Nader Noureddin* reviews what world crops and food production will serve the global community this year The Food and Agriculture Organisation (FAO) report Crop Prospects and Food Situation published in April 2008 stated that the cereal import bill of the world's poorest countries is forecast to rise by 56 per cent in 2007/2008. This comes after a significant increase of 37 per cent in 2006/2007. For low-income food deficit countries (LIFDCs) in Africa, the report stated that the cereal bill is projected to increase by 74 per cent. The increase is due to the sharp rise in international cereal prices, freight rates and oil prices. By the end of March, 2008, prices of wheat and rice were about double their levels one year earlier, while those of maize were more than one-third higher, according to the report. The prices of bread, rice, maize products, milk and milk products, oil, soybeans and other basic foods have risen sharply in recent months in a number of developing countries, despite policy measures -- including export restrictions, subsidies, tariff reductions and price control -- taken by governments of both cereal importing and exporting countries to limit the impact of international prices on domestic food markets. Food riots have been reported in Cameroon, Cote d'Ivoire, Senegal, Burkina Faso, Ethiopia, Madagascar, the Philippines and Haiti in the past month. In Pakistan and Thailand, army troops were deployed to avoid the seizure of food from fields and warehouses. "Food price inflation hits the poor hardest," stated Henri Josserand of FAO's Global Information and Early Warning System, "as the share of food in their total expenditures is much higher than that of wealthier populations." Josserand continued that food represents about 10-20 per cent of consumer spending in industrialised nations, but as much as 60-80 per cent in developing countries -- many of which are net food importers. In 2007/08, the cereal import bill of LIFDCs as a group is forecast to increase considerably for the second consecutive year. Prices of basic foods have soared in domestic markets across the world, leading to social unrest in several countries in Asia, Africa, Latin America and the Caribbean. Governments of both cereal importing and exporting countries are taking a series of measures to limit the impact of higher international cereal prices on food consumption. The FAO report listed 37 countries in crisis requiring external assistance, including 21 in Africa (Egypt is not included), 10 in Asia, five in Latin America and one in Europe (Moldova). Countries in crisis requiring external assistance are expected to lack the resources to deal with reported critical problems of food insecurity. Food crises are nearly always due to a combination of factors, but for response planning it is important to establish whether the nature of the crises are predominantly related to lack of food availability, limited access to food, or severe but localised problems. Accordingly, the list of countries requiring external assistance is organised into three broad categories, namely countries witnessing crop failure, natural disasters, interruption of imports, disruption of distribution, excessive post-harvest losses, or other supply bottlenecks; countries where there are very low incomes, exceptionally high food prices, or an inability to circulate within the country; and finally, countries suffering from the influx of refugees, a concentration of internally displaced persons, or areas with combinations of crop failure and deep poverty. FAO's first forecast for world cereal production in 2008 stands at a record 2.164 billion tonnes, 2.6 per cent up from last year's crop, which was the previous global high. The bulk of the increase is expected in wheat, the output of which is set to reach some 647 million tonnes, 6.8 per cent up from 2007 and also a new record. In spite of the surge in world cereal prices in 2007/08, world cereal utilisation is expected to demonstrate a relatively strong growth and reach 2.126 billion tonnes, an expansion of almost three per cent from the previous season, which is well above the average annual growth rates of below two per cent in the past decade. Food consumption of cereals is forecast to reach 1.006 billion tonnes, an increase of about 1 per cent from 2006/07. Most of this anticipated rise is expected in developing countries, driven by an increase in population growth. However, on a per capita basis, wheat and rice consumption levels decline marginally in developing countries, mostly in favour of higher intakes of more value-added food, especially in China. Feed utilisation is forecast to increase by two per cent in 2007/08, to 756 million tonnes. Industrial usage of cereals demonstrates strong growth this season, but the expansion mainly reflects the rapid rise in the use of grains as raw material for production of biofuels, which in 2007/08 is forecast to approach 100 million tonnes, of which maize accounts for at least 95 million tonnes. Maize is the main cereal used for the production of ethanol and the United States is the world leader of the maize-based ethanol sector. In 2007/08, the United States is expected to use at least 81 million tonnes of maize for the production of ethanol, 37 per cent more than in 2006/07. The FAO Food Price Index continued to increase since the start of the year and by March 2008 it averaged 220 -- as much as 80 points (57 per cent) more than in March 2007. Prices of nearly all food commodities have risen since the beginning of the year supported by a persistent, tight supply and demand situation. In 2007, the index averaged 157, up 23 per cent from 2006. The FAO Cereal Index firmed since the start of 2008, averaging 283 in March, 2008, up 45 points from January. Tight supplies continue to provide support to the prices of most cereals. In recent weeks, rice prices gained most but maize prices also made further gains. Wheat prices have come under some downward pressure during the first week of April 2008 in anticipation of larger crops in 2008. However, because of low stocks, wheat prices remain high and well above the previous year's levels. The FAO Dairy Index averaged 276 in March 2008 down six per cent from its peak in November 2007. In terms of products, prices of milk proteins have fallen the most, as skim milk powder prices dropped by 27 per cent since their peak in July 2007; butter prices have declined the least since their high in November 2007. Tight supplies from traditional exporters, strong import demand, and the exhaustion of public stocks caused an unprecedented eruption of dairy product export prices in late 2006, which has lasted through 2007. The FAO Meat Index increased since the start of 2008 with the preliminary estimate for March 2008 at a high of 133, surpassing its previous peak in 2005. The recent gains mostly reflect the continued surge in feed prices. The extent of price increases varied significantly depending on feed conversion efficiencies, biological lags in production responses, as well as the role played by contract prices. Since the beginning of the year, lamb prices have increased the most as sheep producers are rebuilding flock numbers and reducing slaughter. The FAO Sugar Index in the first three months of 2008 averaged 166, which is 29 points above the corresponding value in 2007. Since the beginning of 2008, sugar prices have gained some momentum, underpinned by strong fund investment in commodity futures. This is despite an expected global sugar surplus for the 2007/08 season. In 2007, the index averaged 129, a 32 per cent drop over 2006. Altogether, a recovery in sugar production in traditional importing countries led to weaker sugar prices in 2007. The FAO Oils/Fats Index in the first quarter of 2008 averaged 269, which is 133 points (or 98 per cent) above the corresponding value in 2007. Constant expansion in the demand for vegetable oils and fats -- for food uses but also as biofuel feedstock -- combined with a slowdown in production growth, has resulted in a gradual tightening of global supplies and a surge in prices. On an annual basis, the index averaged 174 in 2007, compared with an average of 117 in 2006. After looking at the report, it appears that a number of policies need to be addressed promptly. First, the access to food by poor and vulnerable populations should be increased through targeted food distribution by governments in the sub-region. Other safety net interventions, such as sales at subsidised prices, food for work or cash for work activities, are also recommended depending on the extent of food supply in specific areas. Second, the distribution of inputs such as seeds and fertiliser is also needed to enable farmers to produce enough food during the next cropping season. Third, market and price conditions as well as the situation of vulnerable groups in each country should be closely monitored in order to provide assistance as soon as necessary. * The writer is a professor of agricultural resources at Cairo University.
