions, in particular torrential rains from June to September in some countries and El Niño-related droughts in others, were the main common factors behind the worsening performance. The provisional estimates for 1999 indicate that regional production growth may have slowed further, to only 1.2 percent. Such developments are, to a large extent, determined by the situation in China where, after six consecutive years of output growth at more than 5 percent, agricultural output growth in 1998 fell to a more modest 3.3 percent, as floods in the central parts of the country affected, in particular, the rice and wheat crops. Provisional estimates for 1999 point to almost stagnant production, with output increasing by less than 1 percent. In particular, a slight reduction in paddy output is expected, partly owing to the lowering of the state purchasing prices for inferior quality grains and to crop damage caused by heavy rains in June and July. India recorded a slight reduction, of less than 1 percent, in agricultural output in 1998, while a modest recovery was expected to take place in 1999. Other larger countries in the region suffered either declines in agricultural production (Indonesia, the Philippines, the Republic of Korea, Thailand, Malaysia) or slowdowns in output growth (Bangladesh, Cambodia) in 1998. Resumed output growth was expected in 1999 in most of these countries, with the exceptions of Indonesia and the Republic of Korea. The production estimates now point to Viet Nam as the most consistently positive agricultural performer in the region, with rates of production growth near or above 5 percent for the past eight years.
In Latin American and the Caribbean, agricultural production also experienced slower growth in 1998, at an estimated rate of 1.9 percent. The slowdown is largely accounted for by a below average rate of expansion in Brazil, where crops were hit by droughts in parts of the country and rains caused exceptional damage, affecting wheat-producing regions in particular. The Andean region was affected by severe dry spells, which caused output to stagnate in some countries and actually to decline in others. Hurricanes George and Mitch caused immense human and material losses and also damaged agriculture in several countries in Central America and the Caribbean. On the other hand, strong output growth was recorded in Argentina. Estimates for 1999 point to an expansion in agricultural production at a rate only slightly higher than that of 1998. While performance in 1999 should improve markedly in Brazil and Peru, Argentina and Chile appear to have witnessed stagnating or slightly declining levels of production and the rate of growth appears to have slowed in Mexico.
In sub-Saharan Africa, agricultural output recovered in 1998 from the small decline of the previous year and grew by an estimated 4.3 percent, largely owing to strong expansion of production in Nigeria, which followed the contraction in 1997. Particularly good performances were also recorded for Angola, Ghana, Mozambique and Uganda, while Ethiopia, Zambia and Zimbabwe witnessed a decline, estimated in the 3 to 5 percent range, and the Sudan and the Democratic Republic of the Congo saw stagnating levels of production. The provisional estimates for 1999 indicate that agricultural production growth may have slowed to less than 2 percent, with lower rates of growth in the strong performers of 1998 and actual declines expected in Angola, Kenya, the United Republic of Tanzania and Zimbabwe.
Map 1: CHANGES IN CROP AND LIVESTOCK PRODUCTION
In the Near East and North Africa region, agricultural production in 1998 more than recovered from the decline of 1997, growing by an estimated rate of more than 8 percent. A major factor behind this was increased production in the North African countries - Algeria, Morocco and Tunisia - which had suffered a sharp weather-induced downturn in 1997. But performances also improved markedly, with strong expansion of production, in such other countries as the Islamic Republic of Iran, the Syrian Arab Republic and Turkey. In Egypt, by contrast, agricultural production is estimated to have suffered a slight decline. Estimates for 1999 point to another decline in agricultural production in the region, currently estimated to be 3 percent. The major factor behind this is another sharp decline in Morocco, where the cereal crop has fallen by almost half as a result of inadequate rainfalls and reduced plantings, and declines in production are estimated also for the Islamic Republic of Iran, Jordan, the Syrian Arab Republic and Turkey.
The transition countries experienced a 6 percent decline resulting mainly from a further severe contraction recorded for the Commonwealth of Independent States (CIS), where many of the major producing areas were seriously affected by drought. Production declined significantly, inter alia, in the Russian Federation, Ukraine and Kazakhstan. Outside the CIS, a major decline in agricultural production was also recorded in Romania, while strong output growth was recorded in Poland. Estimates for 1999 point to a marginal increase in production in the transition countries as a group, with further slight declines expected for the Russian Federation and Ukraine, strong recovery in Kazakhstan and more modest output growth in Romania. Only relatively minor variations in agricultural production have been estimated for the remaining developed country groupings in 1998 and 1999, with only North America recording increases in production in both years.
2. FOOD SHORTAGES AND EMERGENCIES
The number of countries facing food emergencies as of February 2000 is estimated to be 32, compared with 38 in February 1999.
In East Africa, substantial food assistance will be required throughout 2000, mainly because of drought-induced crop and livestock losses. Successive poor rains in most pastoral areas of the subregion have severely affected pastures and livestock, resulting in acute food shortages and the migration of thousands of people in search of water and food. Past or ongoing civil conflicts have also seriously disrupted food production and distribution in some areas, causing food shortages and mass population displacements. In Somalia, poor Deyr season rains have exacerbated food supply difficulties in some southern regions. In Kenya, food assistance is urgently sought for more than 2.7 million people in the drought-affected Northern Plainlands and North-Eastern Province. In Eritrea, nearly 600 000 people, affected by the war with Ethiopia and by drought, need urgent food assistance. In Ethiopia, the food supply situation is very tight for more than 8 million people, including some 400 000 displaced by the border war with Eritrea. In the Sudan, despite a stable food supply situation, about 103 000 tonnes of food aid is needed for some 2.4 million people affected by drought and the long-running civil conflict. In the United Republic of Tanzania, localized crop failures have affected thousands of people in several central and lake regions. In Uganda, despite an improved food supply situation in most parts of the country, serious food shortages owing to drought are reported in the eastern Karamoja region, while food assistance is being provided to people affected by persistent insurgency in the north and west of the country.
In West Africa, following two consecutive above-average crops in 1998 and 1999 in most countries of the Sahel, the food supply situation is stable and markets are well supplied. Households and national food security stock managers have been able to replenish their stocks. However, some areas were affected by floods in September and October 1999, notably in Mauritania, the Niger and Senegal. In coastal countries along the Gulf of Guinea, floods also affected northern regions of Benin, Ghana, Nigeria and Togo. Following many years of civil strife, Liberia and Sierra Leone remain heavily dependent on international food assistance, despite some improvement in food production in Liberia.
In the Great Lakes region, food shortages persist in several countries. In Burundi, the food supply situation is tight following reduced harvests caused by dry weather and persistent civil strife. In particular, the food and health situation is critical for some 800 000 displaced people in camps who have no access to their fields. In Rwanda, despite an improvement in food production, food shortages persist in certain areas that were affected by drought. In the Democratic Republic of the Congo, severe food shortages and malnutrition are reported among large numbers of the displaced population, mainly in the northeastern Katanga and south Kivu areas, which remain inaccessible owing to insecurity. The security situation is improving in the Congo, but displaced populations are still vulnerable.
In southern Africa, the worst floods in 40 years struck Mozambique, South Africa, Botswana and Swaziland in early February, leaving tens of thousands homeless and causing considerable damage to infrastructure. In Mozambique, the worst hit country, the number of people severely affected by the floods and in urgent need of emergency food assistance is currently estimated to be 300 000 but is still rising. In Angola, emergency food aid continues to be needed for 1.1 million internally displaced people as a result of the protracted civil conflict; food aid is also required by large numbers of Angolan refugees in neighbouring countries.
In the Near East, food production in Afghanistan is likely to be constrained by serious shortages of agricultural inputs and population displacement. In Iraq, despite recent beneficial rains, prolonged drought conditions and shortages of agricultural inputs continue to affect cereal production. In the Islamic Republic of Iran, Jordan and the Syrian Arab Republic, which were affected by drought last year, crop prospects have improved recently following favourable rains.
In Asia, vulnerable populations in a number of countries continue to be affected by serious food supply difficulties resulting from past disasters and the effects of economic turmoil. Two large natural catastrophes affected the region in 1999. The first was the cyclone in northeastern India, which covered the states of Orissa, West Bengal and Andhra Pradesh and had a severe impact on household food security. The second disaster was in Viet Nam, where the worst flooding in decades affected central coastal areas in late October 1999. In the Democratic People's Republic of Korea, the food supply situation continues to give cause for concern as domestic food production remains well below needs, while economic problems are heavily constraining the country's capacity to supply essential inputs to agriculture and to import commercially. In East Timor, overall food supply prospects in the medium to long term are less gloomy than envisaged at the height of the crisis following the August 1999 referendum. Concerns persist regarding the plight of refugees still in West Timor, with the United Nations Children's Fund (UNICEF) reporting moderate to severe malnutrition in camps. In Mongolia, the transition from a centrally planned to a market economy has resulted in the dismantling of various state structures, including state farms. As a consequence, productivity and production have fallen, resulting in deterioration in food security among vulnerable groups.
In Latin America, unusually adverse weather phenomena have affected the whole region in the last few years. A prolonged drought in 1994 inflicted severe damage on the important first-season cereal and bean crops in Central American countries. Losses in the range of 25 to 30 percent of anticipated production were incurred. Hurricanes Lily (1996) and George (1998) in the Caribbean were followed by hurricane Mitch, one of the most destructive natural disasters of the century which swept across Central America in late 1998, devastating all crops along its path and leaving a large number of victims and immense damage to housing and infrastructure. To date, countries are still in the process of reconstruction. Furthermore, and most important, virtually the entire region was severely affected by the El Niño phenomenon for a long period, extending from early April 1997 to late September 1998 and resulting in diverse negative effects such as torrential rains, flooding, severe droughts and extensive forest fires in parts of the region. Finally, in December 1999, incessant torrential rains in Venezuela resulted in deadly slips and mudslides, aggravated by very serious flooding. There were more than 30 000 casualties and extensive damage to housing and infrastructure.
In Europe, several of the Balkan countries remain affected, to a lesser or greater extent, by a decade of civil unrest which culminated most recently in war in Kosovo Province of the Federal Republic of Yugoslavia (Serbia and Montenegro) in the first half of 1999. The Federal Republic of Yugoslavia now has more refugees than any other European country and is in a state of acute economic crisis. This is characterized by, inter alia, the deterioration of public utilities, the destruction of fertilizer and fuel plants and the virtual collapse of social services. At the beginning of 2000, there are estimated to be more than 1.1 million refugees, internally displaced and economically and socially deprived people receiving food assistance in Serbia (excluding Kosovo Province) and Montenegro while, in Kosovo Province, a further 1 million persons are receiving food aid. Assistance continues to be provided also in Albania and The Former Yugoslav Republic of Macedonia for remaining refugees and other persons rendered vulnerable by the Kosovo
war in 1999.
In the CIS, civil strife in Chechnya has led to the destruction of the capital, Grozny, other villages and basic infrastructure. The situation in agriculture is critical, with severe damage inflicted on livestock and the grape growing industry and mined fields. Hundreds of thousands of people have been displaced, either within the country or to neighbouring autonomous states, particularly Ingushetia, a small country of some 300 000 inhabitants who are hosting about 200 000 refugees. The food security of the civilian population trapped in Chechnya is rapidly deteriorating and the outlook for winter grain and fodder crops is bleak. Elsewhere in the CIS, economically vulnerable people and internally displaced or refugees in Armenia, Azerbaijan, Georgia and Tajikistan continue to need food assistance. In these countries, gross domestic product (GDP) is recovering, but slowly, from a level of less than half of that in 1990, but their economies remain fragile. The devaluation of the Russian rouble in August 1998 and the associated cutback in trade have slowed recovery. Many vulnerable people, notably the aged, disabled and recent refugees, are not in a position to benefit from market reforms, and targeted food aid is likely to be necessary in the years to come. In Tajikistan, serious crop losses caused by the infestation of wheat by yellow rust and smut in 1999 will need to be addressed if cereal output is to recover in successive years.
3. WORLD CEREAL SUPPLY SITUATION AND OUTLOOK1
World cereal production in 1999 reached 1 865 million tonnes (including rice in milled terms), slightly below the previous year's level but above the average of the past five years. The decline was mostly a result of lower wheat and coarse grain production. Global wheat production fell in 1999, for the second consecutive year, to about 589 million tonnes, down 2 percent from 1998. Severe drought in the Near East and parts of North Africa, as well as excessive rainfall at planting time in northern Europe, were the main causes of the decline in 1999 wheat production. A 5 to 10 percent rise in compulsory set-aside in the European Union (EU), combined with planting cutbacks by several wheat growers in response to low prices - particularly on winter wheat plantings in the United States - also had a negative impact on global production. However, the decline was partially offset by favourable weather and higher yields in a number of other countries, including Argentina, Australia, Bangladesh, Canada, China, India and the Russian Federation.
At an estimated 876 million tonnes, global output of coarse grains in 1999 was about 4 percent below the previous year. Smaller harvests were gathered throughout all regions of the globe with the exception of Central America, where production remained unchanged, and Europe, where it increased marginally. Significant declines occurred among some of the major producers, including Argentina, China, the EU, India and the United States. In several countries, such as China, exceptional dry conditions during the growing season were responsible for the reduction in output, while in the United States planted area declined but the yield was above average.
World paddy output in 1999 is estimated to have returned to the trend prevailing in the 1990s, after the disappointing 1998 season caused by weather problems in major producing countries. Supported by an expansion in area and generally favourable growing conditions, paddy production rose by 2 percent, to 598 million tonnes in 1999, more than twice the growth rate of 1998. Much of the increase was concentrated in Bangladesh, Brazil, Egypt and the Philippines, but Argentina, India, Indonesia and the United States also performed well. By contrast, output contracted in China following the launch, in 1998, of new policies geared towards enhancing quality grain production, which discouraged the planting of early rice, considered to be an inferior grain.
In 1998/99, total cereal utilization rose slightly above the level of the previous season, to 1 875 million tonnes. At this level, global cereal utilization returned to close to its long-term trend (1986-1998), after being above trend for the previous two seasons. The volume of cereals used for food consumption rose the most, while global feed usage was down slightly from the previous season. All of the increase in cereal utilization occurred in the developing countries. Overall, the growth in world food consumption slightly exceeded the rise in population, resulting in a small increase in per caput food consumption of cereals in 1998/99. Despite a continuing decline in grain prices during the 1998/99 season, which would normally stimulate demand, world utilization of cereals for feed declined slightly, mostly in response to the slow economic growth of several countries in Asia and a continuing contraction in the livestock sectors of the emerging economies of Eastern Europe and the CIS. Looking into the 1999/2000 season, world cereal utilization is forecast to increase by about 3 percent to 1 882 million tonnes. As in the previous season, overall consumption of cereals for food is expected to keep pace with population growth while the total volume of cereals destined for animal feed is expected to remain close to the previous year's level.
World cereal stocks for crop years ending in 2000 are forecast to reach 332 million tonnes, down by 4 million tonnes from their opening levels. The main reason for this decline is the projected level of world cereal utilization in 1999/2000, which is expected to outpace production. A decline in the wheat and coarse grains inventories held by some of the major exporting countries would account for the bulk of this reduction, while rice carryovers are likely to increase for the second consecutive year. Overall, the ratio of global cereal carryovers to trend utilization in 2000/01 would be 17.4 percent, pointing to a small deterioration from the previous season but still within the 17 to 18 percent range that the FAO secretariat considers to be the minimum necessary to safeguard world food security. Moreover, the percentage share of global cereal stocks held by major exporters, an additional indicator of global food security, is expected to remain stable at last year's level of around 45 percent.
The reduction in wheat and coarse grain production in 1999 is mostly responsible for the expected decline in wheat and coarse grains inventories. However, rice stocks are expected to recover from the reduced levels observed in recent years to the highest since 1994. Most of the rice stock buildup will be in the major exporting countries, particularly Thailand, Viet Nam, the United States and India.
Global cereal trade in 1999/2000 is expected to reach 222 million tonnes, some 8 million tonnes, or 4 percent, more than in the previous season. The increase is attributed to an expansion in wheat and coarse grain trade as rice imports are projected to decline slightly. For the developing countries as a group, cereal imports are expected to rise to an all-time high of about 160 million tonnes. While larger wheat imports would account for the bulk of this increase, the gradual economic recovery in southern Asia is likely to result in some expansion in coarse grain trade as well.
At the current forecast levels, the cereal import bill of the developing countries in 1999/2000 is expected to reach roughly $21 billion, which would be about $670 million, or 3 percent, below the previous year's value. Weaker international cereal prices during the course of the season are expected to more than offset the rise in import volume. In making this estimate, the total volume of food aid shipments during the 1999/2000 season is assumed to remain unchanged from the previous season. For the low-income food-deficit countries (LIFDCs), cereal imports are likely to remain at last year's estimated volume of around 70 million tonnes. However, given the prevailing low prices, the overall cereal import expenses for this group of countries are expected to fall by at least $670 million, or 5 percent, to around $9.1 billion.
Based on the current evaluation of the latest official and trade sources and assuming normal growing conditions, the early outlook for the 2000 wheat crop suggests a global production level close to that of 1999. While plantings have yet to begin in the Southern Hemisphere, in the Northern Hemisphere a combination of good yields and higher plantings could result in greater production. Favourable weather conditions in many parts of Asia and North Africa could boost production in countries adversely affected by drought in 1999. Wheat planting in the EU is forecast to rise, as current large domestic supplies of rapeseed, combined with a reduction in aid to oilseeds under the first year of Agenda 2000 reform, could encourage increased wheat planting. In Canada, official estimates point to an increase in spring wheat area at the expense of canola and flaxseed because of favourable wheat prices. By contrast, the winter wheat seeding in the United States was officially set at its lowest level since 1972, apparently because farmers were responding to continuing prospects of low prices at planting time. In China too, latest estimates put winter wheat planting area down by nearly 7 percent from the previous year, mostly in response to low prices and the recent government decision to eliminate support prices for low-quality winter wheat. In the Southern Hemisphere, some of the 2000 coarse grain crops are already planted in the major producing countries. In southern Africa, early prospects are favourable, reflecting generally abundant rains and reports of increased plantings. Similarly, in South America, weather conditions are generally favourable. Although an increase in paddy production can be expected in 2000, it could be modest, as there are indications that low prices in 1999 have prompted some countries in the Southern Hemisphere - including Australia, Argentina and Brazil - to reduce plantings. While, in the Northern Hemisphere, planting for the 2000/01 season will not start until April or May, current policies in China could bring about a further cut in output. By contrast, Indonesia has already announced a production target that is about 1 million tonnes, or 2 percent, higher than the actual 1999 crop.
4. EXTERNAL ASSISTANCE TO AGRICULTURE
According to provisional data for 1998, total commitments of official development assistance (ODA) from the major bilateral and multilateral donors to developing countries for agricultural development amounted to $12 316 million in current prices. This is almost exactly the same level as was recorded in 1997 ($12 340 million) but represents an increase over the
level of 1996.
When measured in constant 1995 prices, the multilateral and bilateral donors' commitments have increased since 1995, but still remain 8 percent below the level that opened the decade in 1990.
The share of concessional assistance in total commitments is estimated at 65 percent in 1998, well below the shares of 1988, at 77 percent, and 1996, at 74 percent. The share of grants in total commitments has remained relatively stable throughout the 1990s and represented 28 percent in 1998.
The contributions made by bilateral donors, mainly countries in the Development Assistance Committee (DAC), remained about $4.3 billion in both 1997 and 1998. Japan contributed $1 797 million and $1 853 million, respectively, for the two years, and thus remained the leading donor among DAC members. In 1997, Germany was the second donor in terms of volume, but was surpassed by the United States in 1998 with a volume of $402 million.
The increased levels of assistance in 1997 and 1998 over that of 1996 were represented entirely by increased levels of multilateral assistance, particularly from the International Development Association (IDA), while bilateral assistance was actually lower than in 1996.
Throughout the 1990s, the flow of funds to primary agriculture (including fisheries and forestry) have tended to decline, while there has been increasing attention to other areas, in particular environment protection and rural development and infrastructure.
As for the geographic distribution of flows, there has been a declining trend throughout the 1990s in the share going to Africa. In 1998, the largest share of commitments went to Asia (46 percent), with Latin America and the Caribbean in second place (23 percent) and Africa third (21 percent). A smaller share went to Europe (2.5 percent) with an unallocated residual of
5. FOOD AID FLOWS2
Total cereal food aid shipments, under the programme, project and emergency categories in 1998/99 (1 July to 30 June) reached 9.5 million tonnes, up by more than 3 million tonnes, or 53 percent, from 1997/98 and the highest since
1993/94. Shipments from the United States more than doubled to 5.6 million tonnes, while those from the EU also rose, by more than 30 percent to 2.4 million tonnes. Among other countries, larger donations were registered for Japan, whereas those from Australia and Canada declined slightly. The increase in cereal food aid shipments concerned mostly wheat, rice and rye.
On the recipient side, the bulk of the increase in food aid shipments went to the Russian Federation in the form of cereals, which rose from only 42 000 tonnes in 1997/98 to more than 1.3 million tonnes in 1998/99. Shipments to Bangladesh also rose substantially, by more than 1 million tonnes to roughly 1.6 million tonnes. Cereal food aid to Indonesia exceeded 700 000 tonnes, compared with only
9 000 tonnes in the previous year. Larger shipments were also registered to the hurricane-ravaged countries of Central America, especially Honduras, Guatemala and Nicaragua. In Africa, cereal food aid to most countries fell; the exceptions being mainly Eritrea, Guinea-Bissau, Sierra Leone, the Sudan and Zimbabwe. In Asia (in addition to Bangladesh and Indonesia, which were mentioned earlier), larger food aid shipments were registered to Mongolia and Nepal, while cereal donations to many other countries fell drastically, including those to the Democratic Republic of Korea, one of the largest food aid recipients in recent years. Similarly smaller shipments were registered to Armenia, Sri Lanka, Azerbaijan, Georgia, Kyrgyzstan and Tajikistan.
In June 1999, major donors approved the new Food Aid Convention (FAC) and confirmed their intention to implement it for an initial period of three years, starting in July 1999. The new FAC calls for a more flexible approach to food aid by expanding the list of eligible commodities and the methods of contribution. The commodity list has been extended to include edible oils, root crops (cassava, potatoes, etc.), skimmed milk powder, seeds for eligible crops, sugar, products that are part of the traditional diet of vulnerable groups or a component of supplementary feeding programmes, and micronutrients and fortified food products. These food items, in aggregate, will be limited to no more than 20 percent of any donor's commitment, with individual commodities limited to between
3 and 7 percent of the total donation, excluding transportation and other operating expenses. Overall, the total volume of commitments under the 1999 FAC is 4.89 million tonnes in wheat equivalent, compared with 5.35 million tonnes under the 1995 FAC . The difference is accounted for by the EU's pledge to provide 130 million euros in cash, equivalent to a volume of about 588 000 tonnes, including transportation costs. At current prices and transportation costs, the food aid volume commitment under the new convention is roughly equivalent to the previous one.
6. INTERNATIONAL AGRICULTURAL PRICES
In the international wheat market, prices have remained under downward pressure during the first half of the 1999/2000 season, mostly reflecting good harvests in the major producing countries. In the futures market, soft red winter wheat values were under continuous downward pressure, particularly between October and December when they were quoted at some $10 to $18 per tonne less than in the corresponding period in 1998. Against the background of abundant global exportable supplies and the current favourable 2000 production prospects, support for a sustained recovery in international wheat prices would have to come from a strong rise in global import demand during the 2000/01 marketing season. However, considering that the trade expansion in 1999/2000 mostly reflected large purchases by a few drought-stricken countries, the likelihood of a further rise in import demand in 2000/01 could be limited should yields return to normal.
World coarse grain prices also remained under downward pressure during the first half of the 1999/2000 season. Large exportable supplies and weak import demand have driven international coarse grain prices down, although some support has come from rising demand in southern Asia. The United States maize export prices between July and December averaged around $89 per tonne, $6 below the comparable period in the previous season. However, starting in January, maize prices began a slow recovery, mostly in response to an expected decline in stocks, especially in the United States. Nevertheless, with large export supplies in the United States and several other exporters, including China, any possibility of supply tightness in the short term is unlikely. In addition, reports of higher plantings in Argentina and the United States would reduce support for maize prices unless the improving economic conditions, especially in Asia, could fuel a much faster rise in feed demand than currently projected.
International rice prices followed a downward trend during most of 1999, as good harvests in a number of the major exporting countries coincided with a production recovery in many of the major importing countries. The FAO export price index for rice (1982-84 = 100) started the year with a monthly average of 125 points in January and ended it with an average of 105 points in December. For 1999 as a whole, the index averaged 114 points, down from 127 points in 1998 and the lowest since 1994. The general weakness in rice prices is expected to continue at least through the early months of 2000, barring any major shocks from the demand or supply sides.
Cocoa bean prices declined during 1999 to the lowest levels of the past five years owing to abundant world supplies and weaker than anticipated demand. Prices fell sharply for most of the 1999 calendar year, with the International Cocoa Organization (ICCO) average monthly price decreasing 37 percent over the year. Overall, the ICCO price averaged $957 per tonne during the year, about 30 percent lower than annual average price levels for 1997 and 1998. Continued economic difficulties in the Russian Federation, Eastern Europe, Brazil and the Far East contributed to overall downward price pressure. The potential for increased production and a larger than anticipated exportable surplus in Côte d'Ivoire, the world's largest cocoa producer, contributed substantially to the decline in 1999 prices. Growth in world production levels is expected to surpass consumption in 1999/2000, with total world consumption expected to grow by about 4 percent, potentially resulting in increased stock building and further downward price pressure.
World coffee prices fell throughout most of the 1999 calendar year, with the International Coffee Agreement
(ICA) composite price decreasing from 98 US cents per pound in January to 72 US cents per pound in September. The
composite price averaged 86 US cents per pound during 1999, 22 percent lower than the previous year and the lowest
since 1993. The composite price for the first quarter of the 1999 calendar year averaged 93 US cents per pound,
27 percent lower than the same quarter in 1998. The fall was principally in response to the devaluation of the
Brazilian real, which encouraged exports from Brazil, the world's largest coffee producer, resulting in a decline
in overall world coffee prices. In May 1999, prices showed a temporary surge in response to the forecast of colder
than usual weather in Brazil, which would have affected the 1999/2000 crops. However, prices fell again soon after
the weather pattern returned to the seasonal normal, and they continued to fall. By September, prices had declined
to 72 US cents per pound as the market expected another surplus in the coming coffee year. As a result, the second
quarter average declined to 87 US cents per pound, and the third quarter average was down to 76 US cents, both more
than 20 percent lower compared with the same quarter of 1998. In response to the dry weather in Brazil, prices
started to pick up in October. By December, they had improved to 96 US cents per pound as the markets anticipated
possible reductions in the 2000/01 crop year.
World cotton prices continued on a downward trend in 1999. The Cotlook A-Index, an indicator of world prices, plummeted to a 13-year low of 98 US cents/kg in December 1999. Abundant supply, a slow increase in demand and, in particular, the huge stocks built up over the past few years, were responsible for the lower prices. World cotton production is estimated at 19 million tonnes for the 1999/2000 crop year
(1 August to 31 July), up nearly 500 000 tonnes from 1998/99, while global cotton consumption in 1999/2000 is expected to be 19.1 million tonnes, which is slightly higher than production. At the same time, the total volume of trade in 1999/2000 is expected to rebound from the depressed level of 5.3 million tonnes in 1998/99, to 5.8 million tonnes. However, given the huge stocks of nearly 10 million tonnes at the end of 1999, the slightly higher demand and imports will have little impact on prices. Cotton prices are therefore unlikely to bounce back significantly in the next few months although, if global demand continues to pick up and China continues to reduce its stock level through production and marketing reforms, cotton prices may be expected to strengthen in the next few years. In addition, the recent surge in the world price of petroleum, which is the key input in synthetic fibre production, may enhance the competitiveness of cotton and induce higher demand in the next few years. Moreover, implementation of the Agreement on Textiles and Clothing is programmed to eliminate all quota restrictions on textile trade by 2005. This, according to FAO/International Cotton Advisory Committee estimates, should induce an increase of about 2 to 3 percent in global cotton consumption and a significant increase in cotton trade, which should result in higher prices for cotton.
Oversupply, record stock levels and depressed demand in key importing countries continued to exert pressure on world sugar prices in 1999, resulting in a 13-year low of 4.78 US cents/pound in April. International Sugar Agreement (ISA) average prices were 6.3 US cents/pound in 1999, almost 30 percent lower than the 1998 average price of 8.9 US cents/pound and almost 50 percent lower than the average annual price of 11.4 US cents/pound for 1997. The sharp decline in world sugar prices between 1998 and 1999 essentially ended a four-year period (1993 to 1996) of relative price stability in the world market in which annual ISA prices averaged close to 11.9 US cents/pound. Continued downward price pressure over the short term is therefore expected, with upward price movements dependent on the economic recovery in Asia, the Russian Federation and Brazil. Brazil will continue to have an enormous impact on the world sugar market over the short term, with export volumes largely dependent on how much sugar cane production is diverted into fuel alcohol for domestic energy utilization in response to rising world oil prices.
World market prices for black tea declined in all auction markets during the first half of 1999, in response to potentially larger crops in major producing countries and weaker demand in the Russian Federation, the world's second-largest importer. The FAO composite price index for tea (a weighted average price of tea traded in the major auction markets of Kenya, India and Sri Lanka) declined by 3 percent during the first two quarters of 1999, from an average of $1 660 to $1 610 per tonne. However, as the year progressed, reports of lower than anticipated production in Bangladesh, India, Indonesia and Kenya emerged, providing the basis for limited price recovery. Prices continued to improve in the last half of the year, recovering by 11 percent to $1 780 per tonne in the third quarter and increasing by an additional 3 percent, to $1 830 per tonne, by the final quarter of 1999. The FAO composite price for black tea for all of 1999 was $1 707 per tonne, 15 percent lower than prices in 1998 and 1997, when higher import demand in the Russian Federation and a drought-reduced crop in Kenya supported higher price levels. Although the annual composite price declined in 1999 compared with the past two years, average price levels were still 26 percent higher than the 1994 to 1996 average of $1 360 per tonne.
Banana prices generally weakened in 1999. For instance, import prices3 in the United States decreased by 13 percent from the preceding year, those in France by 20 percent, in Germany by 18 percent, and in Japan by about 6 percent. The weakening of prices was mainly the result of abundant supplies coupled with constrained demand growth in the emerging markets of the CIS and Baltic states and China. As a result of the general decline in international prices, banana export revenues from developing countries in 1999 were estimated to have declined once more, this time by around $495 million, or 15 percent.
7. FISHERIES: PRODUCTION, DISPOSITION AND TRADE
Production of fish, shellfish and other aquatic animals declined from 122 million tonnes in 1997 to 117 million tonnes in 1998. While aquaculture continued to grow - by 2 million tonnes in 1998 - marine capture fisheries production fell by about 7.3 million tonnes, to 86.3 million tonnes. This fall in landings was caused essentially by the El Niño atmospheric phenomenon that affected fish stocks, particularly in the Southeast Pacific. Landings of Peruvian anchovy and Chilean jack mackerel declined from a total of 11.3 million tonnes in 1997 to 3.7 million tonnes in 1998. However, in 1999 these fish stocks recovered rapidly. Elsewhere the picture was uneven in 1998, the Western Pacific recording modest increases in landings.
China remained the world's top fish producer in 1998, accounting for some 38 million tonnes, followed by Japan with catches of about 6 million tonnes.
Aquaculture production for both inland and marine areas continued to increase, reaching a level of 30.8 million tonnes (not including aquatic plants) in 1998. The Asian region (particularly China) continued to dominate world production.
Fishmeal and oil production in 1998 was lower than normal, as only about 24.5 million tonnes of fish were used for reduction, 4 million tonnes less than in the preceding year. Availability of fish for human consumption also fell, to an estimated 15.7 kg/caput (liveweight equivalent) for 1998.
In value terms, developed countries accounted for more than 80 percent of total fish imports in 1998. The three major markets for fish and fishery products were Japan, the United States and Europe. In spite of the recession, which brought a decrease in fish imports into Japan, the country remained the largest importer of fish and fishery products, accounting for some 23 percent of total imports in 1998. The United States was the second-largest importer. The share of fish imports in total fish supply continued to increase in the EU.
Total fisheries exports amounted to $51 billion in 1998, a decline of about $2.4 billion from the previous year. The net foreign exchange receipts (after deduction of the value of fish imports from the total value of fish exports) earned by developing countries reached $17 billion in 1998. The exports of fish and fishery products for some developing countries represent a significant source of foreign exchange earnings.
Twenty-five countries account for some 78 percent of total fisheries export products in value, and the first 11 countries account for as much as 50 percent of the total. With export earnings of about $4 billion in 1998 (8 percent of the world total), Thailand maintained its position as the leading world fisheries exporter. Norway, placed second with total exports of $3.7 billion, increased its export value by 7.7 percent over 1997. Denmark and China moved into the third and fourth positions, with exports amounting to $2.9 billion and $2.7 billion, respectively, in 1998.
8. PRODUCTION AND TRADE OF FOREST PRODUCTS
Global markets for forest products weakened in 1998, owing to economic difficulties in some of the world's largest producer and consumer countries, particularly in Asia. Overall, global roundwood production fell by 0.9 percent to 3 270 million m3. In the developing countries, which account for about 60 percent of total roundwood production, production fell by 0.8 percent, while production in the developed countries fell by 1 percent.
Industrial roundwood production (which excludes the production of wood used for fuel) accounted for about 46 percent of total roundwood production (including fuelwood) in 1998 and fell by 2 percent, to 1 520 million m3. Developed countries account for the largest share of industrial roundwood production (just over 70 percent) and production in these regions shrank by 0.9 percent, to 1 090 million m3. Developing country production fell much more dramatically, by 5.5 percent to 420 million m3.
Global production of solid wood products (which include sawnwood and wood-based panels) also fell during 1998, by 3.7 percent to a level of 570 million m3. Sawnwood production fell by 3.6 percent, to 420 million m3, while wood-based panel production fell by 4 percent, to 150 million m3. Again, the decline in production was felt much more sharply in the developing countries, where production fell by 12.3 percent as opposed to a fall of 0.6 percent in the developed countries.
In contrast to the markets for solid wood products, the global market for pulp and paper was fairly flat, and there were even a few moderate increases in production in some regions. Overall, global output of pulp and paper products increased by 0.3 percent in 1998, to 450 million tonnes. The economic slowdown in Asia and other developing countries had less effect on pulp and paper production, because developing countries account for only a 20 percent share of the global market. However, growth in pulp production in developed countries also continued to be held down by the increased use of recovered paper in the total fibre furnish.
Global trade in forest products was also severely affected by the economic events in developing country markets in 1998. A significant proportion of forest products output is traded on international markets each year including, in 1998, 30 to 35 percent of sawnwood, wood-based panel and paper production in developed countries and 40 percent of wood-based panel and wood pulp production in developing countries. During 1998, exports increased in some regions and some product sectors, but fell in others.
The value of global industrial roundwood exports in 1998 fell by 17.9 percent, to $6.5 billion. Developing countries recorded a much greater fall than developed countries, with a decline of 29.3 percent to $2 billion. However, only a small proportion of industrial roundwood production is exported (about 5.4 percent in 1998). The fall of 9.4 percent in the value of sawnwood exports, to $23.3 billion, is likely to have had a far greater impact on the sector. Developed countries account for about 85 percent of sawnwood exports, but the percentage fall in export revenues was roughly the same for both developed and developing countries.
In the wood-based panels sector, the export situation varied considerably between developed and developing countries. Export revenues fell overall by 12.1 percent to $15 billion. However, exports from developing countries fell by a massive 39.6 percent, to $4.6 billion, while those from developed countries increased by 9.9 percent, to $10.4 billion. Lower exports of plywood from Indonesia accounted for most of the fall in developing country export revenues in this sector.
Exports of paper and paperboard increased overall by 2.8 percent, to $69.4 billion. Developed country exports increased by 2.3 percent, to $62.9 billion, while developing country exports increased by 7.5 percent, to $6.6 billion. Indonesia and the Republic of Korea accounted for much of this increase in the developing countries. Exports of wood pulp fell overall, by 7.9 percent to $14.6 billion. Developed country exports fell by 9.5 percent, to $12.1 billion, while developing country exports increased slightly by 0.3 percent, to $2.5 billion. Reductions in exports from North America accounted for most of the fall in developed country exports.