WORLD TRADE
ORGANIZATIONG/AG/GEN/36
31 March 1999
(99-1313)
Committee on Agriculture Original:  English
STATEMENT BY THE OBSERVER FROM THE FOOD AND AGRICULTURE
ORGANIZATION PRESENTED TO THE 25-26 MARCH 1999 MEETING OF THE
COMMITTEE ON AGRICULTURE (PART II, AGENDA ITEM A(ii))
FAO has been reporting regularly to the Committee about developments in the global
supply/demand balance and in particular on the food security situation and trends in cereal import
bills of the LDCs and the NFIDCs.  I would like to give you an update on this situation today.  In
addition, I would like to report on some activities by the FAO on follow up to the Uruguay Round.
World supply/demand situation
First, a quick summary of the current world supply/demand  situation.  In 1998 global cereal
production (estimated at 1,880 million tonnes) fell by some 1 per cent from the previous year's record,
but was still just above trend.  This level of production is roughly equal to depressed levels of
utilization for the current season.  As a result, end-of-season stocks  in 1999 are projected to remain at
about 17 per cent of total utilization which is within the range considered by the FAO Secretariat as
the minimum necessary to safeguard world food security.
World trade  in cereals in 1998/99 is currently forecast at 204 million tonnes, 3 per cent lower
than the previous year.  Some important developments have dampened cereal import demand during
the 1998/99 season:  the lower global economic gr owth; the decline in petroleum prices;  and the
financial turmoil in many regions which forced some countries to curtail imports.
Because of large export supplies and subdued commercial import demand, international
prices  of all major cereals have continued to remain relatively weak during the 1998/99 marketing
season.  At the same time, food aid is expected to increase substantially from the depressed levels of
recent years.  FAO's forecast of cereal food aid sh ipments in 1998/99 (July/June) now points to a total
of 9 million tonnes, which is 3.2 million tonnes larger than the previous year.  The greater availability
of grain among the major donor countries combined with higher food aid requirements (particularly
from Asia, Central America and the CIS) would account for this increase in global cereal food aid
shipments.
Cereal import bills of LDCs and the NFIDCs
Regarding the LDCs  and the NFIDCs,  average imports of these two groups of countries
during the last two years (1997/98-1998/99 are estimated at about 44.2 million tonnes of cereals
compared to an average of 38.6 million tonnes during the previous two years (1995/96-1996/97).This amounts to a volume increase of about 15 per cent.  However, during the same period, the cost of
the imported cereals decreased from about US$8.1 billion to US$7.3 billion (about 10 per cent).  Of
course, 1995-96 was a period of very high prices and the substantial decline in nominal prices since
then more than outweighed the increase in volumes resulting in lower import bills.  However, despite
the decline in the cereal import bill of LDCs an d NFIDCs since 1995-96, it still remains much higher
than in earlier years.  It is 36 per cent higher than the average of 1993/94-94/95, about half of the
increase due to increased volume and the other half due to an increase in the per unit cost of imports.G/AG/GEN/36
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The per unit cost in 1997/98-98/99 was about US $165/tonne compared to US$141/tonne during
1993/94-94/95.  Now most of the imports are on commer cial terms whereas earlier a large part of the
total volume imported was food aid and subsidized sales.  Although, as already mentioned, food aid
has increased during the current season, still it would account for only 9 per cent of these countries'
cereal imports compared to 16 per cent in 1993/94-94/95.
Overall, despite the fall in the import bills of the LDCs and the NFIDCs during the current
season, their food security situation remains precarious in a large number of these countries as it is
regularly reported by the Global Information and Early Warning System.
Assessment of the impact of the Uruguay Round on agricultural markets
I would also like to inform the Committee briefly about the outcome of an assessment of the
impact of the Uruguay Round on agricultural markets reviewed by the FAO Committee on
Commodity Problems (CCP) in January this year.  The main conclusions reached in the Secretariat's
assessment, were:  that with the exception of so me commodities, there was little evidence of an
impact of the Uruguay Round on the volume of trade, level of world prices and price instability;  andthat part of the increased cereal import bills of the LDCs and NFIDCs since 1995 could be attributed
directly or indirectly to Uruguay Round-related policy changes.
While the CCP appreciated this assessment, it noted that it was a difficult subject technically,
particularly in view of the short experience so far with the implementation of the Uruguay Round, and
also due to the number of weather and macroeconomic-related events that had affected agricultural
commodity markets in this period.
The CCP requested FAO to undertake additional analysis on the impact of the Uruguay
Round,  particularly on food security, prior to the beginning of the next round of multilateral tradenegotiations.  Such a study would be completed by the FAO Secretariat by the autumn this year.
Technical assistance
Finally, I would like to inform the Committee about FAO's technical assistance to its member
countries in trade-related issues concerning agriculture, fisheries and forestry sectors.  This includes
matters related to the Agreements on Agriculture, SPS/TBT, and TRIPs.
Specifically for the LDCs, FAO currently supports some 75 projects with a substantial trade
component, at a total cost of about US$60 million.  FAO has also made provisions and indicated its
willingness to assist these countries in the context of the Integrated Framework and to collaborate
with the six core agencies in delivering such assistance.
The demand for trade-related technical assistance continues to be high not only by the LDCs
but also by other developing and transition countries.  In response to this widely recognized need,
FAO is organizing a training programme during the second half of 1999.  The goal of this programme
would be to train some 700-800 officials (4-6 per country) in issues related to the Agreements onAgriculture, SPS/TBT and TRIPs.  FAO has been encouraged by generous financial contributions
from various donors to supplement its own resources in support of this training programme.  We will
be seeking additional financial support from other sources as well as strengthening our collaborative
arrangements with other international organizations in the delivery of this assistance.G/AG/GEN/36
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Cereal imports of LDCs and NFIDCs (1993/94 to 1998/99) – Information as of March 1999
1993/94 1994/95 1995/96 1996/97 1997/98 1998/99
Values ($'000)
LDCs 1,185 2,029 2,781 2,087 2,907 2,401NFIDCs 3,513 4,023 5,827 5,536 5,101 4,219LDCs  + NFIDCs 4,698 6,052 8,608 7,623 8,008 6,620% change over 1993-94 -12.6 12.6 60.1 41.8 49.0 23.2
Volumes ('000 tonnes)LDCs 11,167 13,310 12,304 10,754 14,716 14,630NFIDCs 25,516 25,995 26,093 28,018 30,927 28,165LDCs + NFIDCs 36,683 39,305 38,397 38,772 45,643 42,795% change over 1993-94 -3.5 3.5 1.1 2.0 20.1 12.6
Food aid ('000 tonnes)
5,789 5,651 3,946 3,049 3,291 3,773
% of imports 15.8 14.4 10.3 7.9 7.2 8.8
Per unit cost ($/tonne)
LDCs 106.1 152.4 226.0 194.1 197.5 164.1NFIDCs 137.7 154.8 223.3 197.6 164.9 149.8LDCs and NFIDCs 128.1 154.0 224.2 196.6 175.4 154.7
% change over 1993-94 -9.5 8.8 58.5 39.0 24.0 9.3
1993/94-94/95 1995/96-96/97 1997/98-98/99
Averages (LDCs +
NFIDCs)
Values ($'000) 5,375.0 8,115.5 7,314.0Volumes ('000 tonnes) 37,994.0 38,584.5 44,219.0Per unit cost ($/tonne) 141.5 210.3 165.4
% change over 1993/94-
94/95Value change 0.0 51.0 36.1Volume change 0.0 1.6 16.4Per unit cost change 0.0 48.7 16.9
Source: FAO.
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