WORLD TRADE ORGANIZATION  
ORGANISATION MONDIALE DU COMMERCE  
ORGANIZACIÓN MUNDIAL DEL COMERCIO  G/AG/GEN/73 
2 November 2006 
 (06-5285) 
Committee on Agriculture Original:   English/ 
 anglais/  inglés 
 
 
ANNUAL MONITORING EXERCISE IN RESPECT OF THE FOLLOW-UP TO 
THE MINISTERIAL DECISION ON MEASURES CONCERNING THE POSSIBLE 
NEGATIVE EFFECTS OF THE REFORM PROGRAMME ON LEAST-DEVELOPED 
AND NET FOOD-IMPORTING DEVELOPING COUNTRIES 
 
 Attached are copies of contributions* made by  the representatives of the Food and Agriculture 
Organization of the United Nations (FAO) and the World Bank at the meeting of the Committee on Agriculture on 31 October 2006 (Agenda Item 2.C refers).  
 
Comité de l'agriculture  
 
 
EXERCICE ANNUEL DE SURVEILLANCE DE LA SUITE DONNÉE À LA DÉCISION 
MINISTÉRIELLE SUR LES MESURES CO NCERNANT LES EFFETS NÉGATIFS 
POSSIBLES DU PROGRAMME DE RÉFORME SUR LES PAYS LES MOINS 
AVANCÉS ET LES PAYS EN DÉVELOPPEMENT IMPORTATEURS 
NETS DE PRODUITS ALIMENTAIRES 
 
 On trouvera ci-joint la copie des contributions* faites par les représenta nts de l'Organisation des 
Nations Unies pour l'alimentation et l'agricultur e (FAO) et de la Banque mondiale à la réunion du 
Comité de l'agriculture du 31 octobre 2006 (voir poin t C de la deuxième partie de l'ordre du jour). 
 
 Comité de Agricultura  
 
 
EJERCICIO ANUAL DE VIGILANCIA DEL SEGUIMIENTO DE LA DECISIÓN 
MINISTERIAL SOBRE MEDIDAS RELATIVAS A LOS POSIBLES 
EFECTOS NEGATIVOS DEL PROGRAMA DE REFORMA EN 
LOS PAÍSES MENOS ADELANTADOS Y EN LOS PAÍSES 
EN DESARROLLO IMPORTADORES NETOS 
DE PRODUCTOS ALIMENTICIOS 
  A continuación se adjuntan copias de las cont ribuciones* formuladas por los representantes 
de la Organización de las Naciones Unidas para la Agricultura y la Alimentación (FAO), y el Banco Mundial en la reunión del Comité de Agricultura celebrada el día 31 de octubre de 2006 (véase el 
punto C de la segunda parte del orden del día). 
                                                     
 
* In English only/En anglais seulement/En inglés solamente. G/AG/GEN/73 
Page 2  
 
   
A.
 CONTRIBUTION  BY THE  REPRESENTATIVE  OF THE  FOOD  AND  
AGRICULTURE  ORGANIZATION  (FAO) ..........................................................................2  
Annex - Tightening of th e global food  balance.................................................................................. ....... 4  
B. CONTRIBUTION  BY THE  REPRESENTATIVE  OF THE  WORLD  BANK ....................6  
 
_______________ 
  
A. CONTRIBUTION
 BY THE  REPRESENTATIVE  OF THE  FOOD  AND  
AGRICULTURE  ORGANIZATION  (FAO) 
1. In recent months agricultural commodity mark ets have become more volatile with a steady 
upward trend in prices.  Some important food and feed commodities gained on supply tightness and 
stronger demand.  Amid political uncertainties and surging energy prices, agricultural markets over 
the past year have also had to confront abnor mal incidences of natural disasters, ranging from 
devastating hurricanes to fast spreading animal diseases.  
2. Based on current indications, several agricultu ral commodities are likely to experience still 
more unstable months ahead and, in most instances,  the fundamentals point to even further gains in 
prices.  This eventuality seems strongest for cereals , as world cereal demand is forecast to surpass its 
supply in the new season and push down stocks  to an uncomfortably low level.  For sugar , while a 
further surge in prices from the current high levels c ould be considered as less probable, the main risk 
remains the continuing price volatility.  For the oilseed  complex, as well as meat and dairy , 
fundamentals at this point in time do not support a tightening in the markets and the near-term price 
prospects are more on the downside. 
3. Against this background of mixed outlook but ge nerally firm prices, FAO is forecasting an 
increase of over 2 per cent in the world food import bill in 2006 compared to 2005.  The increase is 
expected to be strongest for cereals and sugar but smallest for meat.  Given their higher share as importers of food and feed, the developing countri es' bill is forecast to grow by 3.5 per cent.  
 
Forecast import bills of total food and major foodstuffs (US$ million) 
 
    World Developing LDC LIFDC NFIDC 
    2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 
TOTAL FOOD 379,410 388,053 115,448 119, 557 8,506 9,070 56,352 60,192 14,002 14,653 
Wheat 24,233 25,435 15,924 16,864 2, 439 2,189 9,687 9,674 3,025 3,145 
Coarse Grains 17,566 18,645 9, 134 9,650 348 324 2,885 2,944 1,568 1,633 
Rice 8,918 9,017 6,116 6,134 1,231 1,250 3,309 3,359 614 625 
Vegetable Oils 69,092 71,122 34,405 35,428 1,957 1,973 21,386 21,820 3,738 3,824 
Dairy 40,850 40,145 11,032 10,889 716 704 4,124 4,141 1,238 1,223 
Meat 65,005 64,111 10,792 10, 907 562 566 3,670 3,786 947 1,000 
Sugar 13,844 18,131 5,729 7,503 859 1,125 3,630 4,754 830 1,087 
Other 139,902 141,447 22,316 22,183 394 938 7,660 9,714 2,042 2,117 
  G/AG/GEN/73 
 Page 3 
 
 
  4. Should the current forecasts for food trade, food aid and prices for 2006 materialize, the 
economically vulnerable and food defic it regions could face more elevated import bills this year than 
last.  Food import bills of the Low Income F ood Deficit Countries (LIFDCs - an FAO category of 
vulnerable countries) is forecast to jump by nearly  7 per cent.  The same increase of 7 per cent is 
forecast for LDCs, while the food import bill for NF IDCs is forecast to rise by a smaller amount of 
less than 5 per cent. 
5. The FAO's latest assessment s hows that 39 countries are facing food emergencies and require 
external assistance.  Among them, the most pressing humanitarian problem remains the crisis in the 
Darfur region of Sudan.  The already precarious food supply situation may worsen if deteriorating 
security disrupts the main harvest due  to start in the coming few weeks. 
 
 More information on the current global food situation is given in the Annex. 
 
 G/AG/GEN/73 
Page 4  
 
  
Annex - Tightening of the global food balance  
 
6. Latest information available to FAO on the globa l cereal situation for this season, confirms a 
much tighter balance.  Compared to earlier expectations, global cereal output is seen to be smaller, and to meet the anticipated utilization in 2006/07, worl d closing stocks are forecast to be lower.  As a 
result, international prices of most cereals have increased sharply so far this year.  FAO monitors 
closely the world food supply and demand situation and is expected to alert the international 
community in case of any imminent danger to the glob al food security.  Any ti ghtening in global food 
supplies is always regarded as a cause for concern primarily because of its repercussions for international prices and subsequent impacts on the import bill of many food importing developing 
countries, especially those in the lo wer income category.  Declines in  this year's cereal production, 
lower levels of stocks and a sharp increase in inte rnational prices have raised questions about the 
global food situation.  The main concern is the dec lining stocks and whether supplies will be adequate 
to meet demand without world prices surging to even higher levels. 
7. The apparent tightening of the global food bala nce is largely confirmed by the six leading 
market indicators used by FAO for its regular ass essment of world cereal supplies.  The following 
provides a brief discussion of those indicators; their meaning and what they imply for this season. 
8. The first indicator  (see Figure 1) is the ratio of world cereal ending stocks in any given 
season to world cereal utilization in the following s eason. The ratio for this season is 20 per cent, 
down from 23 per cent in the previous season and we ll below 28 per cent at the beginning of this 
decade. Large draw downs of stocks in China has b een the main factor for a declining trend in the 
global stocks-to-use ratio in previous years but la tely it is in the EU and the United States where 
stocks are seen to decline most. 
9. The second indicator  measures the ability of the five ma jor grain exporters (which includes 
both the EU and the United States) to meet the gl obal demand for wheat and coarse grains imports.  
This indicator is the ratio of the exporters’ supp lies (i.e. a sum of production, opening stocks, and 
imports) to their normal market requirements (defined  as domestic utilization plus exports of the three 
preceding years).  For the current marketing season, th is ratio is forecast at 1.22, which implies that 
supplies in 2006/07 could exceed requirements by about 22  per cent.  This is in a sharp contrast to the 
previous two seasons when supplies exceeded requirements by 34 to 36 per cent. 
10. The third indicator  (see Figure 1) is the ratio 
of the major exporters' ending stocks, by cereal type to 
their total disappearance (i.e. domestic consumption plus exports).  As with the second indicator, the ratios 
for both wheat and coarse grains point to a sharp decrease from the previous season; for wheat from 23 
per cent to about 15 per cent; and for coarse grains from 
18 per cent to 13 per cent.  However, for rice, the expectation is for a small increase from 15 to 16 per cent. 
11. One underlying factor for year-to-year 
variations in supply situation is change in production.  
The fourth indicator  (see Figure 2) shows the size of 
this change at the global level and for all cereals.  In 2006, world cereal production is forecast to decline by 1.6 per cent, and this decline follows a 1 per cent contraction already in the previous year.  In spite of this,  G/AG/GEN/73 
 Page 5 
 
 
  
however, production levels in both years are still above average.  While two years of consecutive 
declines may still be regarded as a cause for con cern, the overall change may be mitigated by 
developments at regional levels or on a commodity basis.  
12. Because the Low-Income Food-Deficit Countries (L IFDCs) are more vulnerable to changes in 
their own supplies and their own production leve ls are critical for their food security, the fifth 
indicator  (see Figure 2) shows only changes in producti on of the LIFDCs as a group.  This indicator 
suggests a more positive development in that total cereal production by the LIFDCs is expected to 
increase by some 2 per cent in 2006 and this fo llows an even stronger growth in 2005 when 
production expanded by over 5 per cent.  
13. Since the LIFDCs grouping includes such large 
countries as China and India, it may be prudent to 
consider aggregate cereal production developments in LIFDCs excluding these two countries.  This is the purpose of the sixth indicator  (see Figure 2).  
According to this indicator, even without China and 
India, total production of the other LIFDCs is expected 
to expand by 2.4 per cent in 2006 which is again a positive outcome although in the previous year it grew more strongly, by 8 per cent.  
14. As shown, the first thre e indicators which deal 
more exclusively with stock levels and export supplies, 
point to a situation that can generally be characterized 
as less stable than in the pr evious season.  On the other 
hand, a brighter perspective can be drawn from the last three indicators which primarily provide information on production.  This contrasting situation raises the need 
for closer monitoring of supply and demand in world 
cereal markets especially during the planting period for the next season.  For this season, major markets seem to have already factored in tighter supplies as demonstrated by the increases in international prices.  These strong prices are likely to encourage higher 
plantings and therefore result in larger production next 
year.  However, given the anticipated decline in  cereal closing stocks, should weather problems 
prevent an increase in world production next year, supplies during 2007/08 would become much tighter and this could lead to a more significant upward movement in international prices than has 
been witnessed already. G/AG/GEN/73 
Page 6  
 
  B. CONTRIBUTION BY THE REPRESENTATIVE OF THE WORLD BANK  
15. Food security remains a concern for the World Bank and many of its client countries. We 
believe that food insecurity is best addressed by  (a) raising the purchasing power of the poor and 
keeping food prices low, (b) reducing their exposur e to negative income shoc ks, and (c) improving the 
functioning of the global food distribution and food ai d systems to make sure that food is available 
and affordable for all. 
(a)  Raising the purchasing power of the poor and keeping food prices low
 
 16. Virtually all World Bank projects are aimed at reduc ing poverty, and in that sense, all of these 
increase the food security of the poor.  This is particul arly the case with regard to trade.  Due to the 
conviction that increased integration into the global economy improves a country's prospects for 
growth and poverty reduction, the Bank has continued to increase our  lending in this area.  We are 
also working to mainstream trade reforms and trad e-related investments into development strategies, 
Poverty Reduction Strategy Papers (PRSPs) and Country Assistance Strategy (CASs).
1  T h i s  
conviction also underlies our commitment to encourag ing trade liberalization on the part of both high-
income and developing countries.  A substantial a nd growing body of literature indicates the potential 
for this to contribute to growth and poverty reduction. 
17. Agricultural trade liberalization in particular can reduce poverty not only by spurring growth, 
but by keeping the price of food staples of the poor at affordable levels.2 
(b) Reducing their exposure to negative income shocks   
 
18. We continue to work to mitigate developing countr ies' exposure to risk.  As mentioned in last 
year's monitoring exercise, the Bank continues to work with the World Food Programme to implement and monitor the innovative weather insurance project in Ethiopia.  We believe this project has great potential to improve the international r esponse to weather-induced food crises in ways that 
do not disrupt domestic markets.  And given the overa ll success of the pilot project undertaken by the 
Government of Malawi to hedge its exposure to price risk while arranging emergency food imports, 
we are now working with the Government of Mala wi and other governments in southern Africa to 
explore possibilities to institutionalize this kind of arrangement
3. 
19. Other projects have been operationalized in India and Malawi and focus on giving small-scale 
farmers access to index-based weather insurance.  The project in India has now been taken over by 
local stakeholders and services 10,000 farmers, with further plans to rapidly scale it up.  Other similar 
projects are under preparation in Tanzania, Kenya, Thailand, Ethiopia, and (jointly with the Inter-
American Development Bank) in Central America.  
(c) Improving the functioning of the global food distribution and food aid systems   
 20. The aim of this is to make sure that food is available and affordable for all.  Improving the 
efficiency and openness of food trade is important on both global and regional levels.  The Bank is 
committed to doing whatever we can to support these goals.  In additi on to our operational 
                                                     
 
1 See Doha Development Agenda and Aid for Trade  prepared by the staff of the IMF and the World 
Bank, 9 August 2006.  http://www.imf.org/external/np/pp/eng/2006/080906.pdf  
2 See Christiaensen, L. and  Demery, L. (2006), Revisiting the role of agriculture in poverty reduction 
in Sub-Saharan Africa, Mimeo, World Bank;  Hertel, T., Keeney, R., Ivanic, M. and Winters, L.A (2006), 
Distributional Effects of WTO Agricultural Reforms in Rich and Poor Countries , paper presented at the 44th 
Panel Meeting of Economic Policy, Helsinki, Finland, October 20/21, 2006; Jaramillo, C. and Lederman, D. (2006), Challenges of CAFTA: Maximizing the Benefits for Central America , World Bank Directions in 
Development Series, Washington DC. 
3 For more information on these projects,  please see G/AG/GEN/71, pages 15-17.  G/AG/GEN/73 
 Page 7 
 
 
  investments aimed at trade facilitation, and our role in the Integrated Framework, the Bank has carried 
out a number of studies which underscore both the benefits to developing countries of MFN 
liberalization as a result of a successful Doha Round and what would be key prerequisites of a pro-
poor outcome.  Among the findings of this work is the importance of liberalizing reforms in 
agricultural trade on the part of both developing an d industrialized countries, and the potential for the 
concepts of sensitive and special products to crea te significant exemptions , which would undermine 
this objective.  
21. The Bank is undertaking – with the support fro m the Dutch government - a large-scale study 
of the role of regional trade in improving food security  in Africa.  This is in recognition of the fact 
that open regional markets can play a key role in improving food security when negative shocks 
impact one country more than others.  The study wi ll suggest ways in which policies, institutions and 
investments can be used to ensure freer a nd more efficient food trade in these regions. 
 
__________