II. Review of the world situation and outlook in respect of food and agriculture
A. World food and agriculture situation
12. The Conference had before it the Director-General's report on the State of Food and Agriculture -1957, together with his supplementary review of Recent Developments in the World Food and Agriculture Situation and a review of the current commodity situation which had been prepared by the Committee on Commodity Problems. It endorsed the general analysis of the current situation and outlook as presented in these documents.
13. It noted with satisfaction that, since the last session of the Conference in 1955, world agricultural production had continued to expand at a rate of about 3 percent annually, or rather over one percent faster than the growth of world population. In spite of unfavourable weather conditions in some areas, the recent rate of expansion was appreciably greater than had been foreseen when the outlook was reviewed in detail at the 1953 Session. Moreover, in contrast to the earlier postwar period, production had in the last few years tended to increase faster in the less developed regions than in those regions where supplies were already more ample, though this was to some extent offset by the more rapid growth of population in the less developed regions. It was noted, however, that this development resulted only in part from the vigorous efforts to expand production in under-developed countries, and was partly due to policies to limit production in more advanced countries.
14. The Conference emphasized that, despite the continuing surpluses of some commodities in certain exporting countries, there should be no slackening in the efforts in under-developed countries to increase food production of types for which their soils and climate were economically suited. In the Far East and Latin America in particular, the set-back to over all production during the war years had still not been made good on a per caput basis, in spite of the expansion of recent years. This fact, coupled with the rapid growth of demand which came with the increasing tempo of economic development, had partly contributed to the inflationary pressures and difficulties of foreign payments which some countries in those regions were experiencing.
15. A few major producing countries reported lower wheat harvests in 1957, and in India the failure of monsoon rains over a wide area was likely to lead to a very critical situation which would necessitate considerably expanded grain imports. Nonetheless, general indications were that world agricultural production as a whole would again be higher in the 1957/58 season. United States production was again at record levels, although acreage had been further reduced. Many countries, particularly in the less developed regions, reported on the vigorous measures being undertaken to improve their agriculture, and it was probable that production would continue to expand. In some countries, however, future growth might be slowed down by shortages of investment funds and by the tendency of price relationships to move against agricultural products in world trade and also on some domestic markets.
16. At its last session the Conference had been concerned that the volume of world trade in agricultural products had shown little growth, and had tended to settle down at about the prewar level. Since that time its volume had again moved upwards, increasing by 5 percent in 1955 and a further 8 percent in 1956. Some exceptional factors had, however, operated in 1956, including poor grain harvests in some countries and an intensification of United States measures of surplus disposal. Together these had contributed to a rise of as much as 30 percent in the volume of North American exports.
17. It was thus uncertain whether the high 1956 level of world agricultural trade would continue through 1957, especially as the apparent slackening in the pace of world economic development would inevitably have influenced the demand for agricultural products.
18. With abundant supplies, average prices of agricultural products in world trade had continued their slow decline, and no reversal of this movement was yet apparent. In comparison with the increase of 8 percent in volume in 1956, the increase in the total value of world agricultural trade had therefore been only about 4 percent, while in some regions the total value of agricultural exports had declined. Even the small rise for the world as a whole had been offset in terms of purchasing power by the continuing upward movement in the prices of manufactured goods.
19. The Conference was concerned at these adverse movements in the " terms of trade " for agricultural exports and stressed the problems which they raised, not only for primary exporting countries but also for the export outlets for manufactured goods of industrial countries. Although it was recognized that this was not exclusively an agricultural issue and had wide implications, it was one in which FAO was vitally concerned, as a prosperous agriculture was a fundamental requirement for a sustained increase in production. In its work on international trade in food and other agricultural commodities the Organization should pay particular attention to the causes and likely effects of this disequilibrium in price relationships and, in cooperation with other competent bodies, should endeavor to suggest corrective measures.
20. The recent movement of prices had also tended to increase existing disparities between farm and urban incomes. Farmers as a whole had not shared fully in recent increased prosperity and in many countries had had little reward for the higher levels of productivity which they had achieved. The Conference stressed the producer's need for an adequate income, not only for a satisfactory standard of living but also to leave him some margin for investment in order to improve his efficiency. This was a particularly acute problem for small producers.
21. In most countries the position of the consumer did not appear to have improved in respect of food prices. Partly because of inflationary pressures and the mounting costs of food distribution, retail food prices had tended to rise in 1956 in almost all countries, and there were few in which any appreciable decline was evident. This had tended to restrict increases in food consumption, especially in countries where incomes were low and needs greatest. In this connection, the Conference emphasized the basic importance of measures to raise food consumption levels. So long as large sections of the world's population remained under-nourished and ill-clothed, the problem of agricultural surpluses was essentially one of distribution rather than of over-production.
B. Commodity problems
Machinery for commodity consultations
22. The Conference, as at its two preceding Sessions, gave much attention to current commodity problems, and in this survey was greatly assisted by the reports of the Twenty-Eighth and Twenty-Ninth Sessions of the Committee on Commodity Problems (C 57/11 and C 57/12). It noted that in the 1957/58 marketing year aggregate import demand for agricultural products might be lower, owing to the fact that some exceptional factors had contributed to the high level of trade in the past year, to disinflationary policies and to balance of payments difficulties in some countries. In contrast, world market supplies of many products probably would remain high. There were prospects that production in 1957/58 of coffee, sugar-beet in Europe, most livestock and dairy products, tea and wool would remain large or increase, while the heavy North American stocks carried over from last season meant that world supplies of wheat, coarse grains and cotton would remain very large. On the other hand, cocoa production was expected to decline, and world supplies of rice would be smaller, reflecting the unfavourable prospects for some of the Asian crops and reduced United States output.
23. The agricultural surplus situation remained disquieting. While the rate of accumulation of surplus stocks had slowed down considerably since 1954, coarse grains being the only major commodities for which there had been a further substantial increase in 1956/57, stocks of surplus commodities remained at levels which inevitably caused fears for the stability of commodity markets, no matter how firmly those stocks were held and however great the restraint shown in their disposal. During 1956 and 1957 the rate of shipment of agricultural commodities moving under special terms had increased very rapidly. The problem presented by the size of current stocks and the manner of their disposal, as well as the problems involved in an adjustment of agricultural policies aiming at restoring a better balance of supply and effective demand, were thus still among the major issues confronting Governments in the agricultural field.
24. There was general recognition and appreciation of the constructive use which had been made of surpluses in aiding development and expanding consumption in economically less developed countries. Several countries reported that supplies received under surplus disposal arrangements were proving of considerable assistance in their economic development by helping to satisfy the increasing demand resulting from development. Moreover, the long term low-interest loans accruing from local currency sales were in some instances one of the few sources of external finance for economic development. The experience of these countries demonstrated that there were great possibilities in such a use of surpluses and the Conference considered that, in continuation of its pioneer work in the Indian Pilot Survey, FAO should further explore these possibilities and that underdeveloped countries should seek to formulate additional projects in which surplus stocks could be employed without prejudice to normal trade. It was pointed out that, in addition to assisting the economic development of underdeveloped countries, this use of surpluses might well benefit exporting countries generally by leading in the longer term to a permanent enlargement of markets.
25. Nevertheless, while recognizing that such wise uses of surpluses were of general benefit and that the problem of excessive stocks was of such magnitude that extraordinary measures were justifiable, several countries reiterated their concern at the size of these stocks and at some of the methods of surplus disposal. The existence of large stocks engendered insecurity in markets and among producers, who were concerned that the disposal of these stocks under special conditions might have repercussions on prices and on the volume of trade, thus imperilling the national livelihood and development of traditional exporting countries. Some of these countries had no other major source of income and little opportunity of switching their agricultures towards other commodities than those which they now produced for export. Considerable emphasis was, therefore, laid by the Conference on the need for full and effective observance of the FAO Principles of Surplus Disposal and for a wider use of the facilities for consultation on surplus disposal matters provided by the Consultative Sub-Committee on Surplus Disposal of the Committee on Commodity Problems.
26. The Conference therefore urged Governments supplying and receiving surpluses to make possible full and effective consultation with other countries on disposal programs and transactions. Several countries stressed the need for prior consultation before the conclusion of surplus disposal agreements, though others felt that this might not be practicable in all cases. There was agreement, however, on the need for carefully assessing surplus disposal programs and transactions in the light of the FAO Principles. For this purpose it was necessary to have fuller knowledge of the uses of surpluses made in recipient countries and of their effects on commercial markets. The Conference endorsed the need for more analysis and interpretation of the results of the surplus disposal schemes hitherto under taken. In this connection it noted with satisfaction that the Committee on Commodity Problems had requested its Sub-Committee on Surplus Disposal to examine and report on the operation and adequacy of the FAO Principles and Guiding Lines of Surplus Disposal over the past three years and to recommend possible ways of ensuring that the disposal of surpluses would be made without harmful interference with normal patterns of production and international trade. While the consideration given by the Sub-Committee to the request made by the Conference at its Eighth Session (Resolution No. 7/55) for an analysis of the effects of disposals on special terms had yielded some useful information, it was noted that the question of developing case studies was still under examination. The Conference noted, too, that the results of studies being initiated in some recipient countries in Asia and the Far East by the joint FAO/ECAFE staff under an ECAFE resolution should soon be available to the Sub-Committee.
27. The Conference emphasized that, side by side with such work on surplus disposal broader studies should also be made of the underlying causes of surpluses for major commodities. The problem, at first regarded as a short term one, now appeared to have become a permanent structural problem of agriculture in some countries. The solution to the problem was not to be found in one country alone, but called for a fundamental examination of national policies in general, as well as long term trends in the world economy.
Machinery for commodity consultations
28. The Conference noted with satisfaction the activities of the Committee on Commodity Problems over the previous two years and endorsed its action in establishing specialized commodity bodies for the consideration of the problems of single commodities or commodity groups. In stressing the practical value of specialized commodity consultations for particular products, the Conference noted with approval that the Committee on Commodity Problems had adopted useful criteria for determining the types of consultative arrangements to be used in particular cases, deciding, according to the merits of each case, whether the appropriate method was to consider it as an ordinary item in its Agenda, or by means of a special study by the Secretariat assisted by consultants, or by setting up a special panel of the Committee on Commodity Problems meeting during its regular sessions, an ad hoc meeting, or a special standing group. Four standing groups were now in existence, covering grains, rice, cocoa and coconut. In addition, provision was made for a special panel on dairy products to meet during the sessions of the Committee on Commodity Problems. By providing the means for regular exchanges of views and information between exporting and importing countries, these bodies could contribute to a better understanding of the various and often conflicting national policies and, through frank and informed discussions, lead the way towards a better adjustment of these policies. They could also be of considerable help in elucidating the trends in production, trade and consumption commodities.
29. The Conference considered a proposal that a Sub-Committee or a Study Group of interested countries should be established by the Committee on Commodity Problems to deal with the problems connected with the marketing of dates and with questions of surpluses and low prices. It was also proposed that such a Sub-Committee or Study Group should extend its consideration to all dried fruit. It was agreed that these proposals should be brought to the attention of the Committee on Commodity Problems, to deal with the matter in the manner it considered most suitable.
30. The Conference adopted the following Resolution:
Resolution No. 5/57
Machinery for Commodity Consultations
Considering that the problems of surpluses of agricultural products, their effect on international markets, and undue fluctuations in the prices of those products, are matters of general concern throughout the world;
Considering further that, in addition to producing agricultural products more cheaply and efficiently and effecting their wider distribution and increased consumption, it is desirable to seek to maintain the income and purchasing power of agricultural exporting countries at a remunerative level and to prevent serious strains upon their economies;
States its conviction that so as to protect the foreign earnings and economic prosperity of developing countries and others heavily dependent upon the export of agricultural products, it is desirable for prices of those exports to lee maintained at an equitable and remunerative level in relation to the prices of industrial products, without interfering with those long-run adjustments which are necessary to assure an optimum allocation of resources;
Requests the Director-General to call to the attention of Member Governments the existing international machinery designed to facilitate international action for the price stabilization of agricultural products, and the studies made and action taken or under way in this respect, and in connection with the terms of trade, in other inter-governmental bodies.
Consultative Sub-Committee on Surplus Disposal
31. Much appreciation was expressed of the work of the Consultative Sub-Committee on Surplus Disposal. This Sub-Committee had provided a most valuable forum for discussion, which could with advantage be used more fully by both donor and recipient countries In this connection, the Conference took note of the recommendations made by the International Federation of Agricultural Producers at its Ninth Ordinary General Assembly and of the comments submitted by the representative of this Federation, aiming at a strengthening of this consultative machinery and its fuller use by Member Countries. These recommendations were still under examination by the Committee on Commodity Problems and its Sub-Committee, but the Conference believed that the Sub-Committee should retain its present open membership. The Conference emphasised that the Sub-Committee should be regarded as the principal intergovernmental forum for continuing consultation on surplus disposal problems. In the opinion of the Conference the present terms of reference of the Sub-Committee were adequate to enable it, with the co-operation of Member Governments, to carry out its functions. Member Governments were urged to co-operate fully in its activities by designating representatives well qualified to deal with the intricate economic issues involved and by providing it with full information on surplus disposal programs or transactions.
32. The Conference adopted the following Resolution:
Resolution No. 6/57
Noting the extent of disposals of surplus agricultural products on concessional terms including special currency arrangements,
Noting that despite some diminution in the rate of accumulation of surplus stocks since 1954, these stocks remain at a level which inevitably affects the stability of commodity markets and exerts a depressing effect on prices, no matter how firmly these stocks are held and however great the restraint shown in their disposal;
Noting the concern expressed by some countries that the field of surplus disposal has broadened to include commodities which, thought not set aside as surplus stocks, have become surplus in the originating countries as the result of national support policies, and are then disposed of in international markets, often on a subsidized basis, thereby displacing commercial trade and depressing price levels;
Recognizing the valuable role which surplus products can play in assisting economic development and in providing food and raw materials for economically less developed countries which would not be able to purchase such products in the normal course of trade;
Recognizing at the same time that surplus disposals, if not made with great care and in accordance with internationally agreed principles, may have serious repercussions upon the trade of other exporting countries, and on price levels and international trade generally, and that such principles have been adopted in the form of the FAO Principles and Guiding Lines of Surplus Disposal;
Noting further the recommendations offered by the International Federation of Agricultural Producers for strengthening intergovernmental consultation and action on surplus disposal;
Recognizing the need for authoritative information on the effects of surplus disposal transactions in specific areas, and in respect of particular products, and on the observance and adequarcy of the FAO Principles and Guiding Lines for Surplus Disposal;
Endorses the action taken by the Committee on Commodity Problems, through its Consultative Sub-Committee on Surplus Disposal, to explore methods of assessing the observance and adequacy of the FAO Principles and Guiding Lines of Surplus Disposal and the effects of disposals, at the same time stressing the urgency of immediate action;
Recommends that the Committee on Commodity Problems, through its Consultative Sub-Committee, develop further ways and means of utilizing surplus products for encouraging consumption without impinging upon existing or future commercial trade and in conformity with the FAO Principles and Guiding Lines of Surplus Disposal;
Further recommends that Governments, through their representatives on the Committee on Commodity Problems and its Consultative Sub-Committee on Surplus Disposal, give particular attention to the attainment of these objectives as expressed by the Conference and the Committee on Commodity Problems, in order to raise world food consumption standards, to assist economic development and at the same time to expand international trade in agricultural products.
33. It was stressed that the present high level of stocks, especially of cereals, provided valuable security against serious food shortages. A number of countries stated that the aid that they had received from surplus stocks at times of crop failure had averted threats of near famine conditions. The world's rice supply, for example, particularly in Asia, was still somewhat precarious and heavily dependent on weather. Some countries described the progress already made in building up national reserves, though it was noted that the Indian reserve stocks were likely to be run down in 1958 in view of the current crop failure.
34. The Conference had before it a paper prepared at the Council's request on the present position, state of the work and plans for future studies and action on food reserves. It also gave some consideration to the earlier basic FAO report on the matter which had been prepared at the request of the General Assembly and which had not been ready for consideration by the Conference in 1955.1 Note was taken of resolutions passed since the Eighth Conference Session by the General Assembly of the United Nations and by the Economic and Social Council, as well as of the findings of the Committee on Commodity Problems, with special reference to the report of the Working Party on National Reserves established by the Sub-Committee on Surplus Disposal.
35. The Conference expressed its satisfaction with the progress made in clarifying thought on these matters, aided by the basic FAO study and subsequent discussions and reports. There was now a widespread consensus of opinion that plans for the establishment of a World Food Reserve, to serve the four main objectives set out by the General Assembly's Resolution on the question in 1954, were not practicable and that attention should be concentrated primarily on the creation of national food reserves, particularly in underdeveloped countries, and with special reference also to possibilities of using surplus foodstuffs available on special terms for aid in establishing such reserves. Some countries suggested the consideration of regional reserves.
36. It was noted that the General Assembly, in Resolution 1025 (XI) of its Eleventh Session, had requested an analysis to be undertaken of the possibilities and desirability of promoting, by way of consultations between importing and exporting member countries, the use of surplus foodstuffs in building up national reserves to be used in accordance with internationally agreed principles (a) to meet emergency situations; (b) to prevent excessive price increases arising as a result of a failure in local food supplies; and (c) to prevent excessive price increases resulting from increased demand due to economic development programs, thus facilitating the economic development of less developed countries. The General Assembly had also invited both importing and exporting countries to continue consultations, through the appropriate bodies established by FAO, with a view to facilitating the establishment of national food reserves, with due regard to the FAO Principles of Surplus Disposal, particularly to the need to avoid harmful interference with normal patterns of production and international trade and to ensure that the use of surplus reserves would result in genuine additional consumption as defined in the FAO Principles.
37. The Conference commended and endorsed the report of the Working Party on National Reserves, which had been established by the Sub-Committee on Surplus Disposal in Washington. It expressed the view that consideration of the problem should be extended, with the help of interested Governments, to include specific case studies.
38. It also noted that some enquiries had already been set in train as a staff study. The main purpose of these enquiries was to provide information that could be of help to Governments, particularly in underdeveloped countries, who were faced with decisions concerning the establishment and maintenance of national reserves. In making these decisions, it was necessary for Governments to weigh the cost and benefit of maintaining such reserves for various purposes, as well as to look into problems of storage capacity and other aspects of an operational and administrative character.
39. The Conference endorsed the intentions outlined by the Director-General for the following three main documents to be presented to the Economic and Social Council in the summer of 1958, in line with requests made by that Council and by the General Assembly:
(1) a brief general report on follow-up action taken in line with various intergovernmental requests for further action and study on subjects relating to food reserves;
(2) a more detailed study by the Director-General on National Food Reserves. also taking full account of the conclusions reached by the Working Party on National Reserves;
(3) a consolidated record, issued mainly for information, on earlier FAO expert studies and administrative arrangements on questions of famine relief, including a brief summary review of existing intergovernmental procedure and relief facilities.
The Conference noted that this program had been discussed informally with representatives of other international agencies mainly concerned and had met with favorable response.
C. National programs and policies
The place of agriculture, forestry and fisheries in national development programs
National programs and policies of agricultural development and their co-ordination
Agricultural support policies
Productivity in agriculture forestry and fisheries
National measures for the improvement of marketing structure and organization for agricultural, forestry and fisheries products
Nutrition and food policy including education in nutrition and home economics
40. The Conference stressed the important place of agriculture in the balanced development of the underdeveloped countries. Even in a world where there were surplus stocks in some areas, the importance of plans and programs to increase agricultural production remained paramount in the less-developed regions. Not only would the major part of any increase in consumption levels inevitably come from domestic production, but in predominantly agrarian countries increased agricultural production was also the chief means of supplying the foreign exchange needed for the expansion of other sectors of the economy.
41. The discussions of the Conference on national programs and policies ranged over a wide field. The Conference emphasized the importance in development programing of a proper balance between the different sectors of the economy. It was also desirable to achieve a better co-ordination of national programs and policies. In particular, in formulating agricultural support policies or in determining the level of self-sufficiency to be aimed at, due regard should be paid to the intentions and interests of other countries as well as to purely national conditions and considerations. The Conference considered that increased productivity was an essential aim of development programing, and that greater attention should be paid to measures designed to remove the various institutional obstacles to improvement. It emphasized also the importance of measures to improve the structure and organization of marketing. Finally the Conference considered that in most countries too little attention was paid to methods of improving nutritional levels, and that governments should give greater weight to nutritional considerations in planning their production policies.
The place of agriculture, forestry and fisheries in national development programs
42. The Conference considered the Director-General's report on the Place of Agriculture, Forestry, and Fisheries in National Development Programs, (C 57/14), prepared at the request of the Madrid Session of the Council. Planning for the three rural industries - farming, forestry and fisheries - could be effective only when done as part of a general economic development program which gave adequate attention to the balance between urban and rural industries, and between each of the three in the latter group. Farming, forestry and fisheries had technical interrelations, partly competitive, as in demands for the use of land, water, capital and, sometimes, manpower, and partly complementary as in conservation aspects, in use of rural manpower, in combined resource developments, or in mixed individual farm/forestry or farm/fishery enterprises. The Conference felt that these interrelations must be given full weight in agricultural planning.
43. At one extreme, if countries neglected agriculture and over-emphasized industry in their development programs, they might run short of agricultural products, with consequent inflationary effects. Or, at the other extreme, if they failed to put enough emphasis on industry, technical progress in agriculture, fisheries and forestry might be retarded by inadequate employment outlets for excess rural manpower. Many countries had suffered in the post-war period from neglect of their agriculture, fisheries and forestry, and some had now shifted their policies to correct this. The Conference emphasized that countries should seek the right balance between industry on the one hand and agriculture, fisheries and forestry on the other, to avoid these difficulties, and that planning in these sectors should be carried on in proper relation to general economic planning. Underdeveloped countries undertaking such planning and program making, might well seek the help of Technical Assistance planning experts, not only from FAO, but also from other Specialized Agencies and the United Nations to deal with the industrial, educational, social, health and labor aspects of economic program making.