Cereal production in 1996 declined for the fifth consecutive year as a consequence of reduced rainfall at the beginning of the season and continuing problems in the sector, brought on by economic transition and market reforms. More specifically, in the Central Agricultural Region, which accounts for some 80 percent of national crop production, 1996 was characterized by poor fallow preparation, low quality/high quantity seed use, delays in germination, poor weed control, no fertilizer use, less than average rainfall at critical stages in the crop cycle and delays in harvest. Mongolia is classified as a Low Income Food Deficit Country (LIFDC). Although it is not food insecure in the normal sense, nor is it facing an emergency which may result in widespread famine, it does, like transitional economies in the CIS, have a growing population of low income groups, who are experiencing a dramatic fall in nutritional standards due to changes in their economic circumstances. As a result, like several CIS countries which are currently receiving food aid, increasing poverty in Mongolia has become a pressing problem, requiring international assistance. The Government has identified the unemployed, the elderly, female headed households, children, pensioners and small herders as those who most bear the social cost of transition. These segments of the population have extremely limited access to financial resources to purchase food from a market which is being increasingly liberalized. Even those in employment face considerable problems in meeting household demand for food as inflation remains high and increases in food prices have so far substantially outpaced wages in the public sector. Dwindling domestic cereal supplies have resulted in further deterioration in the country�s ability to feed its people and large imports will be necessary in the 1996/97 marketing year to meet requirements, a situation further compounded by low cereal reserves, a decline in export trading and the country�s capacity to import sufficient quantities of grain commercially to meet the deficit. Moreover, a fall in world copper and cashmere prices, important revenue earners, will undoubtedly reduce further Government income and expenditure in the year ahead. The overall cereal import requirement for 1996/97 is estimated at 235 000 tons of wheat and 3 000 tons of rice, making a total of 238 000 tons. Of this it is estimated that the Government could finance the commercial import of some 87 000 tons, similar to last year, leaving an overall deficit of 151 000 tons, with which the country needs assistance, through emergency and programme food aid. For the most vulnerable groups in society, those categorized as being absolutely poor, it is recommended that some 22 000 tons be provided in emergency food aid, leaving a balance of 129 000 tons to be met by concessional credits and programme food assistance.