The Hindu Business Line : Falling commodity prices may hit poor nations: FAO report

THE continuing long-term decline in agricultural commodity prices threatens the food security of millions of people in some of the world's poorest developing countries where the sale of commodities is often the only source of cash, the Food and Agriculture Organisation (FAO) said in its new report "State of Agricultural Commodity Markets 2004" released this week.

At the same time, lower prices for basic foods enable many poor food-importing countries and their consumers, especially in urban areas, to meet their food needs at lower cost and to gain access to nutritious diets, the report added.

Although commodity prices had moved down from late 1990s till 2001, in the last couple of year, prices have either improved or levelled off. While cereals, oil crops, dairy products, fibres and raw materials re-bounded, horticultural product prices remained more sensitive to market balance and meat prices were disrupted by animal disease outbreaks.

However, the recent price recovery has been far more fragile for tropical beverages, sugar and bananas on which export earnings of some of the poorest countries depend.

The report said the problems were exacerbated by market distortions arising from tariffs and subsidies in developed countries and role of trans-national corporations.

Setting out an agenda for action to combat commodity oversupply, the report has urged World Trade Organisation's negotiations to give priority to reduction of agricultural tariffs, producer support and export subsidies in developed countries.

At the same time, developing countries have been urged to reduce tariffs so that their consumers benefit. Increased investment to improve productivity of domestic food production in developing countries as also providing farmers an insurance against price shocks through introduction of weather futures, forward-pricing systems and market based price insurance has been proposed.

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