Food Outlook - June 2006
05/06/2006
The recent months saw commodity markets as a whole becoming more volatile with a steady upward trend in prices. In agricultural markets, some important food and feed commodities gained on supply tightness and stronger demand while in the energy complex and metals, the tighter supply and demand balance resulted in a steep increase in prices. Amid political uncertainties and surging energy prices, agricultural markets over the past year have also had to confront abnormal incidences of natural disasters, ranging from devastating hurricanes to fast spreading animal diseases.
Crop Prospects and Food Situation #1, April 2006
06/04/2006
World cereal production in 2006 is forecast to decline marginally from last year’s good level. Wheat output is expected to decrease reflecting smaller crops in the United States and the CIS in Europe, due to adverse weather. Production of coarse grains is tentatively forecast to decline mostly as a result of reduced plantings anticipated in the United States. Rice output may increase as very early prospects are favourable.
Special Report - FAO/WFP Crop and Food Supply Assessment Mission to Ethiopia - 24 February 2006
24/02/2006
An FAO/WFP Crop and Food Supply Assessment Mission visited Ethiopia from 12 November to 11 December 2005 to estimate the main meher season cereal and pulse production; review the final estimates of the 2004 meher and 2005 secondary belg season harvests; forecast the 2006 belg season production; assess the overall food supply situation; and estimate cereal import requirements, including food aid needs, for the 2006 marketing year (January/December). Accompanied by experts from the Federal Ministry of Agriculture and Rural Development (MoARD), the Central Statistics Authority (CSA) and an USAID observer, the Mission, in seven teams, visited sixty-two zones and special woredas (districts), over a 20-day period, in all the grain producing regions. Parallel to the crop assessment teams but spread over a longer period, 25 teams, led by the Government’s Disaster Prevention and Preparedness Authority (DPPA) and with members comprising WFP, bilateral donor agencies and NGO personnel, visited marginal localities and vulnerable zones and woredas to determine their current and prospective food security situation.
GIEWS Updates - Volume 2006
22/02/2006
The GIEWS Updates are issued by FAO’s Global Information and Early Warning System (GIEWS) from mid-2004. The updates focus on developing anomalous conditions aimed at providing early warnings, as well as latest and more elaborate information than other GIEWS regular reports on the food security situation of countries, at both national and sub-national levels.
Special Report - FAO/WFP Crop and Food Supply Assessment Mission to Sudan - 15 February 2006
16/02/2006
An FAO/WFP Crop and Food Supply Assessment Mission visited southern Sudan from 8 to 27 October 2005 and northern Sudan from 12 November to 6 December 2005 in order to assess the current season’s cereal production, forecast wheat production from areas prepared for planting, and estimate cereal import requirements for the marketing year 2005/06 (November-October). The Mission in both northern and southern Sudan received the full cooperation of the Federal Ministry of Agriculture Humanitarian Aid Commission (HAC), Sudan Relief and Rehabilitation Commission (SRRC) and South Sudan Centre for Statistic and Evaluation (SSCSE), all assigned senior members of staff to accompany it. The Mission was accompanied by EC observers and benefited from a wide range of discussions with both national and international stakeholders.
Market access and preferential trading schemes: evidence from selected developed and developing countries
01/01/2006
This report is aimed at analyzing the degree of protection faced by exporters in the EU, Japan, the United States, China, India and Brazil, and at identifying the contribution of product groups to the observed degree of market access. Data on the level of applied trade barriers provided by the MAcMap database is employed to compute Mercantilistic Trade Restrictiveness Indexes (MTRIs) on the basis of bilateral trade flows generated within a general equilibrium model framework. Results indicate that notwithstanding the rhetoric on trade preferences, developing country exporters appear to be still substantially restricted in their trade with some of the major developed country markets, such as the EU, Japan and the United States. Also, the three developing countries involved however impose significant restrictions on the access to their markets.
Food import risk in Malawi: simulating a hedging scheme for Malawi food imports using historical data
01/01/2006
During the 1980s and 1990s least developed countries (LDCs) encountered increasing difficulties in maintaining national food security. By the turn of the century commercial food import bills reached unprecedented heights in terms of domestic food consumption. The already precarious state of food security has been aggravated by occasional “spikes” in food import prices. Additionally, food aid has been reduced substantially by the donor community. The combination of these three developments - declines in food aid, increased commercial food imports and occasional “spikes” in food import prices - have caused a significant increase in the vulnerability of these countries. These circumstances have motivated a further and intensified investigation of policy instruments that can reduce the impact of volatile food import prices. The use of financial derivatives as instruments to hedge risks particularly deserves further exploration since these instruments are possibly cheap and do not distort physical markets. An integral part of this study is the exploration of ways in which the use of such instruments may be embedded in existing food import marketing and financial arrangements. While food import risks have not been a large part of the recent policy debate, it is likely that the increase in the LDCs’ food import bill and the increasing difficulties of LDCs to meet their food security requirements will become a major issue in the near and medium term future.
Producer demand and welfare benefits of rainfall insurance in Tanzania
01/01/2006
This paper explores empirically the issue of the demand, namely the willingness to pay (WTP), for rainfall-based insurance, in the context of a poor agrarian economy, with rural households significantly dependent on agricultural commodity risks. Using data from recent household surveys in the Kilimanjaro and Ruvuma regions of the United Republic of Tanzania, both important agricultural producing regions, the paper ascertains the nature of the weather related risks faced by smallholder growers in the context of their overall risk environment. It then estimates their desirability for weather- based income insurance as well as their demand for it by utilizing contingent valuation (CV) techniques. The results indicate that producer households are affected by a variety of shocks, of which weather related ones are very important. The paper estimates the demand for weather-based crop insurance in each of the two regions, and indicates that there seem to be considerable welfare benefits (net of costs) for such insurance, but differentiated according to regional rainfall instability, as well as producer incomes.
Household vulnerability in rural Tanzania
01/01/2006
This paper develops a measure of rural household vulnerability that combines existing approaches to estimating idiosyncratic risks with an approach to measuring covariate risk arising from crop production. The methodology is applied to rural households in Tanzania, using household surveys in two export crop producing regions. The results suggest that covariate risk arising from crop production faced by rural households is substantial and increases with farm size. Consumption is estimated to depend strongly on crop income, the variability of which induces considerable overall consumption risk. Overall, covariate risk is found to constitute smaller shares of total consumption risk in the wealthier region, but a dominant share in the poorer region. The share of covariate risk in total household consumption risk is found to be larger among the poor. Vulnerability is quite different between the two regions, with rural households in the poorer region exhibiting considerably higher vulnerability. Vulnerability in the poorer region is found to be larger than poverty incidence.
Threshold cointegration in the sugar-ethanol-oil price system in Brazil: evidence from nonlinear vector error correction models
01/01/2006
In this paper, the possibility of nonlinear dynamic adjustment in the sugar-ethanol-oil nexus in Brazil is examined. Threshold vector error correction models are employed to test for linearity in the adjustment of prices of sugar and oil, ethanol and oil and ethanol and sugar. Strong evidence of threshold type nonlinearity is found. The results suggest that sugar and oil and ethanol and oil prices are characterised by discrete threshold behaviour, whereas sugar and ethanol can be thought of as being linearly cointegrated. Threshold estimates suggest that sugar prices adjust rapidly to a long run equilibrium, determined by oil prices, in an asymmetric manner, when disequilibria are negative. The dynamic adjustment of ethanol prices is faster when the oil-ethanol price spread widens and ethanol prices are below a critical threshold. Both sugar and ethanol prices are found to be determined by oil prices and no evidence for a causal relationship that runs from oil to ethanol to sugar is found.
The role of agriculture in reducing poverty in Tanzania: A household perspective from rural Kilimanjaro and Ruvuma
01/01/2006
This paper explores how farm productivity affects poverty, and how various factor market constraints affect farm productivity. The empirical analysis draws on representative surveys of farm households in Kilimanjaro and Ruvuma, two cash crop growing regions in Tanzania. We find that poorer households do not only possess fewer assets, but are also much less productive. We find that agricultural productivity directly affects household consumption and hence overall poverty and welfare. Stochastic production frontier analysis indicates that many farmers are farming well below best practice in the region. Analysis of allocative efficiency suggests that family labour is substantially over utilized, a sign of considerable excess labour supply. Use of intermediate inputs, on the other hand, is well below what is commensurate with the estimated value of their marginal productivities. An important reason for low input use is lack of credit to purchase inputs, but difficult access to the inputs themselves, being connected to the economy, and food security and self insurance considerations are also important impediments. Easy access to credit is positively associated with being a member of a savings association or being in a contractual arrangement with a cooperative or firm. The findings support a continuing emphasis on increasing agricultural productivity in designing poverty reduction policies. Better agronomic practices and increased input use will be crucial in this strategy. Financial constraints might be relieved through fostering institutional arrangements facilitating contract enforcement and institutions that facilitate saving by the households themselves. They may also be relieved by the provision of more adequate consumption safety nets.
Estimating price elasticities of supply for cotton: a structural time-series approach
01/01/2006
The Kalman Filter is used to estimate a structural time-series model of cotton supply for 30 countries and 16 aggregated regions. Estimated short run supply elasticities with respect to the world price are presented for all 46 countries and regions. While they are broadly within the expected range in light of previous work, they indicate extensive cross-country and regional heterogeneity, as well as considerable parameter uncertainty in some cases. Finally, some proposals are made for incorporating both the core estimates and their sampling distributions into applied equilibrium models.
The Agricultural dimension of the ACP-EU Economic Partnership Agreements
01/01/2006
he African Caribbean and Pacific (ACP) countries are facing several major sets of closely interlinked forces that are likely to have significant impact on the development of their agriculture (including fisheries) sectors and their food security situation. The possible conclusion and outcome of both the negotiations for Economic Partnership Agreements (EPAs) under the Cotonou Agreement (with the EU) and the WTO Doha Round pose serious concerns on the future of their agricultural trade and development of the sector. Furthermore, the ongoing CAP reform which will determine the nature of EU agriculture over the next few years, and the process of EU enlargement have also created concerns for ACP States as to how to address these multi-faceted forces so as to reap the maximum benefits for their mostly agrarian economies.
Special Report - FAO/WFP Food Supply and Demand Assessment for Aceh Provind and Nias Island (Indonesia)
22/12/2005
Earlier in the year from 12 to 25 March 2005 FAO and WFP conducted a first assessment of food supply and demand in the tsunami affected districts of Aceh Province. The assessment showed that the livelihoods of approximately 600 000 people had been directly affected by the tsunami of 26 December 2004. At the same time rice production was expected to show some 200,000 tonnes surplus for the 2005/06 marketing year (April/March). At that time the recovery effort by the Government and the international community had just begun. The main objective of this follow-up mission undertaken jointly by FAO and WFP from 7 to 18 November 2005 was, therefore, to determine, after 11 months since tsunami struck, the extent to which people have resumed some form of livelihood which allows them to have sustainable access to markets in order to obtain sufficient and nutritious food. The focus of the Mission was on the extent of agricultural recovery, functioning of markets, and changes in food security, nutrition and vulnerability status of people affected by the tsunami and the role of food aid. The special case of Nias, which was heavily affected by the earthquake on 28 March 2005, is highlighted.
No. 11 Dairy: Measuring the impact of reform
06/12/2005
Determining the impact of reforms to dairy sector policies is problematic and controversial. The extent and pervasiveness of intervention in the sector, and the resulting distortions to the international market, would suggest that liberalization could potentially lead to large gains, and indeed these are consistently reflected in most model-based analyses. The size of impacts has long been thought of as the key reason why dairy reforms and trade discussions have been so difficult. However, there are reasons for questioning estimates of the likely magnitudes of such impacts across different importing and exporting countries.
Food Outlook - December 2005
05/12/2005
FAO latest forecast for the 2005 world cereal output has been raised considerably since the September report to 2 005 million tonnes, 2.4 percent lower than last year’s record crop. Cereal crops have been satisfactory in most regions, except parts of Africa and South America. Planting of the 2006 cereal crop is underway in the main producing regions under generally favourable conditions so far. However, prospects are uncertain in Southern Africa and South America. Global cereal utilization is forecast to rise in 2005/06, with an expected increase in food consumption leading to some gains in the average per capita consumption in developing countries. By contrast, feed use of cereals is expected to decline. World cereal stocks are forecast to decrease, mostly reflecting smaller coarse grains inventory as a result of lower production this year. Cereal trade is expected to contract in 2005/06 following improved production in several major importing countries, mainly in Asia. International prices of cereals are generally higher than a year ago. Export prices have increased sharply in Argentina, reflecting reduced wheat production, and in South Africa as a result of high regional demand for maize. World milk output is expected to grow in 2005, but supplies from traditional exporters remain tight. International trade prices have stabilized at high levels supported by firm demand, particularly in Asia and North Africa. International prices of oilseeds have weakened in recent months following a substantial increase in production in 2004/05 (October/September), which has resulted in record oilseed carryover stocks. Global sugar production is forecast to rise in 2005 but sustained demand in developing countries will likely keep the global supply tight. International sugar prices remain firm. International banana prices have increased reflecting the impact of adverse weather in Latin America. In late November, the EU adopted a tariff-only system for banana imports due to start in January 2006. Any further extensive spread of avian flu could seriously disrupt global poultry and feed markets.
No. 10 Special and differential treatment in agriculture - November 2005
08/11/2005
This technical note is intended to contribute to the process of clarifying issues and identifying possible options to facilitate agreement on areas of special and differential treatment in the context of the agriculture negotiations. It first addresses what is seen by some members as the most difficult area, the cross cutting issues related to development, focused on the principles behind, and purpose of, SDT. It then examines the agreement-specific proposals under the three pillars of the Agreement on Agriculture (AoA), as raised in the August Framework Agreement. It concludes with a discussion of implementation, an area of particular concern to the developing countries.