Global Policy Forum

The prices of farm products have declined, devastating the economies of the least developed countries dependent on exporting one or two commodities and depressing incomes in the rural areas of many countries, but also improving the diets of urban residents, the United Nations agricultural agency says in a new report.

In "The State of Agricultural Commodity Markets 2004" (SOCO 2004), the UN Food and Agriculture Organization (FAO) says an estimated 2.5 billion people in the developing world depend on agriculture for their livelihoods, but "most agricultural commodities have experienced a downward trend in real prices and the long-term forecasts are not encouraging." It cites World Bank estimates for 2015 projecting the price of most agricultural commodities remaining below their mid-1990s peaks even though real prices are forecast to rise above current levels.

One benefit is that lower prices from basic foods enable urban consumers in many poor food-importing countries "to meet their food needs at lower cost and to gain access to nutritious diets," FAO says. Meanwhile, more than 40 developing countries, mainly in sub-Saharan Africa or Latin America and the Caribbean, depend on a single commodity – mostly sugar, coffee, cotton lint or bananas – for more than 20 per cent of their total merchandise export revenues, it says.

FAO recommends addressing the problems of oversupply in producer countries and the trade distortions caused by rich countries, which are escalating their tariffs and decreasing access to their markets. It proposes increasing the ability of developing countries to take advantage of trading opportunities and to participate effectively in such trade negotiations as those of the World Trade Organization (WTO). The international community also should address the negative effects of the elimination of trade preferences for low-income economies and weigh the possible case for compensating them for any losses during trade liberalization.

Moves by producers to strengthen cooperatives, organize commercially and increase their leverage in markets dominated by powerful transnational corporations also should be supported, FAO says, using as one of its examples of need the recent developments in the banana trade. It notes that international trading companies, distributors and retailers claim 88 per cent of the retail price of bananas, even though they need no processing. Less than 12 per cent goes to the producing countries and barely 2 per cent to the plantation workers.

While prices for commodities traditionally exported by developing countries have stagnated or declined, the demand for certain fruits, vegetables and other non-traditional agricultural exports has grown in recent years, but many farmers lack the credit, training and other resources to take advantage of these opportunities, it says. The declines and fluctuations in agricultural export earnings have battered income, investment and employment and left many countries deeply in debt, SOCO 2004 says.