The State of  Food  and Agriculture 1998

WORLD REVIEW

II. CURRENT AGRICULTURAL SITUATION – FACTS AND FIGURES

1. CROP AND LIVESTOCK PRODUCTION

• World crop and livestock production was estimated to have increased in 1997 by only 1.2 percent over the previous year, the lowest yearly rate of growth since 1993. However, the slowdown occurred after a particularly bountiful crop year in 1996, when world output had expanded by as much as 4.5 percent. The slowdown was widespread across both developed and developing country regions.

The developing countries as a whole did not achieve any gain in per caput crop and livestock production during 1997.

• For the developing countries as a whole, 1997 was a disappointing year for crop and livestock production. The 1.8 percent increase recorded was the lowest since 1979 and marked the end of five years of solid and accelerating growth, which by 1996 had reached an estimated 5.3 percent. The recorded rate in 1997 was only just in line with population growth. Thus, for the first time since 1987, the developing countries as a whole did not achieve any gain in per caput crop and livestock production.

• All developing country regions shared to varying degrees in the slowdown. The sharpest negative turnaround in agricultural performance in 1997 was recorded in the Near East and North Africa region, where agricultural output is estimated to have declined by close to 4 percent following a more than 9 percent expansion in 1996. Production shortfalls in this region reflected unfavourable weather, particularly in some Northern African countries where drought caused sharp reductions, mainly in cereal crops. However, production is also estimated to have declined in the Islamic Republic of Iran, Iraq and the Syrian Arab Republic.

MAP 2

CHANGES IN CROP AND LIVESTOCK PRODUCTION, 1994-1997
 

• In sub-Saharan Africa also, agricultural production declined by 1 percent in 1997, implying a 4 percent decline in per caput terms and interrupting a four-year period of expansion in per caput agricultural output. Patterns of production performance in 1997 varied widely across the subregion, largely reflecting weather vagaries. Nevertheless, a majority of 36 countries experienced falls in per caput production, with the sharpest shortfalls occurring in southern Africa.

Although the effects of the Far East’s financial crisis may influence planting decisions in some countries, the effects on output were not yet noticeable in 1997.

• In the Far East, agricultural output continued expanding but at a significantly reduced rate which estimates put at a mere 2.6 percent – the lowest rate in the 1990s and only the second time in the same period that output growth has fallen below 4 percent. Behind the decline are lower rates of output expansion in a majority of the region’s larger countries. In particular, China’s agricultural output growth slowed but remained substantial, while India’s crops were hit by unfavourable weather in large parts of the country. Countries in Southeast Asia also suffered from droughts, partly associated with the El Niño phenomenon, causing a decline in agricultural production in Indonesia and a slowdown in the rate of expansion in Myanmar, the Philippines and Thailand. Although the effects of the region’s financial crisis may influence planting decisions in some countries, the effects on output were not yet noticeable in 1997.• In the Latin America and Caribbean region, agricultural output growth decelerated only marginally in 1997 to an estimated 2.9 percent. This is still slightly above the average of the previous five years and about 1 percent above the rate of population growth. The increase, however, was concentrated in a relatively small number of countries (including Argentina, Brazil and Peru), while several countries in Central America and the Caribbean, as well as Colombia and Paraguay, recorded declines in per caput production. In Latin America and the Caribbean, as in other regions, output shortfalls in many cases reflected the early effects of the El Niño phenomenon.• In the developed countries, growth in overall agricultural output slowed to a mere 0.5 percent in 1997, following an estimated expansion of more than 3 percent in 1996. The most pronounced turnaround was in the European Union (EU), where production contracted by nearly 2 percent after having expanded by 4 to 5 percent the previous year. The contraction affected most EU member countries and concerned both crop and livestock production. Cereal production was slightly down from the record harvest of 1996, as delays caused by rains affected wheat yields in several countries.

• In North America, agricultural output in 1997 continued expanding at an estimated rate of 2.6 percent. While output contracted slightly in Canada for the first time since 1992, the United States recorded an expansion of 3 percent.

• Following record output levels in 1996, agricultural production in Australia declined by about 1 percent in 1997, while New Zealand’s overall agricultural output continued to expand, posting an increase of 2 to 3 percent. In Japan, agricultural output in 1997 practically remained at the level of 1996, which followed two years of decline. Overall production levels are thus still about 7 percent below those prevailing a decade ago.

In the transition countries, 1997 was the first year since the beginning of the transition process in which overall agricultural production expanded, albeit by a relatively modest 1 percent.

• Contrasting with the overall negative performances of the other regions, 1997 marked a positive turnaround for the transition countries. It was the first year since the beginning of the transition process in which overall agricultural production expanded, albeit by a relatively modest 1 percent. Cereal production expanded significantly
while livestock production continued its downward trend. Production increased significantly in Ukraine and somewhat less in the Russian Federation and Kazakhstan. In the Central and Eastern European transition countries production patterns were uneven among countries, with Poland in particular experiencing a largely weather-induced decline and Romania a major expansion in cereal production.
 

2. FOOD SHORTAGES AND EMERGENCIES

• The number of countries facing food emergencies rose from 29 in mid-1997 to 36 in mid-1998, mainly owing to the effects of the El Niño weather phenomenon.

• In East Africa, food supply difficulties stem from recent droughts followed by floods in most countries, coupled with civil strife in some. In Somalia, the food supply situation will remain extremely tight until the next harvest starting in August 1998, after the worst floods in decades sharply reduced the 1997/98 secondary “Dyer” crops. The floods also resulted in the loss of livestock and an outbreak of animal diseases. In eastern Kenya, food assistance continues to be distributed to the population affected by severe floods. In Uganda, emergency food assistance is still required for some 400 000 displaced people in the northern areas affected by continuing insurgency. In the United Republic of Tanzania, food difficulties are being experienced in areas where the 1997/98 secondary “Vuli” crop was reduced by heavy rains and floods. In Ethiopia, food aid is needed by more than 5 million vulnerable people, including those affected by a poor 1997 harvest. In Eritrea, following two successive reduced cereal harvests, the overall food supply in 1998 is tight and food prices have increased sharply in the past months. In the Sudan, despite an overall satisfactory harvest, the food situation is critical and assistance is required for some 2.4 million people affected by civil strife and drought. However, distribution is hampered by insecurity and poor road conditions. In Burundi, the food situation has deteriorated as a result of a decline in the 1998 first-season foodcrop production and the continuing economic embargo by neighbouring countries. The food supply situation is also tight in Rwanda owing to a reduced 1998 first-season harvest and insecurity in western parts of the country.

• In West Africa, despite above-average 1997 harvests in coastal countries, food supply difficulties are reported in several countries. In Liberia and Sierra Leone, rehabilitation programmes are under way and the agricultural sector is improving, but both countries remain heavily dependent on international food assistance. In Sierra Leone, the poor security situation in the east is causing large population displacements and is disrupting all agricultural activities. In the Sahel, several areas are facing localized food supply difficulties following poor harvests in late 1997, notably in northern Senegal, Mauritania, the Gambia and parts of Burkina Faso and the Niger.

• In central Africa, as a result of flooding, shortages of inputs and civil unrest, crop prospects are poor in eastern parts of the Democratic Republic of the Congo.

• In southern Africa, although the impact of El Niño on crop production has been relatively limited, the food supply situation in the subregion is anticipated to be tighter during the 1998/99 marketing year than in the previous year. In Zambia, cereal production is expected to be much below average as a result of incessant rainfall and extensive flooding in the northern areas, while the southern part of the country experienced near drought conditions. In Angola and Mozambique, production of food crops is expected to improve this year, but relief assistance will be required for the internally displaced, vulnerable people and drought- or flood-affected population.

In Asia, a combination of adverse weather conditions, the financial crisis, earthquakes and hostilities caused food emergencies in several countries.

• In Asia, grave food supply difficulties persist in the Democratic People’s Republic of Korea, with continued need for food aid. Severe drought in Indonesia, attributed to El Niño, combined with the financial crisis, has seriously undermined the food security of the population, resulting in the need for considerable international assistance. In Afghanistan, the overall food supply in 1998 is anticipated to be tight as a result of ongoing hostilities and the recent earthquake damage to the irrigation infrastructure in the northern provinces. In Iraq, despite some improvement in the overall food supply situation following the implementation of the “oil for food” deal, malnutrition still remains a serious problem throughout the country. In the Lao People’s Democratic Republic, adverse weather conditions have caused crop damage in major rice-producing areas, exacerbating food supply problems in the country. In Mongolia, declining agricultural production and problems of economic transition continue to have an adverse effect on the food supply situation of vulnerable groups. Serious food supply difficulties persist in Papua New Guinea following reduced foodcrop production as a result of El Niño-related drought.

MAP 3

COUNTRIES EXPERIENCING FOOD SUPPLY SHORTFALLS AND REQUIRING EXCEPTIONAL ASSISTANCE
 

• In Latin America, abnormally dry weather associated with El Niño has delayed planting of the 1998/99 first-season cereal crop in Central American countries. Food assistance is being provided in Nicaragua, Honduras, El Salvador, Guatemala and Panama and will be needed until the harvest of the 1998 first-season crops. In the Caribbean, food assistance distributions continue in Haiti.

• In the Commonwealth of Independent States (CIS), some 16 percent of the population of Tajikistan is in need of targeted food aid, following widespread damage caused by floods and landslides. Vulnerable people in Armenia (about 13 percent of the resident population), Azerbaijan (11 percent) and Georgia (7 percent) continue to need relief food assistance. In Eastern Europe, needy people in Bosnia-Herzegovina are receiving food assistance.
 

3.  WORLD CEREAL SUPPLY SITUATION AND OUTLOOK⁵

Global wheat output rose in 1997 to an all-time record of 615 million tonnes.

• World cereal production in 1997 reached a record 1 909 million tonnes (including rice in milled terms), even though it increased only by a modest 1 percent, or 17 million tonnes, from 1996. Global wheat output rose to an all-time record of 615 million tonnes, 4 percent, or 25 million tonnes, higher than the good crop of 1996. Wheat output increased in nearly all regions with the exception of North Africa where severe drought reduced production in several countries. By contrast, world coarse grain production in 1997 fell by about 1 percent, or 8 million tonnes, to 911 million tonnes, although it was still above the trend. The decline in coarse grain production was mainly on account of reduced maize crops in China, North America and Africa, while much larger crops were harvested in South America, Europe and the CIS. World paddy production in 1997 remained at 571 million tonnes, unchanged from the previous year’s above-average level. Slightly higher rice production in Australia, China, Egypt, Pakistan, Nigeria and the United States almost entirely offset reduced output in Brazil, the Democratic Republic of Korea, Indonesia and Myanmar.

• Global cereal stocks for crop years ending in 1998 are forecast to rise to 321 million tonnes, up by 8 percent, or 25 million tonnes, from their opening volume. Most of this replenishment would be on account of larger wheat and coarse grain inventories, reflecting good crops and slower growth in feed utilization, despite weaker grain prices during the season. By contrast, global rice stocks are forecast to decline, especially in Indonesia, the Philippines and Brazil where the 1997 outputs were adversely affected by El Niño. Total cereal carryovers held by major exporters would rise for the second consecutive year, approaching 39 percent of world total, compared with 34 percent at the beginning of the season and only 28 percent in 1996. However, cereal stocks held by other countries, particularly the developing countries, are likely to remain unchanged from the previous year. Globally, the ratio of end-of-season stocks to expected utilization in 1998/99 would approach 16.9 percent, up by more than one percentage point from the previous season and close to the 17 to 18 percent range that FAO considers the minimum necessary to safeguard world food security.

• The prospects for the 1998/99 marketing season point to further improvement in the global supply situation. Based on the condition of crops as of May 1998, and assuming normal weather for the remainder of the 1998 crop seasons, world cereal production in 1998 is tentatively forecast to reach 1 911 million tonnes, slightly higher than in 1997 and a new record. All of the anticipated increase in global cereal production would be on account of increased coarse grain production which, at 925 million tonnes, would be 1.6 percent higher than in 1997 and above the trend for the third consecutive year. However, wheat output is forecast to decline somewhat to 606 million tonnes, while global paddy output is also forecast to contract slightly to 567 million tonnes, following the bumper crops of the previous two years.

If current forecasts become a reality, cereal supplies will be sufficient to meet expected demand in 1998/99 and allow for further replenishment of global cereal reserves.

• If current forecasts become a reality, cereal supplies will be sufficient to meet expected demand in 1998/99 and allow for further replenishment of global cereal reserves. Early indications suggest that cereal carryovers for the crop years ending in 1999 could rise for the third consecutive year and reach 328 million tonnes, 2 percent, or 6 million tonnes, more than their estimated opening levels. Thus, for the first time in four years, the global stock-to-utilization ratio could return to within the 17 to 18 percent range. However, the likelihood of this forecast becoming a reality would hinge not only on the final outcome of 1998 production but also on the eventual size of cereal utilization during the 1998/99 season.

The forecast increase in cereal food intake in the developing countries would exceed their population growth by a small margin and result in their per caput food consumption rising.

• World utilization of cereals in 1998/99 is currently forecast to grow by about 1 percent to 1 904 million tonnes, which would be slightly above the long-term trend. Most of this increase is expected to be in the developing countries, particularly as increased food consumption is likely in those countries where most of the increase in production is expected. This increase in cereal food intake in the developing countries would exceed their population growth by a small margin and, hence, result in their per caput food consumption rising slightly. By contrast, the increase in global feed use of cereals is expected to be less pronounced despite the expected continuation of a period of weak grain prices. Most of the anticipated expansion in cereal stocks would be in the developed countries, especially in the major grain exporting countries, where the prospects of good crops and slower growth in feed use could result in a further replenishment of cereal inventories.

FIGURE 4A

SUPPLY / UTILIZATION TRENDS IN CEREALS

FIGURE 4B

CEREAL CARRYOVER STOCKS
 

4. EXTERNAL ASSISTANCE TO AGRICULTURE

Multilateral assistance was estimated to have declined slightly between 1995 and 1996.

• Total commitments to agriculture (broadly defined)⁶ made by bilateral and multilateral donors as official development assistance (ODA) in 1996 were estimated to be $10 985 million in current prices  –  $297 million less than the amount recorded in 1995. The figures, however, are not immediately comparable, as the estimate for 1996 does not include commitments in 1996 by the United States, for which data are not yet available. In 1995 commitments from the United States amounted to $400 million; therefore, excluding the United States, the figure for 1996 represents a slight increase of about $100 million over 1995.

FIGURE 5

COMMITMENTS OF EXTERNAL ASSISTANCE TO AGRICULTURE
 

• Measured in constant 1990 prices, total commitments in 1996 (excluding the United States) amounted to $10 363 million, compared with $10 446 million in 1995. Thus, commitments in real terms in 1996 remained at more or less the same level as in 1995, and may even be slightly up when data for the United States are included. However, this can hardly be said to represent a turnaround in the declining trend in external assistance for agriculture during the 1990s, which brought total commitments measured in constant 1990 prices from a level of $12.2 billion in 1991 to $10.4 billion in 1995.

FIGURE 6

COMMITMENTS BY MAIN PURPOSE
 

• The share of concessional assistance in total commitments has been oscillating around 70 percent throughout the 1990s, and stood at 72 percent of the total in 1996, with the share of grants at 47 percent. Most of the bilateral assistance (indeed more than 95 percent) is in grant form, while for multilateral assistance the share of grants is only 20 percent.

FIGURE 7

COMMITMENTS BY MAIN RECIPIENT REGIONS
 

• In terms of bilateral commitments to agriculture, Japan remains the major donor and alone accounted for about half of the bilateral commitments of the Development Assistance Committee (DAC) countries in 1996. Among other DAC members, significantly increased contributions were made by Australia, Canada and Denmark. Australia, committed $300 million (in current prices) for the development of fisheries policies in developing countries.

• Multilateral assistance was estimated to have declined slightly (from $10 446 million in 1995 to $10 363 million in 1996). Among the multilateral donors, commitments in 1996 from the World Bank were down some $1.2 billion (27 percent in constant 1990 prices). The International Fund for Agricultural Development (IFAD) expanded its commitments from $276 million in 1995 to $405 million in 1996 (an increase of 50 percent in real terms), bringing its levels back to approximately those of 1994, following the sharp reduction of 1995. The regional development banks’ commitments also increased by $869 million to $1 987 million, almost the same level in real terms as in 1994 after a sharp decline in 1995 similar to that recorded by IFAD.

• Provisional data for commitments by the World Bank group in 1997 indicate that contributions from the International Bank for Reconstruction and Development (IBRD) should be higher than in 1996 by about $1 billion, while those of the International Development Association (IDA) would remain at the same level.
• In terms of the sectoral destination of assistance channelled to agriculture (narrowly defined),⁷ commitments increased by 24 percent to $8 121 million in 1990 prices, but remained well below the peak level of 1992. The increase affected agriculture, fisheries, forestry and land and water development, the largest percentage increase being in the fisheries sector. Among the broadly defined subsectors, commitments increased only towards agro-industries, while contractions were recorded for environmental protection, rural development and, most sharply, regional and river development.

• With regard to the geographical distribution of flows, the share of the transition countries continued to increase and reached almost 7 percent in 1996, compared with 5 percent in 1995. Among the developing countries, no major changes in the shares were recorded with only a minor increase in that of Asia and a small decline for Latin America and the Caribbean. The share of Asia is still the largest, slightly above 40 percent, followed by Africa at 23 to 24 percent, and Latin America and the Caribbean at just below 20 percent. The share of nationally unallocated assistance, not destined to a specific country, had been increasing and reached 16 percent in 1996.
 

5. FOOD AID FLOWS⁸

Total cereal food aid shipments in 1997/98 are estimated to have increased by about 3 percent from the previous year.

• Total cereal food aid shipments under programme, project and emergency food aid in 1997/98 (July/June) are estimated to have reached at least 5.5 million tonnes. This represents an increase of some 3 percent from 1996/97, mainly on account of slightly larger shipments to low-income food-deficit countries (LIFDCs) resulting from more food emergencies, compared with the previous year, and additional food aid provisions in response to the Asian financial crisis. Cereal food aid shipments to LIFDCs in 1997/98 are estimated to have risen by 3 percent from 1996/97 to about 4.6 million tonnes. Food aid shipments of wheat in 1997/98 are estimated to reach 3.5 million tonnes, coarse grains to increase to 1.3 million tonnes and rice shipments to reach almost 700 000 tonnes, all three cereals together increasing by 3 percent over 1996/97.

FIGURE 8

RECIPIENTS OF SHIPMENTS OF FOOD AID IN CEREALS
 

• Estimates of shipments of non-cereal food aid, i.e. largely pulses and vegetable oils, show a further decline of about 30 percent in 1997 (January-December) to about 646 000 tonnes, compared with an estimate for 1996 of 948 000 tonnes.⁹ This reduction affects most regions and also the LIFDCs. While the decline in 1997 is mostly reflected in reduced shipments of the two largest non-cereal food aid categories mentioned above, shipments of all other food products are also estimated to be down from the previous year.

• As of December 1997, contributions of cereals to the International Emergency Food Reserve (IEFR), administered by the World Food Programme (WFP), expanded by almost 12 percent in 1997 (January-December) to 993 000 tonnes, from 887 000 tonnes in 1996. These contributions are substantially above the minimum annual target of 500 000 tonnes set by the World Food Conference in 1974. For non-cereals, the contributions fell from 225 000 tonnes in 1996 to 167 000 tonnes in 1997. Furthermore, cereal contributions to the Protracted Refugee Operations (PROs), also administered by WFP, at 529 000 tonnes, were marginally higher in 1997 than in 1996. The PROs’ contribution for non-cereals fell by about 20 000 tonnes to 70 000 tonnes in 1997.
 

6. INTERNATIONAL AGRICULTURAL PRICES¹⁰

• Bumper grain crops in the 1997/98 season and the continuing increase in stocks kept grain prices significantly below the previous year’s levels for most of the 1997/98 season. In the absence of any major fundamental change in international wheat markets and given the favourable crop prospects and the seasonal harvest pressure, wheat prices continued to decline during the second half of the 1997/98 season and by late May 1998 they were some 20 to 25 percent below the corresponding period the previous year. Maize, barley and sorghum prices have also dropped further, falling by the end of May by some 10 to 15 percent from the corresponding period in 1997. The decline in coarse grain prices is partly explained by larger supplies and weaker import demand, especially from Asia, while favourable crop prospects in all regions, with the exception of southern Africa, have put even more downward pressure on prices since April 1998. Looking ahead to the 1998/99 marketing season, and given the good crop prospects and a likely decline in import demand especially for wheat, prices for nearly all types of grains are expected to remain under pressure at least through the first half of the next season. Price development during the second half of the 1998/99 season will depend, as usual, on plantings and prospects for the 1999 crops, while the economic situation in Asia may also continue to affect international grain prices until the end of the season.

• In contrast to recent developments in grain markets, international rice prices from most origins continued on an upward trend during the months up to May 1998. As a result, the FAO export price index for rice (1982-84), which has been rising since December 1997, averaged 128 points in May, up from 125 points in March. The increase in prices is attributable partly to the strengthening of the Thai baht against the US dollar and partly to concerns about the availability of exportable supplies, especially in Viet Nam and Pakistan, following large purchases by Indonesia and the Philippines.

• The decline in international prices of oils since the 1994/95 season came to an end during 1997/98. The FAO price index of edible and soap fats and oils rose by about 14 percent compared with the 1996/97 season, from 135 to 154 (1990-92 = 100). The monthly average increase in the weighted prices of all types of oils and fats between August 1997 and May 1998 was about 2.5 percent, reflecting the tight market conditions for the commodities concerned, but especially for soft oils, for which the price increase was even steeper.

• At the same time, the rise in international prices of oilmeals since the 1994/95 season also terminated during 1997/98, and the FAO price index of oilcakes and oilmeals fell by about 7 percent in 1997/98 compared with the previous season, triggered by abundant supplies of the commodities concerned entering the market.

Oilseed production appears to have maintained its economic viability over other agricultural products.

• The divergent movement of prices, i.e. the increase in international prices of oils and the decrease in international prices of meals, coupled with other changes in market fundamentals, resulted in a 2.5 percent decline in international prices of oilseeds, as reflected by the FAO price index of oilseeds, over the same period. Despite this, oilseeds appear to have maintained their economic viability in production over other agricultural products and early indications are that global oilseed production will expand again in 1998/99. As a result, the downward pressure on the prices of oilseeds, oilcakes and oilmeals could continue well into the next season, while the upsurge in the prices of oils and fats could level off.

• World cocoa prices steadily increased during 1997, with an International Cocoa Organization (ICCO) average monthly price reaching 78 US cents per pound in December 1997, 11 US cents higher than in December 1996. In January 1997, the average monthly ICCO price was 65 US cents per pound. This corresponded with the end of a cycle of downward price movements from 1996 as large shipments from Côte d’Ivoire kept pressure on prices despite general expectations of a global deficit in supply. In March 1997, an upward trend in prices began as concerns over a continuing structural deficit in the global cocoa market resurfaced and weather-related concerns over crops in Indonesia emerged. In September 1997, the average ICCO price peaked at a ten-year high of 80 US cents per pound, and this was also underpinned by increased purchases by market speculators and grinders as a reaction to the El Niño phenomenon. In the last quarter of 1997, when an analysis of the El Niño impact became available and market concerns dissipated, prices began to stabilize. In December 1997, the average monthly ICCO price closed the year at 78 US cents. In the first quarter of 1998, prices fluctuated within the 75 to 80 US cents per pound range. The average 1997 ICCO monthly price was 73 US cents per pound, compared with the ICCO 1996 average of 66 US cents, representing an annual average increase of 8 US cents per pound, or 12 percent.

The peak of the market for coffee was reached in May 1997 when the ICA composite price reached 180 US cents per pound, its highest level since 1986.

• World coffee prices rose dramatically during 1997, with the International Coffee Agreement (ICA) composite price increasing from 100 US cents per pound in January 1997 to 130 US cents per pound by December 1997, an increase of 30 percent. The peak of the market was reached in May 1997 when the ICA composite price reached 180 US cents per pound, its highest level since 1986. Unlike previous dramatic price increases in 1986 and 1995, which were caused by frosts in Brazil, the price increase of 1997 was driven by strong demand and tightness of supply of arabica coffee, particularly Colombian and other milds. Reflecting this tightness, the price of arabica coffee beans rose by over 100 percent between January 1997 and May 1997, compared with only 39 percent for robusta. As a result, the price differential between the arabica and robusta varieties increased by more than three times during this period. From its May 1997 peak, the composite price began to fall as production and exports were able to satisfy consumption needs. By December 1997, the price had fallen to 130 US cents per pound and remained near this level in the first quarter of 1998. It has since begun to fall again as crop prospects for the 1998 season appear favourable, particularly in Brazil where a very large crop is anticipated.

The Asian financial crisis and reduced imports from several major importing countries such as China have weakened the cotton market.

• World cotton prices, as indicated by Cotlook A-Index, have trended downwards since July 1997, from 81.3 US cents per pound in July 1997 to 63.9 US cents per pound in May 1998 (average for the first three weeks). The weaker market has been largely due to the Asian financial crisis and the reduction in imports from several major importing countries such as China. World production in 1997/98 (the marketing year begins on 1 August) is expected to be at the same level as that in 1996/97. Consumption, however, is expected to be lower than last year largely owing to a significant decline in consumption in several Southeast Asian countries. Thus, by the end of 1997/98, world stocks are expected to be slightly higher than at the same time the previous year. World trade is expected to contract by about 6 percent in 1997/98. Imports by China, Southeast Asia and the Republic of Korea are expected to decrease by 45, 20 and 21 percent, respectively, from their 1996/97 levels. Consequently, most exporting countries could expect to see their exports slightly lower than in 1996/97. Cotton prices are likely to continue to be under downward pressure in the near future because of the ongoing competition from synthetic fibres and weaker import demand owing to the financial crisis in Southeast Asia.

FIGURE 9

EXPORT PRICE INDEX FOR FOODSTUFFS
 

World sugar trade is expected to decline by nearly 3 percent in 1997/98.

• World sugar prices were relatively stable in 1997. The 1997 International Sugar Agreement (ISA) average price was 11.37 US cents per pound, compared with the 1996 ISA average price of 11.96 US cents per pound. The ISA price rose marginally throughout 1997 to reach 12.33 US cents per pound in the last quarter. The revised FAO estimate of world sugar production for 1997/98 is 123.6 million tonnes raw value, representing a marginal increase of about 100 000 tonnes over the previous year’s output. The share of cane sugar remained substantially unchanged at about 70 percent of the total, or 85.6 million tonnes, compared with an output of 38 million tonnes of sugar from beet. World sugar consumption in 1998 is forecast by FAO to reach 123.1 million tonnes raw value, an increase of 1.6 percent compared with 1997. This represents a decline from the average growth rate in recent years of 2.5 percent, mainly owing to the economic downturn in Asia. World sugar trade is expected to decline by nearly 3 percent in 1997/98 with gross import demand amounting to 33.5 million tonnes compared with 34.5 million tonnes the previous year. World sugar stocks are expected to remain ample at more than 45 million tonnes, or 36 percent of consumption. In the first quarter of 1998, world sugar prices again began to decline, weakening to 9.77 US cents per pound in April 1998. This was attributed in part to lower global import requirements, in particular from Southeast Asia owing to the financial turmoil, from the Russian Federation owing to stock carryover in 1997, from China owing to increased internal production, and from India owing to increased internal production and the drawdown of stocks. Considering that sugar from the new crop in the Southern Hemisphere will soon be on the market, a substantial recovery in prices is not likely to take place in the short term.

FIGURE10

EXPORT PRICES OF SELECTED COMMODITES, 1994-1998
 

World market prices of tea continued their upward trend in 1997, averaging 25 percent more than in 1996.

• World market prices of tea continued their upward trend in 1997, averaging $2 215 per tonne on the London market, 25 percent higher than in 1996, mainly owing to a further improvement in demand in the Russian Federation and CIS countries, and drought-reduced output in Kenya. Prices continued to be strong at the beginning of 1998, reaching $3 118 per tonne in January. After initial 1998 reports indicated that production in major exporting countries such as Sri Lanka, Kenya and India was significantly above the previous year’s level, tea prices declined rapidly to $2 049 and $1 760 per tonne in April and May 1998, respectively, and rose slightly in June. There is a strong indication that for the remainder of 1998 the downward pressure on prices might continue given the slow growth in demand and the strong supply available in exporting countries.
 

7. FISHERIES: PRODUCTION, DISPOSITION AND TRADE

• Production of fish, shellfish and other aquatic animals reached a record level of 121 million tonnes in 1996, an increase of 3.2 percent over 1995. Capture fisheries, at 94.6 million tonnes, increased by 1.7 percent and contributed 78 percent of the total volume. The remaining 22 percent was contributed by aquaculture production, which at 26.4 million tonnes recorded an increase of 8.2 percent over 1995. In addition, 9 million tonnes of aquatic plants (wet weight) were harvested, nearly 90 percent of which came from aquaculture production.

• Inland capture fisheries increased globally by 2.3 percent to 7.6 million tonnes; the increase occurred entirely in Asia while decreases were recorded in Africa, South America and Europe.

• Global catches from marine waters increased by 1.7 percent in volume for an estimated value of some $80 billion. This was as a result of higher landings from the Northwest Pacific – which accounts for nearly 30 percent of total marine capture fisheries – and, to a lesser extent, from the Eastern Central Atlantic and the Indian Ocean. These increases more than compensated for the lower landings reported for fisheries from some other marine areas, such as the Mediterranean and the Black Sea (where landings declined by 11 percent), the Western Central Pacific (a decline of 2 percent) and the Northeast Pacific (a decline of 5 percent). Small pelagic species, which represent 40 percent of the volume of specified captures, increased by nearly 3 percent to 39 million tonnes. Demersal fish, at 18 million tonnes, remained at the same level as in 1995, while salmons and tunas decreased by 10 percent and 2 percent, respectively. Increases relative to 1996 were also recorded for captures of shrimps and prawns (8 percent), crabs (4 percent) and cephalopods (6 percent), while production of molluscs decreased by 13 percent.

FIGURE 11

WORLD FISH CATCH AND SUPPLY
 
 

FIGURE 12

TRADE IN FISHERY PRODUCTS
 
 

Output from aquaculture continued to expand at a faster rate than from any other food production sector.

• Output from aquaculture continued to expand at a faster rate than from any other food production sector. Between 1986 and 1996, global aquaculture production increased at an average annual rate of 10 percent in terms of both quantity and value, and in 1996 the value of total world output from the sector reached $46.6 billion (aquatic plants included). Asia, and in particular China, continues to dominate world production, and in 1996 Asia accounted for 91 and 83.5 percent of production in terms of volume and value, respectively. In contrast, Africa accounted for only 0.3 percent of volume and 0.6 percent of value, although since 1990 output in this continent has been increasing at an average annual rate of 5.4 percent.

• Total fisheries exports amounted to $52.5 billion in 1996, virtually the same level as in 1995. Trade volumes increased, but as prices were lower for the most important fisheries commodities, the change in global value was insignificant. In value terms, just below half of total exports in 1996 originated from developing countries, compared with a share of 51 percent in 1995. Within this amount 36 percent was attributable to LIFDCs, compared with 39 percent the previous year. For many developing nations fisheries exports constitute a significant source of foreign currency earnings, with total net developing country receipts from fishery trade representing $16.6 billion in 1996, more than three times the total for 1986

PICTURE 3

Export-oriented aquaculture activities on the Tonle Sap River in Cambodia
Aquaculture is the fastest-growing food production sector.
 

• Twenty-two countries account for 75 percent of exports of fish and fisheries products in value, and the first 11 countries account for as much as 51 percent of the total. With export earnings of $4.1 billion in 1996 (9 percent of the world total), Thailand maintained its position, which it has held since 1993, as the leading world fisheries exporter, in spite of a 7.5 percent decrease compared with 1995. The second largest exporter, Norway, with total exports of $3.4 billion, increased its export value by 10 percent over 1995, while the third largest exporter, the United States, saw its exports decline by 7 percent to $3.1 billion. However, the United States is also the second largest importer of seafood products, with imports exceding exports by $4 billion. Exports from mainland China amounted to $2.9 billion, showing no change compared with 1995, and those from Taiwan Province of China to $1.8 billion, preceded by Denmark and Canada showing exports of $2.7 and $2.3 billion, respectively.

Industrialized countries accounted for more than 80 percent of the value of fisheries imports, and Japan alone for nearly 30 percent of the world total.

• The destination of most of the fisheries exports is the developed economies. Industrialized countries accounted for more than 80 percent of the value of imports, and Japan alone (with $17 billion of imports) for nearly 30 percent of the world total. The United States was the second largest importer, with imports of $7 billion, followed by France and Spain with just over $3 billion each. In 1996, however, all the three largest importers recorded declining imports relative to 1995. Developing country imports grew by 7.5 percent to more than $9 billion, corresponding to 16 percent of the world total, one-fourth of which was imported by the LIFDCs. Some of these imports, however, were composed of fishmeal for poultry, and aquaculture feed for the production of high-value species for export.

• The major part of world fish and shellfish production (75 percent in 1996) is destined for direct human consumption and reaches consumers in a variety of end uses, mainly as fresh or chilled products. In recent years, in parallel with the upsurge of world aquaculture production, the importance of fishery products marketed fresh has increased in both absolute and relative terms. Indeed, in 1996 one-third of global production was marketed as fresh/chilled with volumes nearly 70 percent higher than ten years earlier. As a result of increased fishery production and unchanged levels of its reduction to meal, world fish availability for food increased from 15.2 kg per caput in 1995 to 15.7 kg in 1996.

• Early estimates for 1997 point to a lower level of fish production, mainly owing to lower catches of small pelagic species in South America as a consequence of the El Niño phenomenon. Since such species are largely used in the feed industry, it is likely that the availability of fish for food has remained unaffected.
 

8. PRODUCTION AND TRADE OF FOREST PRODUCTS

In 1997, there was a general increase in output for all forest products.

• In 1997, world roundwood production increased by 1.6 percent to reach 3 410 million m³. In the developing countries, which account for about two-thirds of the total (64 percent in 1997), roundwood production increased by 2.3 percent, while in the developed countries output growth was limited to a modest 0.5 percent. Industrial roundwood production (which excludes fuelwood and accounts for 45 percent of the total) in its turn increased by 1.9 percent to 1 520 million m³. The developed countries are responsible for the larger share of industrial roundwood (70 percent) and expanded production by 2.2 percent to 1 060 million m³, with developing country production increasing by a more limited 1.5 percent to 460 million m³.

• Global production of solid wood products (sawnwood and sleepers and wood-based panels) showed an increase in 1997, with production of sawnwood and sleepers estimated to have increased by 2.3 percent to 439 million m³, and that of wood-based panels by 2-3 percent to 153 million m³. The bulk of this expansion again occurred in the developed countries, which account for more than two-thirds of the total output of these products.

A predicted decline in Asian  1998 consumption is likely to depress world demand for pulp and paper products and lead to reduced prices.

•  There was also a significant growth in world output of pulp and paper products in 1997, following the small decline experienced by the sector in 1996. Production of paper and paperboard increased by 6.3 percent. The strongest growth was recorded in the developed countries, at 6.8 percent, particularly in Western Europe where paper production went up by 8.5 percent, followed by the United States with an expansion of 5.2 percent, Japan with 3.3 percent and Canada with 3 percent. These producers account for some 75 percent of world paper production. The situation was less favourable in the developing countries, where the past strong growth of some major Asian producers slowed down considerably. As with paper products, production of wood pulp also grew considerably, at a rate of 5.7 percent, with international prices slowly recovering after the sharp fall experienced in 1996. Wood pulp inventories decreased from the 1996 high of 2.5 million tonnes to 1.6 million tonnes, which is considered to be closer to a balanced market. Because of the Asian financial crisis, analysts have predicted a decline in 1998 in Asian consumption, which is likely to depress world demand for pulp and paper products and lead to reduced prices.

• Markets for other forest products were particularly favourable in Europe, where demand strengthened and consumption of nearly all forest products rose. However, because of highly competitive markets, European prices of wood products showed no increase in 1997. In North America, demand was favourable for most of 1997. In Canada, housing starts, the main economic indicator for the mechanical wood industry, increased by some 20 percent. In the United States, however, because of strongly reduced log prices caused by the diminished demand in Asian markets, domestic prices of sawnwood fell sharply in the second part of the year. Japan experienced a serious decline in starts of wooden houses in 1997, down by some 20 percent, reflecting the poor performance of its economy. This resulted in a marked reduction in its imports of processed wood products, both tropical and temperate, which had grown steadily in previous years.

• Prices for most forest tropical wood products such as logs, sawnwood and plywood decreased considerably in 1997, reflecting the weak demand of major Asian importers. The log exporters of Papua New Guinea and the Solomon Islands are reported to have experienced the worst market conditions in a decade. On the other hand, international prices for wood pulp and paper products rose marginally above the depressed levels of 1996.

FIGURE 13

MAIN FOREST PRODUCTS
 

• As a result of increased prices for pulp and paper products, 1997 saw an estimated increase of 2.2 percent in the total value of exports of forest products. The increase was confined to the developed countries, which are the major producers and traders in pulp and paper products. On the other hand, the depressed prices of tropical wood products resulted in a 5 percent decline in developing country forestry exports and in a diminished weight of the developing countries in the total value of trade in forest products, with their share declining from 18 percent in 1996 to an estimated 16.5 percent in 1997.