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FAO: Low Agricultural Prices Threaten Food Security

The U.N. Food and Agriculture Organization warns the long-term downward trend in agricultural commodity prices threatens the food security of hundreds of millions of people in some of the world's poorest developing countries. Lisa Schlein in Geneva was at the launch of the FAO's new report on The State of Agricultural Commodity Markets.

The report says many developing countries rely on exports of a small number of agricultural commodities, even a single commodity, for much of their export revenues. It calls this short-sighted and dangerous. The report explains this concentration on a few products leaves these countries exposed to unfavorable market or climatic conditions.

FAO economists explain a drought or a drop in prices on the international markets can, for example, quickly drain a nation's foreign exchange reserves. This, they say will stifle its ability to pay for essential imports and plunge the country into debt.

FAO's Director of Commodities and Trade Division, Alexander Sarris, says as many as 43 developing countries depend on a single commodity for more than 20 percent of their total earning from exports. He says most of these countries are in sub-Saharan Africa or Latin America and the Caribbean.

"FAO estimates that if prices of the 10 most important, in terms of export value, agricultural commodities which were exported by the developing countries had risen in line with inflation since 1980, these exporters would have received around $112 billion more in 2002 than what they earned," he said.

Mr. Sarris says this is more than twice the amount of total development aid distributed worldwide. He says many commodity-dependent countries now export more but earn less. He notes many of these countries also depend on agricultural commodity exports to finance food imports. Thus, a decline in export prices can threaten food security.

He warns these problems are worsened by market distortions. For example, he says a reduction of subsidies for cotton and other agricultural products in major developed countries such as the United States and in the European Union could influence world trade significantly.

"Because their domestic production will be reduced and their trade will have to be picked up by some of the other countries," he said. "Now, here again our analysis shows that most of the increase in exports will come from the more advanced developing countries, not from the least developed countries, such as Brazil, such as Uzbekistan, such as Pakistan, India - these countries. They will have an increase in their exports, but countries like Benin and Burkina, the ones that have been complaining a lot, will, of course, benefit as well, but not as much."

The report calls for the elimination of market distortions. It urges the World Trade Organization negotiations to give priority to reducing agricultural tariffs, producer support and export subsidies in developed countries.