G/AG/GEN/123  
11 November 2014  
(14-6594)  Page: 1/8  
Committee on Agriculture  Original: English  
 
 IMPLEMENTATION OF THE DECISION ON MEASURES CONCERNING THE POSSIBLE 
NEGATIVE EFFECTS OF THE REFORM PROGRAMME ON LEAST-DEVELOPED 
AND NET FOOD-IMPORTING DEVELOPING COUNTRIES 
SUBMISSION BY THE OECD 
The following submission, dated 7 November 2014,  is being circulated at the request of the 
Organisation for Economic Co-operation and Development (OECD). 
 
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This paper summarises the latest work of the OECD  concerning the contribution of trade to food 
security, with a focus on the issues faced by Net Food Importing Developing Countries (NFIDCs). The paper draws heavily on the 2013 OECD report  o n  f o o d  s e c u r i t y  a s  w e l l  a s  t h e  l a t e s t  
OECD-FAO agricultural outlook 2014-2023. 
 Open agricultural and food trade markets have the potential to directly improve the availability and 
accessibility of food. However, to fully address fo od security concerns, especially the use of food, 
countries also need complementary policies such as those which increase investments in social infrastructure (such as health and education) along with broader macroeconomic policies aimed at promoting growth. In this light, there is scope for the international community to focus Official 
Development Assistance (ODA) on the provision of public goods aimed at improving food and 
nutrition security for NFIDCs.  
Going forward, medium-term forecasts for production , trade and prices in the agricultural sector 
under business as usual assumptions highlight the increased potential for open markets to play an improving role in food security globally. The gr owth forecasts for the total volume of trade in 
agricultural products should be beneficial to NFIDC s in terms of both the quantity and the diversity 
of the products available. Of particular importan ce are shifts towards more demand driven prices 
in food markets and potentially higher levels of risk for domestic production associated with climate change. 
 
While trade has the potential to address some of the future challenges, individual country actions that reinforce upward price movements during ti mes of relative scarcity, e.g. through export 
restrictions, will significantly increase the risks to global food security. A multilateral approach to 
addressing these risks is highly preferable to unilateral approaches.  
1  GLOBAL TRENDS IN FOOD SECURITY AND FOOD TRADE 
1.1.  We take as a starting point the agreed FAO de finition of food security - that is, food security 
exists "when all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy 
life". The FAO's definition suggests that people will  only be food secure when sufficient food is 
available , they have access  to it, and it is well utilised . A fourth requirement is the stability  of 
those three dimensions over time. The OECD has assessed the contribution of trade to food 
security on the basis of this comprehensive approach. We have paid particular attention to the 
dimension of availability and accessibility of food security. G/AG/GEN/123 
 
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  1.1  Trade and food availability 
1.2.  Trade plays an important role in food availa bility globally, with around 15% of all crop and 
livestock production traded internationally. Moreover , the role of agricultural trade in contributing 
to food availability has increased over time. For ex ample, the proportion of global grain and oilseed 
production traded globally has increased for most products. Since the beginning of the 1970s, the 
volume of production traded globally has increased by 100% for rice and 38% for soybeans. Changes in wheat and maize trade have been less significant. 
1.3.  For individual countries and country groups, the importance of trade in food supplies varies 
considerably (figure 1). For some, particularly NFIDCs, it is hugely important. Net agricultural trade deficits (measured in value terms) for deve loping country groups have generally increased 
over time, and significantly so recently. This has, in part, been driven by price effects, but is also 
replicated in quantity terms. Since the start of the 1980s, the trade balance deficit of the Least 
Developed Countries (LDCs), Low Income Food De ficit Countries (LFDCs) and NFIDCs groups has 
grown constantly. The increase in imports compared to exports is particularly noticeable in 
NFIDCs, with the trade deficit for agricultural products reaching some USD 43 billion in 2011. 
1.4.  In terms of food security outcomes, the more important point is that the relative cost of food 
imports in the total import bill for NFIDCS has been falling (figure 2). In the long term, for the 
world as a whole and for all developing countries groups, the relative share of food imports costs 
in the total merchandise imports bill is falling. Even with increased prices from 2005, the relative share of food costs has stabilised around trend ra ther than increased significantly. In the NFIDCs, 
the share of food product imports in total agricultural merchandise imports increased from  10% 
in 2007 to 12% in 2009 before falling back to 11% in 2011. This evidence suggests that, for 
food-importing developing countries in general, m eeting the cost of food import bills has become 
less onerous over time. 
Figure 1. Net agricultural trade of NFIDCs Figure 2. Food imports as share of total 
merchandise imports 
 
  
Source: FAOSTAT 
 
1.5.  Trade also increases the diversity of products available to consumers. The lack of diversity in 
diets is a considerable problem in some NFIDCs. The malnutrition rate in numerous NFIDCs is 
higher than the undernourishment rate and for some the difference is large. Products other than grains are, for the most part, sold rather than eaten at home, resulting in a diet which is not 
balanced and particularly low in fats, proteins and micronutrients. By providing consumers with 
increased access to a wide range of goods, trade helps address the nutritional dimension of food 
insecurity. Over the past 20 years, the trade of agricultural products with LDCs and NFIDCs has 
diversified and imports of bulk agricultural products have increase less rapidly than for other types 
of good (figure 3). Consequently, imports of intermediate agricultural products, which represented 
less than 30% of trade at the beginning of the 1990s, accounted for 44% of trade in 2011 whereas the share of imports of bulk agricultural produc ts fell from 50% to 39% over the same period. G/AG/GEN/123 
 
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  Figure 3. NFIDCs imports growth inde x by type of agricultural products 
 
Source: USDA/GATS 
 
1.2  Trade and food accessibility 
1.6.  Over the longer term, increasing trade volumes, improvements in productivity and the 
emergence of a number of new agricultural producing countries has placed continued downward 
pressure on world food prices (figure 4). In a context of low-income households, these factors 
have contributed to significant improvements in food accessibility viewed from the point of view of 
food costs. 
1.7.  However, from the beginning of the new millennium, the long-term decline in food prices 
appears to have reversed and real consumer pric es continued to grow until 2011, returning to the 
level they had reached in the mid-1990s. Further, there have been a number of international price 
events that have affected food accessibility — most recently the price spikes seen around 2009 
and again around 2011. The 2008 food crisis arose due to a combination of factors, with reduced 
availability being only one of many. These included  lower supply caused by droughts in key grain 
producing regions, increases in demand (human, livestock and biofuels), higher production and 
transport costs related to oil prices and lower stockholdings (reduced 'buffering effect') (OECD 2008; Piesse and Thirtle 2009; Naylor and Falcon 2010). However, trade policy played a 
critically important role in the final price effects seen in international markets (Headey 2011). 
1.8.  The immediate impact of higher food prices  on household budgets and food security depends 
on their status as net food buyers or net food sellers and most importantly their levels of income. In general, food price spikes are detrimental fo r poor households as most rely on markets to 
source much of their food needs and even if they are food sellers, prices rise quickly and occur 
before any production response can be made. For NFIDCs, the food crisis of 2008 showed this was the case. However, while a number of households we re made food insecure or their food security 
was put at risk from the food price spikes in 2008, from an aggregate viewpoint meeting the costs 
of food import bills has not become more oner ous throughout the period of price increase 
(2002-2013) for NFIDCs as a whole (figure 4). While the consumer prices of food products 
increased in general between 2002 and 2013, th e share of food product imports in the total 
merchandise imports remained relatively stable over the period. G/AG/GEN/123 
 
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  Figure 4. Food Commodity Price Index on a long and short term (base 100=2004-2006) 
 
  
Source: FAOSTAT 
 
1.9.  It is not only price levels that can affect food accessibility, but also price variability. For the poorest households in NFIDCs with no access to risk management tools, income and price volatility 
can affect food security. 
1.10.  Increased trade openness helps to reduce f ood price volatility. Price volatility of tradable 
f o o d  p r o d u c t s  o n  d o m e s t i c  m a r k e t s  i n  N F I D C s  i s  g e n e r a l l y  h i g h e r  t h a n  o n  t h e  w o r l d  m a r k e t ,  
including since 2007 when international market prices have been more variable (figure 5). 
Furthermore, importers and exporters often serve to  stabilise domestic prices by establishing a 
price band defined by import parity prices (celling price) and export parity prices (floor price). 
Figure 5. Price volatility on domestic market: Example of maize in Burkina Faso (base 100= 2004) 
 
Source : SONAGESS-Burkina Faso; Index Mundi 
 
2  FUTURE DEVELOPMENTS AND IMPLICATIONS FOR FOOD SECURITY IN NET FOOD 
IMPORTING DEVELOPING COUNTRIES 
2.1.  The evolution of trade flows will have an im pact on the availability and accessibility of food 
products in NFIDCs. The Aglink-Cosimo model developed by the OECD and the FAO provides a set 
of projections on agricultural production and tr ade to 2023. These projections represent 'business 
as usual' projections of what may occur if policy settings remain relatively unchanged. 
2.2.  By 2023, global cereal production will en joy annual growth of betw een 0.85% and 1.2% per 
year, with oilseeds around 2%, and meat between 1%  and 2.5% per year. Production is driven by 
a regular increase in yields and, for certain prod ucts, by production support policies. With regard 
to international trade forecasts, the share of expo rts of production is expected to remain stable, G/AG/GEN/123 
 
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  although insofar as the global level of production is increasing, this means a rise in the total 
volume of agricultural products traded. 
2.3.  International prices of major cereals are proj ected to decline in real terms over the projection 
period, although prices are expe cted to stab ilise at abov e pre-2007 levels (figure 6). For many 
meat products, real prices are also expected to de cline of the longer term, but by significantly less 
than what is seen for cereals. Projected price declines are expected to arise from increased productivity and occur despite increased and altered patterns of demand globally.  
Figure 6. International prices projections for cereals 2014-2023 (real prices) 
 
Source: OECD-FAO Agricultural Outlook 2014-2023 
 
What implications for food security in NFIDCs? 
 2.4.  NFIDCs are highly dependent on global trade to ensure their food availability. With this in 
mind, the growth forecasts for the total volume of trade in agricultural products should be 
beneficial to them in terms of both the quanti ty and the diversity of the products available. 
2.5.  The impact of the predicted fall in cereal prices on food security in NFIDCs depends on the 
distribution of net sellers and net buyers in the countries. Figure 7 shows that in the countries 
covered, very often fewer than 20% of rural househ olds are food sellers and that, in all cases, net 
food buyers account for more than half of the population studied. Moreover, figure 8 also shows that the proportion of households that are net f ood buyers is often higher among poor households 
than rich households. In the short term and for th ese countries, the decrease in food prices from 
2013 would therefore benefit at least more than ha lf of rural households, almost all the urban 
households, and specifically the poorest of these two areas. G/AG/GEN/123 
 
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  Figure 7. Share of net food sellers among rural
poor households (rural and urban) Figure 8. Share of net food sellers among rich  
and households in some NFIDCs 
 
  
 
Source: Aksoy, A., Isik-Dikmelik A. (2008); 
Jayne T.S., al. (2011) Source: Aksoy, A., Isik-Dikmelik A. (2008) 
Note: "Poor" households are those in the bottom 40% of the population by per capita income ; "Rich" are those in the top 20% 
 
2.6.  Despite cereal prices falling from 2013 levels, real international prices of major cereals are 
projected to remain above pre-2007 levels. In the short term, while the dissipation in food prices 
will help ease pressure on household budgets of  the poor, higher food prices over the medium 
term will mean that past improvements in (potential) food accessibility from falling prices are unlikely to be repeated in the future. However, in the long run, the flow on effects on higher food 
prices should also be considered. The World Bank suggests that two other important factors are at 
play in determining the impact of sustained high er prices on poverty levels and as such food 
security: poor workers may benefit from increases in wages rates for unskilled workers that stem 
from higher food prices; and poor farmers may benefit from higher agricultural profits as they 
raise their output. Through these 'second round' e ffects, World Bank research has suggested that 
in the long run, higher prices are likely to reduce poverty globally, providing opportunities for 
improvements in food security (Jacoby 2013; Ivan ic and Martin 2014). However, such effects are 
dependent on the functioning of labour markets. 
2.7.  While these forecasts seem relatively encouraging with regard to their impact on food 
security in the NFIDCs, a certain number of risks remain. The estimates mentioned above are 
obtained on the basis of economic fundamentals but do not incorporate stochastic political and 
climate shocks or any trade measures implemented such as export restrictions. All these events would increase the pressure on international prices, potentially contributing to future price spike 
events, and as such to negative impacts on food security in NFIDCs. 
2.8.  These risks make the role of trade policy, and movements to a more open multilateral 
agricultural trading system more important. Open world agricultural trade markets will allow 
countries to secure supplies from a wider range of producers who face differing climate and other 
risks, therefore helping limit price variability caused by climate change. It will also place downward pressure on international prices as it allows production to be centred in areas of lowest cost, helping production to shift in response to long-term changes in comparative advantage. From an 
international perspective, agreement on trading rules, in particular on rules that limit the use of 
trade distorting domestic policies (such as export restrictions and market price support) will play a significant role in helping to avoid future price spike events that pose significant risks to food 
security. 
2.9.  Furthermore, policies aimed at increa sing income must be accompanied by other 
complementary measures enabling the nutritional dimension of food security to be addressed. 
Public services and social safety nets can fulfil this role although often these are not sufficiently 
well developed. Consequently, it is important to pursue efforts aimed at encouraging the emergence of a new generation of safety nets into a country's social protection schemes (World Bank 2013). An improved understanding of the determ inants of malnutrition is also necessary to 
improve the targeting quality of the safety net programmes and thus improve their efficiency and 
avoid the potentially disruptive effects on the markets. G/AG/GEN/123 
 
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  3  THE ROLE OF AID TO ADDRE SS FOOD AND NUTRITION SECURITY 
3.1.  While the Marrakesh decision focused on f ood aid as a means for the international community 
to ensure food security in NFIDCs, data on DAC donors from the Creditor Reporting System (CRS) provides information on all kinds of aid for FNS (figure 9)
1. In the absence of a specific FNS 
classification, it provides a reasonable picture of trends in this area. 
Figure 9. ODA for FNS to NFIDCs Figure  10. Share of ODA for FNS intended for 
NFIDCs 
 
  
Source : OECD DAC/CRS, Commitments, constant 2012 USD 
 
3.2.  Total Official Development Assistance (ODA) for FNS to NFIDCs in 2012 stood at around USD 6.7 billion, up 93% in real terms from 2002. Its share of total ODA to NFIDCs has fluctuated 
at around only 8% for the last ten years. Nevertheless, it is interesting to note that the share 
allocated to FNS stagnated between 2004 and 2007 but increased steadily after the price hike of 
2008, reaching 9% of total ODA to the NFIDCs in  2012. Furthermore, figure 10 suggests that the 
efforts made by the international community in te rms of FNS since the food crisis of 2008 is more 
marked for NFIDCs than for other developing countries. While the share of ODA for FNS intended 
for NFIDCs fell steadily over the three years leading up to the food crisis in 2008, barely reaching 44% in 2007, it has hovered around 51% since the crisis. The efforts made by the international 
community vis-à-vis NFIDCs can be explained by th e fact that they are the net importers most 
vulnerable to price increases on the international market.  
                                               
1 All aid reported under agriculture,  agro-industries, forest ry, fishing, nutrition and development, food 
aid/food security assistance is deemed  to be aid for FNS. As such, estimate s will include some aid that is not 
specifically targeted to FNS and exclude some which is. G/AG/GEN/123 
 
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low-income countries , World Bank, Policy Research Working Paper Series 4642 
 
Brooks, J. (2013), Agricultural trade and food security : Choosing between trade and non-trade 
policy instruments  , workshop INRA-MAD, 2013 
 
FAO (2014), The State of Food Insecurity in the World (SOFI) 2014 , FAO Publishing 
 Filipski, M. and K. Covarrubias (2012), "Distribut ional impacts of commodity prices in developing 
countries", in J. Brooks, Agricultural Policies for Poverty Reduction , OECD Publishing, Paris. 
 Greenville, J. (2014), Evolving agricultural trade markets and food security , workshop "Tackling 
agriculture in the post-Bali context", ICTSD/FAO, 2014 
 Ivanic, M. and Martin, W. (2014), 'Short- an d Long-Run Impacts of Food Price Changes on 
Poverty', Policy Research Working Paper 7011, World Bank Group.  
 Headey, D. (2011), "Rethinking the Global Food Crisis: The Role of Trade Shocks", Food Policy , 
vol. 36 
 
Jacoby, H.G. (2013), 'Food Prices, Wages, and Welfare in Rural India', PRWP 6412, World Bank Group.  
 
Jayne,T.S., al, (2011), Smallholder Maize Marketing in Mozambique, Kenya and Zambia, Diálogo 
sobre Promoção de Crescimento Agrário em Moçambique, Maputo, 21 de julho 2011 
 
Matthews, A. (2013), "Food Security Typologies of Developing Countries" , Background paper 
prepared for OECD by Pr ofessor Alan Matthews. 
 
Matthews, A. (2012), "Agricultural trade and food security" , Background paper prepared for OECD. 
 Naylor, R. L. and W. P. Falcon (2010), "Food Se curity in an Era of Economic Volatility", Population 
and Development Review , vol. 35(4), pp. 693-723.  
 OECD (2008), Rising Food Prices: Causes and Consequences , OECD Publishing. 
 
OECD (2013), Global Food Security: Challenges for the Food and Agricultural System, OECD 
Publishing  
OECD/FAO (2014), OECD-FAO Agricultural Outlook 2014, OECD Publishing 
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Piesse, J. and C. Thirtle (2009), "Three Bubbles and a Panic: And Explanatory Review of Recent Food Commodity Price Events", Food Policy , vol. 34, pp. 119-29.  
 
World Bank (2013), Closing the Gap: The State of Social Safety Nets 2013 , Washington, DC 
  
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