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The State of Agricultural Commodity Markets (SOCO) 2006

Year of publication 2007

Pages 55

Author Trade and Markets Division

Product type Book (stand-alone)

ISBN 978925105652

Series title The State of Agricultural Commodity Markets (SOCO)

Edition 1

Synopsis (short abstract) The State of Agricultural Commodity Markets 2006 is the second issue of this FAO publication. It focuses on the question of why the development and food security needs of developing countries need to be better reflected in the design and implementation of new agreements on further liberalization of international agricultural markets, and on the mechanisms under discussion to achieve this. In the Doha Development Round of the World Trade Organization (WTO), the questio n of how to safeguard the interests of developing countries, especially the lower income countries, has proved to be highly topical but also problematic, because the issues and arguments are complex and sometimes controversial. The stalling of the Doha Round in July 2006 provided an opportunity to revisit the issues of how future reductions in import tariffs on agricultural products will affect different developing countries, whether there might be any negative repercus sions of further liberalization and, if so, how these might be addressed in the formulation of new trade rules.

Language English

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    Technical developments that increase productivity and reduce costs mean that the long-term trend in real agricultural commodity prices on international markets is gradually downwards but that trend is dominated by significant short-term variability. Many developing countries, and especially the least developed countries, continue to depend on just a few agricultural commodities for the bulk of their export earnings. For them, commodity price variability has a strong impact on incomes, employment and government revenues, compromising macroeconomic planning and development efforts more generally. However, developing countries are also as a group increasingly reliant on food imports. The least developed countries are already net food importers. In these circumstances, falling international food prices are obviously beneficial but increasing reliance on imported food also means greater exposure to the variability in international food prices and hence food import bills. Developing countrie s need to contend with variability of international commodity prices in their efforts to increase their export earnings or manage their food import bills. At the same time, they must also contend with the market distortions introduced by the import tariffs and export and production subsidies used by both developed and developing countries, and by the market power in many commodity value chains of large transnational companies. The traditional international responses to commodity market instabili ty based on market interventions or compensation schemes are not currently favoured and new approaches are needed. These new approaches, such as marketbased price risk management, are aimed less at preventing price swings than at helping producers and consumers predict and manage better their adverse impacts.
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