In recent years, the agricultural sector has been seriously and adversely affected by the transition of the country from a centrally planned to a market economy and by the withdrawal of substantial technical and economic assistance from the former U.S.S.R. Prior to these economic shocks, the country produced sufficient cereals, principally wheat, not only to satisfy domestic demand but also for export. Since 1990, however, the area harvested and yields have declined dramatically. In 1996 grain production was some 70 percent lower than pre-1990 levels. The decline is largely attributed to the break-up and sell-off of state farms to farm companies under the economic reform programme, high indebtedness, reduced access to credit, high interest rates, a critical shortage of inputs and operational farm machinery and poor husbandry practices.
In consequence, the country now faces a serious food deficit and only produces some 60 percent of its estimated cereal needs. As a result, although the country is not facing an emergency of a scale which may result in widespread famine, it does, like other transitional economies, have a growing population of vulnerable, low income people who have been experiencing a dramatic fall in nutritional standards due to a major deterioration in their economic circumstance.
To determine the extent of this year�s deficit an FAO Crop and Food Supply Assessment Mission, funded by UNDP, visited Mongolia in October to assess wheat production and evaluate the food supply situation for the 1997/98 marketing year. The evaluation is based on discussions with Government, UN, international development agencies, NGOs and crop assessment visits to main agricultural areas.
The Mission forecasts the production of wheat in 1997 at 282 000 tons, some 28 percent above output in 1996. Despite the increase this year, however, production remains only 40 percent of the level in 1990. Moreover, the increase this year compared to last is mainly attributed to improved rainfall in main producing areas rather than generalized improvements in the sector, such as better input supply. Indeed, the provision of credit and agricultural inputs remains a major problem which will have to be addressed if food production is to be restored in future. The agriculture sector urgently needs large scale investments in machinery, chemicals, input supply and marketing channels and training and research programmes. Without such interventions, for the majority of farm companies and the country as a whole, the future of grain production looks bleak.
The livestock sector contributes 88 percent to gross agricultural production. In common with other areas in the economy, the livestock sector has also been subject to radical reforms and the break-up of large state enterprises into smaller units. During its transition phase, there has been a sharp decline in budgetary and service support to the sector. As a result, infrastructure such as wells have broken down, veterinary and other services have been cut back, fodder production has decreased, marketing systems are underdeveloped and investment capital is unavailable or unaffordable to most herders. As the terms of trade turn against livestock, there is growing pressure to increase the number of animals per unit to make it viable. This has created many vulnerable households, whose capacity to absorb economic shocks has already been compromised.
Economic reforms have affected households in a number of negative ways including a significant increase in poverty, loss of employment, reduction in consumption, cuts in safety nets and social sector services. Amongst vulnerable groups of most concern are those that have least access to financial resources for the purchase of food, especially in a situation where purchasing power has been significantly eroded by high inflation. These groups include the unemployed, the elderly, female headed households, children, pensioners and small herders. Without additional assistance these groups, especially a growing population of abandoned �street� children, will face great hardship in the years ahead as their ability to counter food supply problems remains highly constrained. Moreover, as real incomes have fallen households have been forced to cut back on non-food items, leading to substantial welfare costs and increase in expenditure on cheaper and less nutritious food. Recent survey results suggest that the sharp rise in chronic under-nutrition in children to around 25 percent is a direct result of the adjustment made in consumption by households to adapt to a tightening food supply situation. Furthermore, with a substantial fall in the relative price of livestock to other food commodities, strongly negative terms of trade have developed against herders making the earning of their livelihood increasingly precarious.
Economic slow-down and a trade deficit in 1996 further constrained the country�s capacity to import both sufficient quantities of grain to meet needs and essential agricultural inputs to maintain productivity. The Mission estimates an overall cereal requirement for the 1997/98 marketing year of 178 000 tons comprising 175 000 tons of wheat and 3 000 tons of rice. Commercial imports are expected to cover the rice requirement, and, based on cereal imports last year, some 85 000 tons of wheat equivalent. This leaves a deficit of 90 000 tons, for which the country needs emergency and programme food assistance. The Mission recommends that for the most vulnerable sectors of society, the absolute poor who constitute some 6 percent of the population, 23 000 tons of emergency food aid be provided. The remaining 67 000 tons of the deficit should be covered by programme food aid. Both categories of food assistance can be handled by the National Poverty Alleviation Programme.