RICE
Characteristics of the market
• Rice is a major food staple and a mainstay for the rural population and for household food security. It is mainly cultivated by small farmers in holdings of less than one hectare. Rice also plays an important role as a “wage” commodity for workers in the cash crop or non-agricultural sectors.
• Global rice production in the 1990s has been expanding at 1.8 percent per year, marginally above population growth. Developing countries account for 95 percent of the total, with China and India alone responsible for over half of world output. Most of increase recorded in the 1990s has been sustained by productivity gains rather than land expansion.
• Global trade in rice has expanded on average by 7 percent a year over the 1990s. Despite such a dynamic growth, the international rice market remains thin, accounting for only 5-6 percent of global output.
• Unlike for other bulk commodities, the international rice market is segmented into a large number of varieties and qualities, which are not easily interchangeable because of relatively strong consumer preferences. Ordinary indica rices are the most commonly traded, accounting for some 80 percent of international flows by the end of the 1990s, followed by aromatic (Basmati and fragrant rices), at 10 percent, and medium and glutinous rices at 9 percent and 1 percent respectively.
Changing patterns of international trade in rice
• Developing countries are the main players in world rice trade, with a share of 83 percent of world exports and of 85 percent of world imports. The concentration is particularly high on the export side, since five countries (Thailand, Vietnam, China, the United States and India) supply about three-quarters of the trade.
• This contrast with the fragmentation of import markets and the wide year-to-year fluctuations in individual countries’ purchases, as most importers do not rely consistently on the international market to get rice supplies, but only as a last resort to fill the gap caused by a production shortfall.
• Because of the special characteristics of the commodity for food security and political stability, a significant share of trade is conducted by state trading enterprises, some of which are also vested with the obligation of procuring or distributing rice domestically. This applies to both importing and exporting countries.
• Government-to-Government transactions, which used to account for about half of world trade in the 1970s, are now estimated to account for less than 10 percent. In the last few years, however, they have regained some popularity as low international prices have incited or compelled Governments to play a more active role in trade to gain bargaining power or as an indirect means to sustain producer prices.
Thrust of government policies
• Government support to producers in the developing countries has mainly concentrated on research in improved or hybrid rice varieties, investments in irrigation, preferential credits, extension and distribution of improved seed. Intervention to influence prices is also common, through procurement purchases or releases from stocks, or through changes in trade policies. In the developed countries, much assistance to the sector is being conveyed through direct payments and through price support.
• In general, the involvement of the public sector in paddy processing and rice distribution to consumers has been more limited. However, management of rice stocks or trade policy measures has been used extensively to stabilize domestic market prices.
• Trade measures, especially tariffs, are widely used to protect domestic rice markets. Besides relatively high WTO bound tariffs, rice imports are often subject to special safeguard in countries’ schedules. Many commercial transactions are conducted through government-to-government deals, without much transparency. Restrictions on exports of paddy or husked rice are very common, in order to promote the processing of rice domestically.
• Because of the importance of rice as a staple food, many governments maintain minimum food reserves for food security. In addition, countries engaged in rice distribution schemes and producer price support usually hold large rice inventories in public stores.
• Rice stands as one of the most protected traded commodities. However, because of its importance for food security, income generation and political stability, governments may be reluctant to decrease that protection and is being promoted for consideration in the forthcoming round of multilateral trade negotiations.
Current issues and problems
• Falling international prices have been the principal cause for concern in the last few years, both for the importing and exporting countries. The slide in world quotations is a reflection of expansionary production policies in a large number of countries.
• Supply releases from stocks have also been instrumental in keeping the downward pressure on prices.
• Although genetically modified rice varieties have been developed (mainly as a way to enhance its nutritious characteristics, e.g. “golden rice” or to adapt the rices to extreme growing condition, e.g. varieties tolerant to salty water), the issue about their acceptability world-wide has not yet gained prominence because rices produced from such varieties are not yet widely traded. More important, concerns have arisen regarding the use of “Basmati” rice denomination and claims of bio-piracy on fragrant rice genes.
• Rice production sites are often the habitat of a wide variety of birds and plants. Water management in rice lands also ensures a soil desalination process essential to the maintenance of land fertility. As a result, environmental concerns are frequently brought up in defence of the sector, especially in the developed countries.
BEEF
Characteristics of the market
• The extensive nature of beef production, difficulties in vertically integrating the beef production/processing chain, as well as stagnant beef demand in developed countries have constrained growth in global beef production to only one percent annual growth over the past decade.
• The process of technical innovation and restructuring has proceeded slowly in the beef sector, constrained by the small size of farms and the other special roles these animals play in a large numbers of countries, e.g. as capital assets, for dairy production, social status and draught power.
• Trade growth, while rising 2 percent annually, lags considerably that of total meats, which has registered almost double-digit annual growth over the same period, leading to beef’s share of global meat trade declining to 30 percent recently from 45 percent in the early 1990’s. In addition, animal disease outbreaks and food safety issues (particularly related to BSE) around the world have raised considerable health concerns among consumers and limited consumption growth in developing countries and moved consumption to other meats.
• Developing countries share of imports beef remained unchanged over the past decade despite the growth in trade, while its shares in exports declined from 6 percent to 4 percent. Constraints to expanded beef exports by developing countries include disease issues, particularly FMD, which is endemic to many countries, increasing number of SPS regulations, and the higher relative price of beef to alternative meats.
Policy developments affecting international beef trade
• Global beef markets, over the late 1990’s, have been characterised by a gradual dismantling of trade barriers, with countries reducing tariffs and replacing non-tariff barriers by tariff rate quotas (TRQs). However, increasing instances of animal diseases affecting beef, particularly BSE and FMD have led countries over the 1998-2001 period to impose import bans and stricter sanitary requirements, as well as other technical barriers, such as requirements on labelling and animal traceability schemes.
• While progress towards the restructuring and privatisation of the beef sectors in many developing countries continued in the late 1990s, this trend was disrupted as animal disease outbreaks in developing countries resulted in increasing support to livestock sector while heightened concerns regarding food safety and animal disease issues escalated the trend for countries to enact legislation to improve meat quality standards.
• Beef trade has been, in general, significantly influenced by WTO provisions, especially the URA limits on subsidized exports as witnessed by the declining share of the EC in world beef exports since 1994. Of the various meat products, the global market for beef was expected to feel the most direct effects from the policy development under the AoA because both export subsidies and market access barriers were more prevalent for beef than for other meats.
Challenges in the future
• Despite a progressive dismantling of trade barriers to beef trade and country specific initiatives to reduce expenditures on government support, the support for beef industries around the world remains high.
• The extensive nature of beef production limits the transfer of new technology to the sector and the productivity increases which have benefited the pork and poultry industries. This combined with stagnant beef demand in many developed countries will limit overall growth in the industry.
• Participation of developing countries in the global beef market will continue to be constrained by difficulties in managing animal disease issues as well as the challenge of meeting increasing more stringent food safety regulations in developed countries.
PORK
Characteristics of the market
• The international pork economy, while witnessing 3 percent production gains over the past decade, continues to be a very concentrated market. China, the EC, the US, Brazil, Canada, and Poland represent a combined share of more than 80 percent of global pork production and nearly 90 percent of global pork exports. China while accounting for nearly one half of global production, accounts for only 5 percent of global exports.
• Japan and Russia, on the other hand, account for more than one-half of world pork imports..
• Global pork markets are relatively thin, with less than 4 percent of world output traded internationally. This is partially due to cultural/religious preferences in consuming markets where, in many instances, poultry and beef are preferred to pork. In addition, pork trade has been handicapped by problems associated with heterogeneous quality.
• The heterogeneous quality of pork products is being addressed by structural improvements in hog industries in major exporting countries with larger, and more integrated, operations using production technologies that yield a more consistent quality of pork. The ease of transferring technologies in the area of genetics, feeding, and the growing move in investment flows from developed to developing countries is increasing the size of pigmeat operations also in developing countries.
Policy developments affecting international trade
• Markets for pigmeat are less restricted than those for beef products. However, the Asian markets, constituting nearly 50 percent of imports, with Japan alone accounting nearly one-third, than maintain relatively high tariffs. A WTO-safeguard provision allows a snapback provision to be implemented in Japan in the case of import surges, raising tariffs and restricting imports.
• Other importers, such as the EC and Mexico, have in place TRQ’s which limit imports, while the EU, one of the largest pigmeat exporters, periodically uses its export subsidy allocation for pigmeat of 400 000 tonnes.
Challenges in the future
• Larger and more concentrated production processed have been accompanied by rising environmental concerns which, in developed countries, have driven increases in the stringency of environmental regulations facing animal feeding operations. However, industries in developing countries are also expanding operations without accompanying environmental regulations, raising questions about the long-term sustainability of livestock operations.
POULTRY
Characteristics of the market
• Growth in livestock production in both developed and developing countries has been led by the poultry sector, with poultry contributing nearly 50 percent of meat production gains over the past decade. Output growth in developing countries, increasing by 8 percent over the decade, has expanded at double the rate of that in developed countries, now constituting more than half of global production.
• Increasing productivity in the sector, as production units have become more integrated, concentrated, and better managed, has allowed poultry meat to be produced at a lower cost than competing meats. This has led to double digit gains in trade over the past decade, now accounting for nearly 43 percent of world meat trade, up from 25 percent in 1990. Much of the growth in import demand has stemmed from developing/transitional economies, in particular China and Russia, which now account for over one-third of global poultry trade.
• Several important events have shaped demand for poultry imports over the past 5 years. Animal disease outbreaks, particularly BSE, shifted consumption and trade demand away from beef to pork and poultry.
Policy developments affecting international poultry trade
• Among the meat sectors, poultry is perhaps the least protected and is consequently characterized by the fewest new market access opportunities under the Agreement on Agriculture. Canada and Mexico contribute the main share of TRQ access opportunities. Additional marginal gains in trade may be attributed to TRQ commitments by several Central American countries, including Costa Rica and Guatemala.
• The use of export subsidies for poultry meat is sanctioned under the AoA with levels gradually declining from the 802 000 tonnes authorised in 1995 to an estimated 594 000 tonnes in 2000. However, the actual use of these subsidies is lower, with only EC and Hungary regularly using their allocations.
Challenges in the future
• Trading patterns in poultry meat will continue to be shaped by the increasing specialisation of operations which focus on value-added processing. This will result in low-cost labour markets importing commodity products (leg quarters), providing value-added and re-exporting. This will increasingly occur in Asian markets, a region with the highest growth opportunities.
SHEEPMEAT
Characteristics of the market
• The sheep and goat sector is of least significance in the world meat economy, accounting for less than 5 percent of world production and trade. Except for a small number of countries in Asia, in particular China, which contributed to sustained growth at the global level, there has been a tendency for the sector to contract over the last decade, which can partly attributed to low wool prices.
• However, because of the resistance of sheep and goats to harsh rearing conditions and their cultural role, these animals are important for food security and social cohesion, especially in Africa and the Near East. In Africa, in particular, this sector is of particular importance, constituting 26 percent of total meat output and serving as an important source of income for many vulnerable families.
• Global trade of sheep and goat meat is very concentrated, with New Zealand and Australia accounting for 90 percent of global shipments which are destined for three major markets: the EC, the US, and the Middle East. Increasingly, the composition of lamb exports is shifting to higher-valued chilled product.
• Live sheep/goat trade is of considerable importance to the sectors in Africa, particularly to countries in the Horn of Africa. Animal disease concerns related to Rift Valley Fever, however, constrain animal movements. Difficulties in resolving trade barriers in the region have been complicated by the fact that only a few of the countries involved in this trade are members of the World Trade Organisation.
Policy developments affecting international trade
• Sheepmeat sectors in developed countries tend to be recipients of high domestic support; this is particularly true in Western European countries and the US. This protection is accompanied by the imposition of TRQs, which have been successfully challenged through the WTO.
• The WTO accession of China and the Chinese Province of Taiwan is likely to support the global lamb industry, as declining tariffs could increase market access and trade.
Challenges in the future
• The sheepmeat sector is expected to continue to contract in developed countries with meat preferences shifting away from lamb, as a speciality product. Consequently, it is a market with only limited potential for developing countries interested in expanding exports.
• Sheep and goat production will continue to be of critical importance to some countries in Africa and Asia, both for food security and export earnings. Animal disease control and membership in WTO will shape the abilities of many of these countries to participate in and benefit from increased access to global markets.
MILK AND MILK PRODUCTS
Characteristics of the market
• Most of the world’s milk production is concentrated in the developed countries, especially Europe and North America; however, some developing countries are important producers, for example, India, Pakistan and Brazil.
• Milk production is growing most strongly in the developing countries, as a result of increased consumption in this group of countries.
• There are, however, substantial differences in the characteristics and level of development of production and processing capacity between countries. In many developed countries all milk is essentially collected from the farm and processed before being distributed to the consumer. While, in some developing countries the bulk of milk is processed and consumed on farm or at the village level, with little or no additional processing. Even between countries with similar levels of dairy development, characteristics of production activities can vary substantially.
Patterns of milk production and consumption
• During the first part of the 1990’s, overall world milk production declined, principally as a result of falling output in Eastern Europe and the former USSR. Since the mid-1990’s, world milk production has been growing at the rate of 1 or 2 percent per year.
• Throughout the 1990’s and into this decade, the relative importance of milk production in the developing countries has continued to increase.
• Milk output has also grown significantly in Australia and New Zealand, where low costs of production have led to increased participation in the world market.
• Comparing milk consumption in developing and developed countries, substantial differences exist: average consumption of milk and milk products (in milk equivalent) in the developing countries is 200 litres/person/year, compared to 45 litres/person/year in the developing countries.
• Milk consumption is growing in the developing countries, as personal income levels increase and diets become more diversified. Conversely, in the developed countries, consumption of milk overall is stable, with the main changes beginning switches from one type of product to another, for example from drinking milk to eating cheese, rather than in total consumption.
Trade and price policy developments
• Developed countries account for 90 percent of exports of milk and milk products. Although small, the participation of developing countries in international exports is increasing, reflecting mainly growing sales from the southern-cone countries of South America.
• Developing countries account for 70 percent of imports of milk and milk products.
• Since the start of the 1990’s, the relative importance of the type of products traded has moved away from the traditional bulk commodities of skimmed milk powder and butter/butter oil to whole milk powder and cheese. This reflects changes in import preferences and a movement on the part of exporting countries away from lower-value products.
• Over the same period, the participation of state trading companies in the import market has been substantially reduced and the importance of private sector importers has increased. This has been reflected in fewer large-scale, periodic purchases of bulk commodities and the development of smaller-scale, but more regularly spaced, purchases of more highly specified products.
• As a result of domestic policies to limit milk production and URA commitments on the use of export subsidies, participation of Europe and North America as exporters of dairy products has decreased. Conversely, exports by Australia and New Zealand have grown substantially and exports by southern South American countries, especially Argentina and Uruguay, have increased.
• International prices for milk and milk products have been characterised by a substantial degree of volatility as supply and demand on the world market are generally finely balanced.
Emerging issues
• The movement from a market dominated by northern hemisphere countries (and the use of export subsidies) to one dominated by non-subsidising exporters implies that supplies to the world market will be less controlled, as the use of government financed stocks and production controls decline in importance. Additionally, as supplies to the export market will come increasing from countries with pasture-based systems of production. The combination of these two factors may lead to prices for dairy commodities traded on the international market showing substantial variations in future years.
• In an effort to reduce dependence on the bulk commodity market, many exporting countries are placing greater emphasis on developing more highly specified products. Beyond this, the movement amongst exporting countries from surplus disposal to market development means that an increasing volume of dairy products is being exported as retail-branded products and not as bulk commodities.
• International dairy companies, many of which have their headquarters in Europe or North America, are making substantial investments in areas of the world where milk consumption is increasing or where supplies of low-priced milk are available. Consequently, such companies are able leap-frog over national domestic policy measures or URA commitments limiting production or trade in the products they produce.
OILSEEDS, OILS AND FATS, OILCAKES AND MEALS
Characteristics of the market
• Oilseeds and oleaginous fruits include a wide range of crop and tree plants that are grown under a variety of agro-ecological conditions across the globe, by variety of different types of producers. Except soybeans, over 90 percent of global oilcrop production occurs in tropical and subtropical countries.
• Only a small part of production is directly consumed as food; the bulk of production is processed into oil and cakes/meals for use as food and feedstuffs respectively. The sector is characterized by a strong integration with downstream processing industries.
• Oils and fats play an important role in human diets across the world (primarily as energy source), while the meals and cakes derived from oilcrops represent a primary protein source for feedstuffs in many countries.
• In several countries, the contribution of the oilcrop sector to overall export earnings is substantial.
• A number of countries - developed and developing – depend on imports of oilseeds and derived products to satisfy domestic demand for these goods. As a result, oilseeds and oleaginous fruits and the products derived thereof form the second largest group of agricultural commodities traded internationally (in value terms), after cereals, averaging over US$ 51 billion annually during the period 1995-2000.
• The markets for the oilcrop are particularly complex because on the supply sides crops are both annual and perennial, while on the demand side tend to be influenced by factors ranging from competition with feed grains to demand for livestock products, for oils for food as wells as industrial (paints, bio-fuels, detergents etc.) uses.
Overall production pattern
• World oilseed production has expanded at over 3 percent per year during the last decade. Soybean is by far the most important oilseed, followed by rapeseed, cottonseed, groundnut and sunflowerseed.
• The share of developing and developed countries in total production is respectively 58 and 42 percent. In a number of developing countries there is considerable potential for expansion of oilcrop production through both yield improvements as well as expansion in cultivated area. Compared to developed countries, average yield levels are considerably lower in developing countries. Soybean and rapeseed yields, for example, are, respectively, 30 and 60 percent lower in developing countries.
• Asia (which includes the two majors players China and India) is the world’s leading production region, followed closely by North America and then South America. Europe and Africa play a more limited role.
• The oilseeds group includes some of the crops most affected by the recent strides made in the area of genetic modification. Cultivation of GMO oilseeds has rapidly expanded in recent years and accounts for the bulk of production in certain countries.
• In terms of oils and fats, the developing countries’ share in global production exceeds 60 percent, with Asia alone accounting for over 40 percent. The share of tropical oils (derived from the fruits of the oil and coconut palm) in overall vegetable oil production is increasing steadily.
• In the case of oilmeals and cakes, the single most important producing regions are North and South America, which together account for over 70 percent of production. The group of developing countries accounts for about 53 percent of global output.
Overall consumption pattern
• Global consumption of oils and fats expanded at about 3.5 percent per year during the last decade. Growth in global oil consumption has been led by palm oil in recent years (as opposed to soyoil in earlier years). About 60 percent of global consumption occurs in developing countries, prompted by steady population increases and rising incomes, particularly in Asia
• As to per caput consumption of oils and fats, average intake in developing countries does not exceed 16 kg, less than half of that in developed countries.
• With regard to oilcakes and meals, close to 60 percent of global utilization occurs in developed countries. However, annual growth in consumption in developing countries (over 7 percent annually in the 1990s) by far exceeds expansion recorded in developed countries, reflecting changing consumer preferences that accompany income growth and greater concentration in livestock production in the former group of countries.
Overall trade pattern
• Within the oilseeds complex, seeds account for about 30 percent of the total value of trade, whereas the share of the two sub-products, oils and meals, amount to 55 and 15 percent respectively.
• Eight oilseeds and the respective oils and cakes/meals account for over 90 percent of global trade. Soybean and its meal dominate trade in oilseeds and meals, whereas palm oil and soyoil are the most important vegetable oils traded.
• The proportion of world supply entering international trade - at almost 40 percent in the case of oils and close to 50 percent for meals - exceeds those recorded for most other basic foodstuffs.
• During the last two decades, trade in oilseeds and products experienced considerable growth, encouraged mostly by economic expansion in many regions of the world. With average annual growth rates at 4 percent or above, expansion in trade of oilseed products (during the 1990s) was strong compared to that recorded for other sectors. Most of this expansion emanated from importing developing countries, with Asia playing a central role in recent years.
• With regard to oils and fats specifically, imports have surged in many developing nations as domestic demand is expanding at a faster rate than production. This process has partly been aided by increased market liberalization.
• Also global trade in oilmeals continues to rise, again on account of sustained demand increases in developing countries, accounting for about two thirds of the expansion in global trade. By contrast, growth in oilmeal imports by developed countries is rather limited, as reduced expansion in the livestock sector slows down the demand for meals.
• In recent years, a number of importing countries shifted from the importation of oils or meals to purchases of oilseeds so as to promote domestic processing and value addition.
• With regard to exports, a main feature of the market is the high level of concentration, with three developed and eight developing countries accounting for some 90 percent of world exports of oilseeds and derived products. This applies in particular to the market for vegetable oils, where the dominance of some key players and a few major oils is felt strongly, especially under conditions of general oversupply as observed in recent years.
• Whether the recent expansion in genetically modified oilcrop varieties in some countries will lead to separate markets for GMO and non-GMO crops (including the respective price differentiation) remains to be seen.
General trends in policies 2
• In general, over the last several years, the URA-induced trend towards a gradual reduction of potentially market distorting, direct government intervention in production, marketing and international trade of oilseed-based products has continued.
• However, more recently, as a result decreasing prices a number of exporting countries stepped up direct support to domestic producers and to increase export promotion efforts, while major importing countries tended to raise border protection in an effort to shield domestic industries form international competition. It is important to note, however, that, in supporting the oilseeds sector, WTO member countries generally adhered to the commitments made under the URA.
CASSAVA
General characteristics
• Cassava is cultivated in most tropical countries situated in the equatorial belt, which attest to its adaptability to a wide range of ecosystems. Some of the characteristics of the crop are its efficiency in producing carbohydrate, its tolerance to drought and to impoverished soils, and its high flexibility with respect to the time of planting and harvesting, and therefore plays an essential role for food security. It is the world's fourth most important staple after rice, wheat and maize and an important component in the diet of over a billion people.
Patterns of production and trade
• Almost 70 percent of world production is concentrated in five countries Nigeria, Brazil, Thailand and the Congo Democratic Republic.
• The bulk of world trade in cassava consists of pellets and chips for feed (80 percent) and the balance in starch and flour for food and industrial use. Thailand and Indonesia are the major suppliers to the world markets, contributing respectively for some 85 and 10 percent of total trade; while small farmers in Asia, Africa and Latin America provide the remainder.
• The European Community is the main destination for cassava traded products, particularly chips and pellets for the feed industries and volume is sensitive to developments in livestock and feed markets. In recent years, falling grain prices coupled with environmental concerns and animal diseases outbreaks have depressed demand in the EC, causing imports of chips and pellets to fall more than 40 percent. However the contraction in the EC market was more than compensated by larger purchases by countries in the Far East, in particular China, stimulated by very attractive prices.
International cassava prices
• Since 1990 the international prices of cassava pellets exported to the EC have fluctuated from a minimum of US$ 82 per tonne to a maximum of US$ 182 per tonne, though hitting historical lows during the past five years. The decline was essentially due to the downward pressure exercised by the competitive grain pricing policy in the EC and the weakness of the Euro compared to the US dollar.
PULSES
General characteristics
• Pulses are the edible dry mature seeds of leguminous crops, excluding those harvested for fresh products which are classified as vegetables. Pulses include dry beans, dry peas, dry broad beans, chickpeas, lentils, cow peas, pigeon peas, lupins, vetches and pulses.
• Pulses are produced throughout the world. Pulse crops, especially in developing countries, are planted on marginal land and grown under rain-fed conditions, which explain their low yields and large year-to-year production variability.
• Over 60 percent of total utilisation of pulses is for human consumption. Pulses, especially dry peas, are also used as feedstuff. Some 25 percent of pulse total use goes for feeding animals, namely pigs and poultry.
• On the nutrition side, pulses are known for their high protein content and also as a good source of energy. They also contain significant amounts of other essential nutrients like calcium, iron and lysine.
• The importance of pulses in human diets varies from region to region and country to country, with a general trend of higher consumption in lower income nations. The share of food use in total utilisation of pulses in the developing countries is over 75 percent, compared to 25 percent in the developed countries.
• Pulses, by contributing about 10 percent in the daily protein intake and 5 percent in energy intake, are of particular importance for food security in low income countries where the major sources of proteins are non-animal products.
Patterns of production and trade
• Production of the major pulses, except dry pea, is concentrated in developing countries; with developing countries accounting for 70 percent.
• Dry pea production is dominated by developed countries, accounting for over 80 percent of the global dry pea output.
• World pulse production posted a low growth rate over the past two decades (1.3 percent) partly due to low profitability of pulse crops relative to other crops.
• Global trade in pulses exhibited a positive trend since 1980 with an annual growth rate of 7 percent, translating into some 5-million-ton increase in absolute terms. The proportion of pulse production that is traded increased from 6-7 percent in the early 1980s to about 15 percent currently.
• For market composition, dry peas are the largest traded pulse with a 37 percent share of the total pulse trade, followed by dry beans (28 percent), lentils (9 percent) and chickpeas (8 percent).
International market structure
• Global trade in pulses is not a residual market, as several countries produce for the export market, while many others rely on the world market to meet domestic demand.
• The largest market for food pulses is South Asia (mainly Bangladesh, India, Pakistan and Sri Lanka), while the largest market for feed pulses is the European Union (EU-15).
• In 1998-2000, over 70 percent of global pulse exports were supplied by 5 countries: Canada Australia, Myanmar, China and the United States.
• On the import side, 50 percent of global pulse imports in 1998-2000 were made by 6 countries: EU, India, Egypt, Pakistan, Bangladesh and Mexico.
2. RAW MATERIALS
COTTON
General characteristics
• Although more than 100 countries plant cotton, both production and trade are relatively concentrated in a few countries.
Production
• World cotton production increased by 62 percent since 1970 for three major reasons: the emergence of new producers, expansion by existing producers, and increase in yields.
• Some major producers such as Australia emerged since 1970.
• Others such as China, India and Brazil saw their yield nearly double.
• In 2001/02, two major producers, the United States and China accounted for 43 percent of total output in the world.
• Nearly 90 percent of world production was from 9 countries.
• Adoption of transgenic cotton and significant extension of the area under cotton in Brazil and Turkey may have significant effect on world production in future.
• The adoption of biotech cotton reached 16 percent of world total production area in 2001 and production costs in some of these new areas are believed to be lower than the current world market price.
Trade
• World cotton exports currently about 6 million tonnes, 30 percent of world production.
• The United States, Former USSR, Australia and EC account for nearly 65 percent of world exports.
• EC, China, Indonesia, Mexico, Former USSR, Turkey, Thailand and Korean Republic account for 62 percent of world imports.
• Trade in textiles is the major force driving cotton imports and exports.
• Developed countries are the major cotton exporters.
• Countries in Asia accounted for more than one-third of world imports in 2001/02.
Production, exports and food security
• Cotton production generates cash income for millions of rural households.
• More than 20 million rural households in China and 10 million in India and Pakistan produce cotton.
• Cotton textiles contribute to employment, food imports and trade balance in many developing countries.
Trade restrictions, domestic supports and world prices
• There are no significant restrictions in trade in raw cotton.
• Domestic support and export subsidies in major producing and exporting countries affect production and trade, and contributed to the lower world price over recent years.
• In 2000, world cotton prices dropped to a record low of about US$0.45 per pound (‘A’ Index).
• Domestic support policies, advances in technology including bio-tech cotton, weak demand, emergence of low cost producers and competition from man-made fibres, are responsible for the low prices.
NATURAL RUBBER
General characteristics
• Developing countries are major producers and exporters while developed countries are importers.
• Production is highly concentrated in a very few countries.
• Production is labour intensive.
Production
• Production has grown steadily from around 3 million tonnes in early 1970s to 7 million tonnes in 2001.
• Six countries account for nearly 84 percent of world output.
• The growth in world average yield was less than 50 percent during past 30 years but some countries saw their yield rising very substantially.
• Production has shifted to the low cost producing countries.
• Emerging new producers include Thailand, Vietnam and some African countries.
• Malaysia, the world’s largest producing country in 1970s and 1980s, now produces one third of former level.
Trade
• World trade accounts for more than 70 percent of global production.
• Thailand, Indonesia, Vietnam and Malaysia account for 80 percent of exports.
• A large proportion of natural rubber is used for tyres.
• Demand for vehicles induced by economic growth is major driving force for imports.
• Sixty-nine percent of imports go to the United States, China, Japan, Korea Republic, Germany, and France.
Exports and food security
• Export revenue from natural rubber contributes significantly to total agricultural export revenue in producing countries.
• As a result, revenue from rubber exports were the important source of cash income for millions of rural household in these countries.
• In 1999, the share of rubber in total agricultural export revenue was 93 percent in Liberia 77 percent in Cambodia, 17 percent in Indonesia, 16 percent in Thailand, 8 percent in Malaysia, 10 percent in Vietnam and 16 percent in Nigeria.
Trade restrictions, domestic supports and world prices
• There are no significant trade restrictions on rubber.
• However, tariffs on automobiles have indirect effects on rubber trade.
• The International Natural Rubber Organisation supported stable and higher prices to exporting countries using a buffer stock.
• The agreement collapsed in 2000 in the face of changes in comparative advantage among producing countries, exchange rate fluctuations and sharp decline in world prices.
• Over the past few decades, the world price of rubber has weakened.
• Countries with higher production costs have reduced their production and shifted to other cash crops.
• To combat the low prices, several major producing countries, including Thailand, Indonesia and Malaysia, recently agreed to control both production and export.
JUTE
General characteristics
• Jute ranks next to cotton as the most important renewable natural fibre in terms of volume of production.
• The commonest item manufactured is the gunny bag.
• Jute in the form of closely woven hessian is made into deck covers, hammocks, tarpaulins, and upholstery fabric, and is used as underlay of linoleum and carpets.
• Uses are being diversified in making varieties of products like fashionable carrier bags, kit bags, rucksacks and hand bags. Jute laminated or mixed with plastic is being used to produce products as substitutes for wood. It can also be used to produce paper pulp.
Pattern of production
• World raw jute production averaged 3.4 million tonnes a year during the 1970 to 2000 period. it is produced mainly in the Asian region with Bangladesh and India accounting for over 95 percent.
• In the major producing countries jute remains a major cash crop and it is grown by 10 to 12 million small and marginal, providing employment to hundreds of thousands of other people in the processing, manufacturing, trading and transportation of jute and jute products.
• Jute-based agriculture is highly labour intensive.
Pattern of consumption and trade
• World consumption of jute averaged approximately 3.4 million tonnes during the period 1970 to 2000.
• Over the last 30 years, the growth in jute consumption slowed substantially because of the introduction of bulk handling of goods in transportation and storage and the development of synthetic substitutes.
• Trade in both fibre and products contracted sharply over the last 30 years following concentration of consumption in the major producing countries.
• Exports of jute in the form of fibres and products have fallen to about 1.1 million tonnes at present against about 2.0 million tonnes in early 1970s.
• Only about 35 percent of the world production of jute now enters the world trade which generates some US$500 000 per year.
• Main export market for raw jute is Pakistan and that of products is the European Union followed by the Near East countries.
Economic and institutional structure
• Use of jute has been mandatory for some uses in some producing countries.
• Some countries allow price support for its production.
Trade issues
• Jute and hard fibres and products are covered under the Agreement on Textiles and Clothing, not under the AoA.
HIDES AND SKINS
General characteristics
• Hides and skins are produced as by-products of the meat industry.
• Value is secondary to meat, and the income accrues more to processors than to farmers.
• Considerable employment is generated in processing and manufacturing.
• Their output is virtually totally inelastic to changes in demand.
• This commodity group is characterized by its extreme heterogeneity.
• Further magnified by the existence of numerous intermediate processing stages.
• Raw and processed hides and skins enter international trade in a variety of forms from air dried pelts to finished leather.
Production and trade patterns
• In past two decades, world output of bovine hides and skins rose by about 1 percent per annum.
• Output of raw hides has grown strongly in developing countries, while it contracted in most developed regions..
• Developing countries account for more than 50 percent of the world production of bovine hides.
• The four largest producers account for more than 40 percent of the world total.
• The Far East now produces more than any other region.
• Developing countries became net importers of raw bovine hides and skins in the early seventies, having previously been net exporter, their tanning and leather manufacturing expanded.
• Some major producers of hides and skins, such as India, Pakistan and Thailand, also import considerable volumes of raw hides to produce leather.
• Developed countries in aggregate changed from net importer to net exporter of cattlehides in 1970s.
• International prices of most types of hides and skins reached a low in 1999 as a result of weakened demand, recovered in 2000 and 2001 as demand for leather and leather products strengthened in major consuming countries.
• A major trade issue is the existence of export restrictions in many countries seeking to protect domestic tanning industries.
• Thus supply to potential importing/processing countries is reduced.
Environment
• Tanning industry can be highly polluting.
• The cost of meeting environmental standards is one reason for shift of activity from developed to developing countries.
• Discussion of a proposal for an industry-wide international ecolabelling scheme has not borne fruit.
Trade Issues
• These products and leather are covered under the general provisions of the GATT.
• AoA has indirect implications for the sector through its implications for meat and dairy policies.
• No import tariffs are applied to raw hides and skins.
• Tariff escalation is an issue for leather and leather products - finished leather, leather bags, leather shoes etc. carry high tariffs in some countries.
• Trade-weighted average tariffs in developed countries are around 5 percent for leather and around 8 percent for leather products, although in some cases tariffs on footwear have been as high as 80 percent.
• Direct export subsidies/refunds are little used in the sector.
• Export prohibitions and taxes are used in a number of developing countries.
• Restrictions on export of raw hides and skin, wet blue and crust, are typically imposed in order to protect domestic industries, but reduce the incentive to supply good quality raw material.
HARD FIBRES
General characteristics
• There are three major hard fibres - sisal and henequen, abaca, coir - and a number of minor hard fibres.
• Sisal is used primarily for harvest twine, but other uses are becoming relatively more important.
• Abaca’s main market is for specialty papers.
• Coir is used for floor coverings, rubberized pads for upholstery, car seats, etc, and mattresses.
• African countries account for 30 percent of the world's sisal production, essentially on single crop estates.
• In Brazil farmers produce sisal as part of a mixed agricultural system.
• Abaca is grown largely in the Philippines as a secondary crop.
• Coir is produced by processors as a by-product of oil, copra, desiccated coconut, etc.
• These fibres provide significant economic support to the population in certain impoverished and least-developed areas of a number of producing countries, and exports provide income vital for food purchases by people who, in many cases, are among the poorest.
Production and trade patterns
• Total export values of fibre and products in 2000 amounted to US$310 million,
• of which sisal amounted to US$108 million, abaca US$96 million, and coir US$105 million;
• Exports, excluding re-exports, are entirely from developing countries, and largely to developed countries.
• Major exporters are:
Sisal: Brazil, Kenya, Tanzania
Abaca: Philippines, Ecuador
Coir: Sri Lanka, India
• Hard fibres are generally traded through networks of private and some governmental traders. None is sold in a centralised market.
• Trade in fibres is generally unhindered by trade policy, and any tariffs on manufactured goods are low.
• The Intergovernmental Group on Hard Fibres is the only relevant international body.
Trade issues
• Hard fibres and products are covered under the Agreement on Textiles and Clothing, not under the Agreement on Agriculture. Other general provisions of the GATT apply to these products.
• Fibres are generally traded freely, but some countries apply tariffs on processed fibre products.
• There are generally no export restrictions.
New applications
• Fibre producers and processors have suffered from reduced levels of employment and incomes as a result of the weakening of the market for hard fibres in recent decades. In response industries are seeking alternative new outlets for fibres.
• Sisal and coir, still largely dependant on traditional applications, are moving towards use in geotextiles, in pulping applications, and in use in various composite materials used particularly in automobile manufacturing.
• Abaca, once used almost entirely for cordage, now has a strong market for pulping for various speciality papers.
COCOA
General characteristics
• Cocoa is grown on about 7.2 million hectares with major concentrations in West Africa, South East Asia and Latin America.
• Stocks of cocoa beans have declined in recent years due mainly to reduced production, as well as the clearing of buffer stocks.
• The world stock-to-grinding ratio, a proxy for world cocoa availability, is currently at similar levels to those in the 1970s after increasing to unprecedented levels in the late 1980s/early 1990s when the ratio reached a record 66 percent, due to buffer stock levels. The ratio in 2000/01 was 37 percent.
Pattern of production and consumption
• World production increased by 2.2 percent annually between 1970 and 2000, reaching 2.9 million tonnes in 2001.
• Côte d’Ivoire is the largest producer, accounting for more than 40 percent of cocoa bean production, followed by Ghana (14 percent), Indonesia (14 percent), Nigeria (7 percent), Brazil (5 percent) and Cameroon (4 percent).
• World grindings of cocoa beans, a proxy for world cocoa consumption, increased by 2.5 percent yearly during the same period, reaching 3.0 million tonnes in 2001.
• The EC is the world’s largest consumer and accounts for 39 percent of the world total, followed by the United States at 15 percent.
• Grindings at origin accounted for about 32 percent of the world grindings in 2000/01, an increasing trend over the last decade
Pattern of trade
• World exports grew yearly by 2.3 percent over the 30 years reaching 2.2 million tonnes in 2000.
• Côte d’Ivoire is the major exporter accounting for 53 percent of the global total followed by Ghana (16 percent), Indonesia (15 percent) and Nigeria (5 percent).
• World imports grew by 28.8 percent annually to reach 2.5 million tonnes in 2000.
• The EC, the United States and the Russian Federation were the largest importers.
Economic, market and institutional structure
• During 1970-2001, ICCO daily prices increased by 1.6 percent p.a. from 67 cents per kg to 109 cents per kg in nominal terms, however declined by 3 percent p.a. from 268 cents per kg to 104 cents per kg in constant 1990 terms.
• The relative rigidity of short-term supply coupled with low price elasticity of demand in consuming countries (Germany:-0.120 United States: -0.199), and the long gestation period of the crop (between 3-4 years), cause alternating short periods of booms and long periods of oversupply with depressed market prices.
• As with coffee and tea, international trade in cocoa is dominated by 4 large companies accounting for nearly 80 percent of global trade.
Trade policies
• Tariffs on cocoa beans are generally low, but those on cocoa products are high.
• Major cocoa exporting countries have liberalized their national marketing boards.
• In late 2001, the Government of Côte d’Ivoire decided that cocoa beans for exports are to be bagged in small bags.
Current issues/problems
• Four West African producers (Cameroon, Côte d’Ivoire, Ghana and Nigeria) agreed on an establishment of a scheme to withdraw and destroy 250 000 tonnes of cocoa beans to improve world market prices in 2001. However, a detailed implementation schedule and the likely impact of this scheme are still uncertain.
COFFEE
General characteristics
• Coffee is grown on about 10 million hectares of land in countries in Africa, Asia, and Latin America.
• Arabica and robusta are the two main varieties of coffee produced and traded. Arabicas account for about 70 percent of total world production.
• Robusta prices have generally been considerably lower than Arabica prices.
Pattern of production
• World coffee production increased at 2.1 percent annually from 1970 to 2000 reaching 6.6 million tonnes in 2001.
• During the same period, world production of arabicas grew by 2 percent annually, from 2.5 million tonnes to 4.4 million tonnes, while that of robustas increased from 1.0 million tonnes to 2.2 million tonnes.
• Brazil is the largest coffee producing country, accounting for 26 percent of the world total, followed by Viet Nam (12 percent), Colombia (11 percent), Indonesia (6 percent) and Mexico (5 percent).
Pattern of trade
• World coffee exports have grown annually by 1.8 percent over the last 3 decades reaching 5.4 million tonnes in 2000.
• World net-imports of coffee have grown at an annual rate of 1.7 percent from 2.9 million tonnes in 1970 to 4.8 million tonnes in 2000.
• The EC is the largest importing country followed by the United States, Japan, Canada and Poland.
Economic market and institutional structure
• Since the late 1970s world coffee prices have experienced a long-term declining trend.
• During 1970-2001, ICO composite prices declined from 51 cents per kg to 46 cents per kg in nominal terms, and from 201 cents per kg to 44 cents per kg in constant 1990 terms.
• Recent important trend of the world coffee market is growing demand for high-valued specialized coffee from selected origins. Demand for other types of value-added coffee such as flavoured coffee, organic coffee, decaffeinated coffee, has also been growing though their share is still very small.
• The relative inelasticity of short-term supply with low price elasticity of demand in importing countries cause alternating short periods of booms and long periods of abundant supply with low world market prices.
• Four transnational companies (roasters) account for more than 75 percent of world trade in coffee.
Trade policies
• Import tariffs on coffee are generally low for developed countries.
• Major coffee exporting countries have deregulated their national marketing boards and farmgate prices are now determined by market forces.
Current issues/problems
• Current price levels make it difficult for many coffee producers to generate profits as their costs exceed world market prices. The ACPC coffee retention scheme, which was tried in 2000/01 did not improve price levels.
• Low farm revenue has caused reduced investment and this in turn could adversely affect the quality of coffee and prospects for price recovery.
TEA
General characteristics
• Tea is grown on about 2.5 million hectares of land in Asia (89 percent of global tea cultivated areas) and Africa (8 percent).
• Camellia Synensis, the tea plant, is a multi-stemmed evergreen shrub originally grown in China and India. It takes 4-6 years to mature and has an economic life of nearly 100 years. Tea manufactured from Camellia Synensis is roughly grouped into three types: black, green and oolong.
• Tea plays an important role in generating foreign exchange for the country and regular cash income to farmers.
• Tea production is labour intensive and provides substantial employment opportunities.
Pattern of production and consumption
• World tea production increased at an annual growth rate of 2.8 percent between 1970 and 2000 expanding from 1.27 million tonnes to 2.97 million tonnes.
• Most of the growth was due to the increase in productivity rather than an expansion in area.
• Major producers are: India, which accounts for about 29 percent of global production; China, 23 percent; Sri Lanka, 9 percent; Kenya, 8 percent; and Indonesia, 6 percent.
• Black tea accounts for more than 70 percent of world tea production and green tea, 22 percent. Over the past decade, production of black tea has increased at 1 percent per annum, while that for green tea at 2.5 percent.
• Tea is consumed in both producing and importing countries. India is the largest producer and consumer of tea and accounts for more than 20 percent of global tea consumption, while the United Kingdom, the Russian Federation, the CIS countries, Pakistan and Japan each account for about 5 percent of the total tea consumed globally.
• Over the past decade, world tea consumption has increased by 1 percent annually.
Pattern of trade
• World tea exports have grown by 2.2 percent annually between 1970 and 2000, from 674 000 tonnes to 1.29 million tonnes. Growth in export values, however, was 4.6 percent annually during this period, rising from US$573 million to US$2.3 billion in 2000. Sri Lanka, the largest exporter, accounts for about 20 percent of world exports, Kenya (18 percent), China (17 percent), India (16 percent) and Indonesia (8 percent).
• World net-imports of tea grew at 1.9 percent between 1970 and 2000, to 1.2 million tonnes. Major importers continued to be the United Kingdom, the Russian Federation, Pakistan, the United States and Egypt.
Economic and market institutional structure
• Tea prices are mainly determined at auctions in major producing countries. Major auctions included Colombo, Mombassa, Calcutta, Chittagong and Jakarta. Prices vary among auctions as well as within auctions because of the differences in origin and quality. In the decade from 1985 prices experienced a declining trend with annual fluctuations caused by supply disruptions. Since 1995 prices have shown a brief recovery. Prices averaged 157 US cents/kg in 2001.
• The relative rigidity of short-term supply coupled with low price elasticity of demand in consuming countries, and the long gestation period of the crop (between 4-6 years), cause alternating short periods of booms and long periods of abundant supply with depressed market prices.
• Three multinational companies account for nearly 80 percent of tea traded globally.
Trade policies
• Value addition is significant in international trade.
• Current tariff levels for value-added teas are high while those for bulk teas are very low or at zero.
Current Issues/problems
• Erosion of market shares in the total beverages market, coupled with stagnant consumption in some markets, has reduced prices.
• New strategies particularly aimed at enhancing consumption, increasing value-addition as well as further reduction in production and marketing costs are required.
• Maximum Residue Levels (MRLs) should be harmonized.
5. HORTICULTURAL PRODUCTS
CITRUS
General characteristics
• Citrus = 4 main commodities: oranges (70 percent of total output), tangerines, lemons/limes and grapefruits.
• Perennial crops that grow in tropical and “Mediterranean type” climates.
• A significant share of output is processed (40 percent for oranges and grapefruit).
• World’s most exported fruit in terms of value.
• Represents a significant source of income and employment for many developing countries.
Pattern of Production and trade
• Global production has risen steadily and was estimated at 100 million tonnes in 1998/2000 up 138 percent from 42 million tonnes in 1970/72 due to increased areas (+130 percent).
• The main producing countries are Brazil, the United States, China and the Mediterranean countries.
• World exports of fresh citrus have increased steadily, rising by 40 percent from 6.5 million tonnes in the 1970s to 9 million tonnes in 1998/2000.
Fresh citrus:
• The main exporting regions are the Mediterranean rim (with a predominance of Spain) and the United States. Exports have increased rapidly in Spain and some Southern Hemisphere countries (South Africa, Australia, Argentina), reflecting improvements in storage and transport technology.
• After a period of growth, per capita consumption of fresh citrus in developed countries has declined since the mid-1980s. It is still growing in developing countries.
Orange juice:
• The bulk of world supply is produced in only two areas: Florida, United States and Sao Paolo state, Brazil.
• Brazil is by far the largest exporter, followed at a distance by the United States.
• The EC is by far the largest importer, accounting for over 80 percent of world orange juice imports.
• The EC and Japan import overwhelmingly from Brazil.
• The United States and Canada source their juice in Florida, with some imports from Brazil.
• Consumption has increased strongly in developed countries, while it is still very low, albeit rising, in developing countries.
Economic, market and institutional structure
• Multitude of medium-sized firms involved in fresh citrus trade. Some trend towards vertical integration by certain producer groups.
• Trade in orange juice is dominated by a very small number of processing companies operating in Brazil and Florida. These companies tend to be vertically integrated.
• Fresh citrus prices vary greatly with crop size every year, depending on weather, diseases, tree cycle.
• Prices for concentrated orange juice were very low in late 1990s due to large inventories in both Brazil and Florida that led to a price war between large processors in Brazil. Prices have firmed up recently due to smaller crops and reduced inventory.
• Price elasticity of supply low due to long time needed to reach full productivity in citrus grove.
Trade policy
• Reduction in tariffs on imported citrus and juice as a result of Marrakech Agreement on Agriculture.
• Increasing number of trade disputes arising from bans on citrus imports on phytosanitary grounds.
• If agreed, Free Trade Area of the Americas might have significant impact on world orange juice trade.
• EC’s system of tariff-quota, minimum entry price and processing subsidy for citrus criticized.
• Accession of China to WTO expected to open new market for citrus.
Current issues
• Rise in not-from-concentrate orange juice consumption is the most significant development in orange juice market. May reduce market share of concentrated juice.
• Large Asian citrus-producing countries set to increase output (China, India, Pakistan).
• Consumption of fresh citrus expected to continue to decline in developed countries.
• Therefore, risk of fresh citrus surplus in the medium to long term.
