Contents -

VII. Review of the world situation and outlook in respect of food and agriculture

A. World Food and Agriculture Situation
B. Food Production in Relation to Population Trends
C. Changes in the Terms of Trade for Agricultural Products
D. The Economic Position of Farm Populations
E. Problems of Agricultural Development in Less Developed Countries
F. Agricultural Price Stabilization and Support Policies
G. Agricultural Price Stabilization and Support Policies
H. FAO Principles of Surplus Disposal and Guiding Lines
I. Further Consideration of Surplus Problems and of Methods of Surplus Disposal

J. Proposals Presented by the International Federation of Agricultural Producers (IFAP) on Intergovernmental Commodity Consultations and Action
K. Future Activities of the CCP
L. Possible joint Session of the United Nations Commission on International Commodity Trade and the Committee on Commodity Problems
M. Freedom - from - Hunger Campaign
N. Social welfare
O. Agrarian reform
P. Mediterranean development project

A. World Food and Agriculture Situation

17. The Conference had before it the Director - General's report, The State of Food and Agriculture 1959, together with his supplementary review, Recent Developments in the World Food and Agriculture Situation. It endorsed the general analysis of the current situation and outlook presented in these documents.

18. The Conference noted with satisfaction that in 1958 a 4 - percent increase in world agricultural production had followed the temporary pause in expansion of the previous year, when harvests in many areas had been reduced by bad weather. The information available to the Conference indicated that world production would again rise in the current 1959 season, though the increase would probably not be as great as in 1958. Variable weather conditions were likely to result in considerable differences between regions and between individual commodities.

19. In 1958 the greater part of the increase in world production had been contributed by North America, Oceania and the U.S.S.R. The Conference was concerned that, apart from a substantial increase reported in Mainland China, gains had generally been small in the less developed regions, where a rapid increase of agricultural production was so urgently needed.

20. Once again, much of the increase in production did not move into consumption. The large cereal crops of 1958, especially in the United States, had led to a sharp rise in unsold stocks of wheat and coarse grains, and there had also been a marked increase in stocks of coffee and sugar. Thus, the familiar situation of the last few years still persisted. While on the one hand the economically more advanced countries were technically able to increase production fairly rapidly, in the less developed group, on the other hand, not only was it more difficult to expand output but also they, could not afford to import sufficient food from the rest of the world to ensure the adequate nutrition of their rapidly growing populations.

21. Although the world food problem was partly a problem of distribution, and although the availability of surplus stocks on concessional terms had proved of great value in many cases, the recent virtual disappearance of such stocks of dairy products for use in special nutritional programs had demonstrated that nutritional improvement could not be based securely on the assumption that surplus stocks would always exist. As at its Ninth Session in 1957, therefore, the Conference again emphasized that, in spite of the continued existence of surplus stocks, in the long run the twin problems of rural poverty and inadequate food supplies in less developed countries could be overcome only by building up their own agricultures and by a balanced development of their economics.

22. Many of the less developed countries described to the Conference the programs they were undertaking to ensure a rapid expansion of their agricultural production. Most laid increased stress on the need to create a favorable economic and social climate for agricultural development and to remove institutional obstacles to the adoption of technical improvements, especially through land reform measures accompanied by improvements, often on a co - operative basis, in marketing, credit facilities and extension, and through the development of other basic services. Greater attention was also being paid to the diversification of agricultural production, both to lessen dependence on anarrow range of export products and, through the increased production of protective foods, to improve the quality, of the diet.

23. The Conference reaffirmed that, for the rapid economic development of the less developed countries, continued sacrifices were required, not only by those countries themselves but also in the more advanced areas on which they relied for financial and technical assistance. In this connection the recent establishment of the United Nations Special Fund and other increased facilities for the provision of international financial aid were especially welcomed.

24. There was a grave danger, however, that the benefits of such assistance might be largely nullified by international trade developments. In the two years that had elapsed since the Conference last met, the recession in economic activity in most of the industrialized countries had had serious consequences for world trade in agricultural products. For industrial raw materials of agricultural origin (the commodities most severely - affected by the recession), the volume of exports had fallen by some 8 percent in 1958 alone and their average price by about 16 percent. The total export earnings of this group were, thus 23 percent less than in 1957. Total earnings from all agricultural exports were about 9 percent smaller in 1958 than in 1957. Many, countries stressed the severe effects of these adverse trade movements on their ability, to import the capital goods needed for the implementation of development plans.

25. Recovery from the recession was now fully under way in the industrialized countries. Although the decline in world prices for most agricultural products appeared to have been halted during 1959, there still seemed, however, to be no grounds to expect any considerable general shift in price relationships in favor of agricultural exporters in the near future.

26. In spite of the fall in export prices in 1958, farm prices and incomes appeared to have been fairly well maintained in the few countries, mainly the more industrialized, for which data were available, though there were some notable exceptions. This had been due mainly to the operation of price support measures, together with the substantial rise in the volume of output. Nevertheless, a continued decline in per caput farm incomes in relation to earnings in other sectors was causing growing concern, especially in the more developed countries.

27. Except in a few countries, the increase in food production seemed to have done little to check the rise in the cost of food to consumers, and retail food prices had generally continued their slow rise during 1958. In most of the more developed countries, this had occurred largely because of the increasing cost and complexity of marketing services. In many of the less developed countries, with low agricultural productivity, where population and the demand for food were rising quickly, food prices had tended to increase faster than the cost of living as a whole.

B. Food Production in Relation to Population Trends

28. The average annual increase in world food production had recently been only about 0.5 percent above the average population growth of 1.6 percent, in contrast to the margin of some 1.5 percent that had been achieved in the earlier part of the postwar period. The Conference expressed its concern at the slackening in the increase of production in relation to population that had taken place in the less developed regions during the last few years. In the less developed regions as a whole, although the rate of production increase had been better maintained than in the more developed regions, the average annual margin over population growth was estimated to have fallen from nearly 2 per cent in the earlier period to a little under 1 percent in more recent years. Latin America was the only one of the less developed regions where food production was now expanding faster than before.

29. The rate both of population growth and of production increase had naturally varied sharply from country to country. Examples brought to the attention of the Conference included India, where population was increasing by 1.9 percent per year and the expansion of production had been stepped up from an annual average of 2.8 percent under the First Five - Year Plan to 3.9 percent during the first three years of the second plan; Chile, where the rates were estimated as 2.5 percent for population and 1.7 percent for production; and Pakistan, where food production had recently shown little increase in the face of an annual population growth of 1.6 percent. In several Far Eastern countries and in parts of Latin America and Africa, the increase in production had recently fallen behind, or was barely keeping pace with, the accelerating growth of population.

30. Furthermore, both in the Far East, where the wartime setback to production had been particularly severe, and in Latin America, where population was growing especially rapidly, per caput food production was still somewhat below the average prewar level, while in Africa too it appeared recently to have fallen back to approximately that level. In the Far East, even an improvement to the prewar level would leave per caput production at less than half the low world average. It was emphasized, however, that per caput production levels were not a reliable guide to actual consumption. Because of smaller exports or larger imports, per caput supplies of food available for consumption in each of the less developed regions were slightly higher than before the war. Nevertheless, the widespread poor harvests of 1957 had demonstrated that the immediate situation remained precarious.

31. The difficulty of ensuring a sufficiently rapid increase in food production was further emphasized by the absolute level of population increases in some countries. In India, for instance, an annual rate of only 1 percent would mean an additional 4 million mouths to feed. In many countries, the density of the rural population was already, extremely high, the possibility of extending the cultivated area was often very limited, and the expansion of food production would soon depend entirely, upon higher yields. In those countries the development of nonagricultural employment was particularly urgent.

32. Even when it had been possible to expand production in line with population growth, higher incomes resulting from economic development had exerted a steady upward pressure on retail food prices. The greatly increased pace of industrialization and urbanization since the Second World War had considerably affected the demand for food. This meant not only that production must be increased but that proportionately a still greater rate of increase was needed in the marketed surplus. An indication of the increases that might be necessary was that tinder India's forthcoming Third Five - Year Plan it was hoped to expand food production by as much as 8 percent annually. In some countries the increase in the demand for food was accentuated by the rise in the incomes and purchasing power of the lowerincome groups.

33. Rising incomes were also a main factor in causing a shift in demand from the cheaper staples to superior cereals and to dairy products, fruit and vegetables, and other protective foods. Diversification of production was necessary to improve diets and to meet the changing pattern of demand.

34. The Conference emphasized that existing knowledge of agricultural resources, of the pattern of demand and of population trends, was not sufficient for the prediction with any certainty, of the longer - term course of food production in relation to the growth of population. The recent acceleration in the rate of population growth had resulted mainly from lower death rates, especially among young children, following improvements in medical services and in nutrition, and there appeared to have been little change in birth rates so far. Some countries, notably in the Far East, had recently adopted family planning policies but it would be a long time before their effects could be felt. There was evidence that, with rising levels of living, the coefficient of fertility tended to decline. The various factors influencing this tendency required much further study.

35. On the production side of the equation, knowledge of the world's agricultural resources was still far from complete. Existing technical knowledge was as yet being utilized to only, a small degree in the world's agricultural production. Moreover, recent developments in research suggested that agricultural technology was still only on the threshold of the achievement of its full possibilities.

36. A high rate of population increase was, however, bound to continue for many years to come, and there could be no slackening in efforts to remove the barriers to the fuller application of existing technical knowledge in the less developed countries and to improve their purchasing power so that they, could increasingly utilize the abundant production of the more advanced countries for the better nutrition of their populations. The immediate problem of providing sufficient food was itself immense and challenging. Its solution could not safely be delayed much longer and should not be jeopardized by inadequately based hopes or fears about the more remote future.

C. Changes in the Terms of Trade for Agricultural Products

37. The Conference noted with concern the deterioration in the terms of trade for agricultural products on world markets, which had had serious effects for agricultural exporting countries. For example, in comparison with the average for the relatively stable two - year period of 1952 and 1953, the terms of trade for agricultural products, as measured by their purchasing power for manufactured goods, had fallen by some 20 percent. Agricultural exporters in general had therefore not benefited at all from an increase of about 19 percent in the volume of their shipments from 1952 - 53 to 1958. For the less developed regions of the world, the volume of agricultural exports had increased by 15 percent during this period but their real value had declined by about 3 percent. Real prices of agricultural products as a whole were still, however, appreciably higher than during the period of depression immediately before the war.

38. The less developed countries urgently needed to increase their foreign exchange earnings. Their import requirements were growing rapidly, as they needed capital goods for the implementation of their programs of economic development. In addition, many of them needed larger food imports, in order to meet the demand caused by population increase, urbanization and rising incomes, and to prevent undue rises in the price of food to the consumer. As a result of the deterioration in the terms of trade, they had had either to reduce imports of capital goods or to pursue their development plans at the expense of food imports, which had sometimes led to inflation. World trade problems were thus closely linked to the problem of feeding the rapidly increasing populations of the less developed countries, and this had already had considerable effects on the pattern of world trade. The Far East region, for example, which before the war had been a net exporter of food and feeding stuffs, had had substantial net imports throughout the postwar period. The net exports of food and feeding stuffs of the less developed regions as a whole were now less than one third of their prewar volume.

39. The deterioration in the terms of trade for agricultural products had also affected the more developed agricultural exporting countries, and in these countries also, import restrictions had frequently been necessary in recent years. Although the industrialized importing countries were able to obtain their imports of food and raw materials at lower prices, their own exports of manufactured goods had suffered as a result of the reduced purchasing power of the agricultural exporters. In 1958, when export earnings from agricultural products had fallen by 9 percent, there had been, for the first time since the war, a decline in both the volume and total value of exports of manufactured goods. There could be little doubt that the reduced export earnings of primary, producers had contributed to this result.

40. A number of factors appeared to have contributed to the decline in the prices of agricultural exports. The level of economic activity in the industrialized countries, which largely influenced the level of import demand, was clearly of great importance. The effects of short - term fluctuations in this activity were sharply evident from the events of 1957 and 1958. In addition, the growth of domestic production in the industrialized countries, as a result both of technical improvements and of support measures, had limited their import demand for commodities they were able to produce themselves. For example, revenue duties on coffee, cocoa and tobacco also restricted demand in many of these countries. Another factor was the relatively low income elasticity of demand for some food products in the industrialized countries, especially at the farm or import level, as processing and distribution accounted for an increasingly large proportion of their final cost. For many agricultural raw materials, demand in the industrialized countries had been reduced by the development of substitutes and by economics in the use of raw materials in manufacture. In addition to the decline in agricultural prices, the terms of trade for agricultural products had been influenced by the almost continuous rise in the prices of manufactured goods.

41. The special study of factors influencing the growth of international trade in agricultural products, included in the Director-General's report, The State of Food and Agriculture 1956, had brought to light new data on long - term trends in agricultural trade, which had been extensively drawn on in the reports of GATT and other agencies. The Conference urged that such basic studies should be continued, in collaboration, where appropriate, with GATT and other international agencies. Measures to even out the harmful short - term fluctuations, and the results of existing national and international stabilization measures, including commodity agreements, required careful study. Countries whose export earnings were particularly vulnerable to world market fluctuations because of their heavy dependence on one or two main products, should strengthen their efforts to broaden their export base, though it was recognized that diversification was a slow process and might require considerable capital investment and technical and financial assistance, as well as an understanding of their special situation by importing countries.

42. Finally, the Conference again emphasized the responsibility of all countries, when considering changes in their agricultural and trade policies, to pay careful attention to the likely effects of such changes on other countries. The industrialized countries should also consider how policies designed to influence the level of domestic economic activity would affect the agricultural exporting countries and thus, indirectly, the demand for their own exports of manufactured goods. It was important that the growing tendency for the formation of regional economic groups should not have the effect of further contracting export outlets for efficient producers.

D. The Economic Position of Farm Populations

43. The Conference welcomed the study of agricultural incomes and levels of living in countries at different stages of economic development which had been included in the Director - General's report, The State of Food and Agriculture 1959. The scattered and incomplete nature of the information, and the weaknesses of some of the basic statistical data, to which attention had been drawn in the report, were recognized, as also were some of the methodological difficulties. At the same time it was considered that the broad picture which emerged was substantially correct. Although it had not been possible to get a precise measure of the difference, there appeared to be little doubt that in most countries farm incomes and levels of living were appreciably lower than those of other sectors of the population. The few exceptions were mainly agricultural exporting countries and some industrialized countries heavily dependent on food imports. Several countries noted that the social problems arising from income disparities between town and country were at the present time the biggest problem of agriculture in the industrially more developed countries. Although the situation of the rural population appeared to have improved compared with the prewar period, in more recent years farm incomes had as a rule not increased as quickly as those in other occupations.

44. In nearly all countries nonagricultural production had recently grown faster than agricultural production, as was normal in expanding economies. The Conference stressed the need for further studies of the conditions influencing the movement of manpower from agriculture to other occupations. This migration facilitated the raising of agricultural productivity and consequently per caput farm incomes. It was also noted that as per caput incomes rose in a country, consumer demand shifted to farm products which were more expensive and more labor - intensive. This too could be a factor tending to minimize the disparities between rural and urban incomes.

45. The Conference recognized that the biggest single factor determining the general level of agricultural incomes was the average physical output per man, in which striking differences existed between different countries for the same agricultural products. It was noted, however, that such factors as average size of farm and price levels also had a substantial influence on farm incomes, especially in comparing countries at about the same stage of economic development. It was also observed that widely disparate levels of productivity and incomes often occurred between different types of agricultural enterprise within a single country. It was stressed that studies of levels of living in agriculture could be most effectively based on farm household and farm management surveys, and that further studies of this nature, particularly in less developed countries, would be of great value, the more so if they could be carried out on comparable lines to be suggested by FAO.

46. Differences in the level of technology and the failure to use fully technical methods already available were not the whole explanation of the great differences in average levels of productivity between countries. The importance of institutional factors was also emphasized. Lack of effective domestic demand was noted as a major factor which limited aggregate agricultural productivity in less developed countries. This resulted partly from the relatively small size of the nonfarm population and partly from their low purchasing power. An exception arose where a large part of the production of less developed countries was for export but as world markets for most agricultural products were already heavily supplied, further export opportunities were recognized to be limited.

47. The well - known inverse correlation between the percentage of the population engaged in agriculture and per caput national income might give the impression that economic progress could be served best by, devoting virtually, all available resources to further industrialization. The Conference stressed that postwar experience had shown this view to be erroneous. The economic and inflationary, stresses set up when agricultural development lagged seriously behind industrial development were now widely, recognized, and in recent years there was much more appreciation of the importance of the agricultural sector and of the need to maintain a balanced rate of growth between industry, and agriculture.

48. Much less attention had been given hitherto to trends in the actual numbers, as distinct from the percentage of the population, engaged in agriculture. The study under consideration suggested that while this percentage showed a continuous decline. in the course of economic development, the absolute numbers of the rural population usually continued to increase, at least until the farm population fell below 50 percent of the total. This stage had already been passed in most industrialized countries, and there the number of people engaged in agriculture was now declining. Most less developed countries, however, must anticipate a continuing rise in the absolute numbers of the farm population for many years to come.

49. The Conference recognized the serious problem which a growing farm population caused in some less developed countries where numbers were already large in relation to land resources. Such countries faced the danger of a further subdivision of their already small farms before they reached the stage when a decline in the numbers of persons dependent on agriculture began to case the pressure on the land. Yet all this time they would need to find ways of raising their total farm output to feed their larger farm populations and to meet the needs of the still more rapidly growing populations in towns. It was suggested that special measures might sometimes he needed to prevent the further subdivision of farms.

50. The Conference recommended that FAO should continue its studies of the root causes of agricultural poverty, better knowledge of which would ease the way toward solutions of the problems of agriculture as well as of general economic growth. The Conference considered that further studies on the impact of industrialization on agricultural development were needed. It was recognized that further industrialization was necessary for the progress of commercial agriculture, in order to supply the increasingly wide range of fertilizers, machinery, etc., now needed for efficient production, and to provide the expanding market necessary if this equipment were to be put to effective use, and also to provide employment opportunities for surplus rural populations.

E. Problems of Agricultural Development in Less Developed Countries

51. The Conference emphasized that the most pressing problems of food and agriculture were now centered in the economically less developed countries of the world. The review of some of the general problems of agricultural development in these countries in the light of postwar experience, included in The State of Food and Agriculture 1959, was therefore considered particularly appropriate. Such a study was of value, in that it considered the interrelation of the social, economic and technological approaches to these problems, both in their over - all aspects as they must be considered by governments in planning further development, and from the point of view of the individual farmer. The study concentrated on the domestic aspects of agricultural development problems, which were largely under the control of individual governments; production for domestic consumption was much the largest sector of the agricultural economy in nearly, all countries. Nevertheless, it was appreciated that international problems, largely outside, the control of individual governments, such as the recent deterioration in the terms of trade for agricultural products, were in many cases a major difficulty hampering general economic development, and not only agricultural development. These problems had been considered elsewhere by the Conference.

52. While agricultural development could not for long run far ahead of the progress of the economy as a whole, the current situation in many, less developed countries was that production was falling appreciably behind the growth of demand. As a result, these countries had been compelled to reduce food exports, or to rely increasingly on imported foodstuffs, to the detriment of their balance of payments and of economic development as a whole. There was reason to believe that in many cases this was largely the result of institutional obstacles to agricultural expansion, or a lack of adequate incentives for farmers to expand production, especially production for the market. Technical developments and agricultural resources available to farmers were not always fully utilized.

53. The Conference therefore endorsed the view that a first essential in fostering agricultural development was that governments should provide favorable economic and social conditions at the farm level, which would encourage the flow of adequate investment funds into agriculture and would also encourage farmers to develop their own initiative. At present, investment in nonagricultural enterprises gave bigger as well as quicker returns in most less developed countries. In this connection, the Conference noted the particular importance of price stabilization measures, of improved marketing (including processing) facilities, and of agrarian systems which gave the farmer both reasonable security of tenure and an equitable share of the benefits from increased output. Unless these basic conditions were provided, it was recognized that farmers would be less receptive to the new methods advocated by extension services, and that other efforts to increase production might yield only a fraction of their potential benefit. It was emphasized, however, that a broad simultaneous approach to all these problems was necessary. Experience had shown that, especially in peasant economies, the confidence of farmers could not be obtained or the momentum of development built up under a piecemeal approach.

54. While many countries emphasized the need for stability of domestic prices to give confidence to farmers in expanding their output for the market, and to encourage further investment in agriculture, it was also suggested that measures of price stabilization should not be allowed to harden into a system of agricultural protection. It was recognized, however, that as a rule, less developed countries were not in a financial position to support prices at a level substantially above those usually prevailing in world markets. Nor were such price levels compatible with the limited purchasing power of their consumers. It was considered, however, that price stability was in itself a powerful incentive to increased output.

55. The rapid growth of towns in less developed countries had greatly increased the strain on their often primitive marketing services. Improvement was especially necessary in marketing perishables, including livestock products, fish, fruit and vegetables, which occupied an increasingly important place in the diet as incomes rose. It was also noted that effective price stabilization of basic foods such as cereals was seldom possible without improved marketing services. A number of less developed countries were establishing a network of official buying points, or of warehouses where produce could be deposited against warehouse receipts, so that farmers could count on receiving at least minimum official prices. Many countries stressed the essential connection between marketing services and the provision of credit, especially in less developed countries where most farmers lacked the resources to avoid selling immediately after the harvest when prices were at their lowest.

56. More ready availability of credit was stressed as an essential for agricultural development. Normal commercial credit could not be obtained by most farmers, especially in less developed countries, since they were seldom able to provide the necessary security. This pointed to the need for credit institutions catering for the special needs of farmers. Several countries also stressed the importance of building up effective farmers' co-operatives for marketing, for the provision of credit, and also for the purchase of farm implements and requisites. Such institutions not only improved the farmers bargaining position and made possible numerous economics but also enabled them to concentrate their attention on production problems and on improving their productive efficiency. In less developed countries, it had usually been found that government assistance was necessary, in initial stages of developing agricultural co - operative organizations. However, farmers had to live up to their responsibilities if co - operatives were to be successful.

57. Many countries laid great stress on the powerful effect which improved conditions of land tenure could have as an incentive to increased production in less developed countries. Without some security of tenure the farmer had little inducement to improve his holding, while he was unlikely to make his best efforts to increase output for the market if much of the benefit went to others. Wide experience of land reform measures since the war confirmed their importance but also underlined the difficulty of putting them effectively into practice. It was emphasized that the redistribution of land alone might not lead to increased output and might indeed have the opposite result, unless accompanied by adequate programs of improved credit, extension, marketing and other services. Problems of land reform were considered more fully, under another item of the Conference agenda.

58. Several countries noted the need to include some cash crops in the cropping program if the shift from a subsistence to a market agriculture was to be encouraged. Mention was also made of the importance of making available consumer goods of the kind wanted by farmers as an incentive to increased production for the market. Instances were cited where peasant farmers had not troubled to harvest the whole of their crops because they had nothing on which they wished to spend additional cash earnings. Other countries mentioned the need for improved amenities in rural areas, including educational and medical facilities, if efficient and expanding agricultures were to be developed.

59. The Conference stressed that in less developed countries governments had a vital role to play in agricultural development. It was for them to plan the over - all approach and balance of agricultural development in the framework of general economic development. They had a prime responsibility to establish favorable conditions for expansion and to remove institutional and other obstacles. They usually had to provide a large share of the investment funds, including funds for farm credit to individual farmers, for large - scale irrigation or land settlement schemes, and for roads and other essentials of the infrastructure. Governments also have to provide research and extension services, which were essential if improved methods were to be adapted to local conditions and put into practice on a large scale. Community development programs had proved of value for this purpose in some countries, and in addition fostered general social development.

60. In general, the Conference supported the broad approach envisaged in the Director - General's study, and considered that specific problems of agricultural development might usefully be explored further in future issues of The State of Food and Agriculture. The suggestion was made that experience in developing the more backward areas in economically, more developed countries might often provide information which would be of value in tackling the problems of less developed countries. It was also considered that the importance of providing favorable conditions for agricultural expansion should be increasingly reflected in both the regular and technical assistance programs of the Organization. Finally, emphasis was laid on the need for an adequate level of investment for agricultural as for all other types of economic development. There were some aspects of agriculture, and some circumstances, where increased financial aid from industrially more developed countries seemed essential for speeding up the tempo of agricultural development. But it was recognized that in most cases investment funds for such development must come mainly from the less developed countries own resources. Markets at stable prices in the industrially more developed countries would also contribute greatly, to the development of the agriculture of the less developed countries.

Contents -