By Gustavo Capdevila
GENEVA, Jun 21 2005 (IPS)

Over the next decade, South-South trade will account for an increasing share of global agricultural trade flows, according to a new report by FAO and the OECD released Tuesday.

During the 2005-2014 period, agricultural output will grow at a slower rate than in the previous decade, while consumption will expand, driven by economic development and the increase in population in the developing countries.

The report also predicts the emergence of new leading players in agricultural trade, headed up by China, which will pose a challenge to the wealthy industrialised nations that currently dominate the global market thanks to the subsidies they provide their farmers, totalling over one billion dollars a day in 2004.

The stiffer competition resulting from an increase in exports by developing countries is expected to lead to a drop in real prices for most agricultural commodities.

The new report, Agricultural Outlook 2005-2014, was presented in Rome and Geneva by representatives of FAO (United Nations Food and Agriculture Organisation) and the OECD (Organisation for Economic Cooperation and Development), whose 30 member nations include all of the world’s industrialised countries.

One of the main conclusions of the joint report is that both production and consumption of basic farm products will experience sustained growth over the next ten years

One of the most significant changes forecast for the coming decade is an increase in agricultural trade among the countries of the developing South.

Boonekamp predicted that an expansion in South-South trade for certain commodities will be seen relatively soon, while FAO expert Merritt Cluff stated that the developing nations will play a leading role in the future of agriculture.

With regard to imports, China will play a decisive role, said Cluff. By the end of the period in question, the Asian giant will be importing 10 million tons of wheat, five to ten million tons of coarse grains and 42 million tons of oilseeds.

Demand for farm products will increase in developing countries as a whole because of a growth in population and per capita income, predicted the FAO official.

Food demand is more sensitive to a rise in income in the developing world than in the industrialised nations, commented Cluff.

This phenomenon has already been observed by both experts in a number of developing nations, particularly in East Asia and several African countries.

In terms of exports, Cluff pointed to the emerging position of Brazil and other leading South American suppliers, such as Argentina. Brazil has traditionally played a major role in the markets for certain products, including sugar and oilseeds, a sector in which the South American giant is capturing an increasingly larger share of the world market.

The forecasts place Brazil in a significantly competitive position as a low-cost supplier of oilseeds, coarse grains, beef, poultry and pork. Argentina will find itself in a similar position, although perhaps not to such a great extent, added the FAO expert.

The transition economies of Russia and Ukraine have also demonstrated considerable potential to markedly increase exports, he added.

The growing competition represented by the increase in exports from these nations will pose a serious challenge to the OECD exporter countries, where production is more costly but highly subsidised.

It will become increasingly difficult for the wealthy nations to compete on the world agricultural market, despite the hefty financial support they provide to their farmers. Even this will not allow them to maintain their share of the market, said Cluff.

Coinciding with the release on Tuesday of the joint FAO-OECD report, the OECD also presented its own Agricultural Policies: Monitoring and Evaluation study, which reveals that support to the agricultural sector in the organisation’s member countries totalled almost 378 billion dollars in 2004.

Cluff stressed that this sum included all forms of support to the sector, including funding for research. The total represents 1.16 percent of the combined gross domestic product of these nations, the wealthiest in the world.

Producers in developing nations lack this kind of financial support, he added.

The United Nations has acknowledged that it faces difficulty in studying agricultural conditions in Africa, because no detailed information or statistics are available.

Nevertheless, according to FAO estimates, imports of agricultural products will expand considerably in Africa over the coming years.

Cluff reported that wheat imports to the continent are expected to reach almost eight million tons, representing a 30 percent increase over current volumes.

Africa will also import an additional eight tons of coarse grains, reflecting an increase of 70 percent, while rice imports will rise three million tons by the end of the next ten-year period, marking a 40-percent increase.

These projections spell a growing food dependency on the part of the African nations, and especially the least developed countries among them. As a result, they will become increasingly vulnerable to price fluctuations on the world market, and their expenditures on food imports will rise significantly.

The FAO-OECD report also forecast that growth in agricultural commodity trade will continue to under-perform relative to non-agricultural trade due in large part to the persistence of high trade barriers.

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