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`Farm markets emerging from slide'

G. Srinivasan

NEW DELHI, May 27

AGRICULTURAL markets the world over are emerging from a protracted spell of downturn that has seen the value of many commodities reduced to historic lows, the Organisation for Economic Cooperation and Development(OECD) has said.

In its just published Agricultural Outlook, 2001-06, the Paris-based inter-Governmental think tank of 30 industrial countries said a growing world economy and population bolstered by more broadly-based economic growth in the OECD area and continuing fast recovery of Asia, Latin America and Russia from the financial turmoil of the late 1990s would lead to a market turnaround. This is characterised by world demand for farm products growing faster than production and stocks-to-use ratios tightening appreci ably. Demand will expand more rapidly in developing countries aided by increased spending power, urbanisation, improving diets and higher population growth.

The medium-term better prospects of recovery in the prices of world farm products assumes added significance for India because its latest Exim (Export-Import) Policy unveiled on March 31, 2001 has given primacy to promotion of agricultural exports by pro posing the creation of the Agri Economic Zones which would be followed by a national agri-export policy.

OECD said world prices for most farm products were expected to rise gradually to 2006 and more for some beef and dairy products than for cereals and oilseeds. World pig meat and beef prices would continue to move in cycles with a price dip projected for each over the outlook period.

World production of agricultural products is projected to expand over the outlook period with the mix of output changing towards a larger share of livestock products and feedstuffs and declining share for foodgrains. Yield and productivity increases woul d continue to play the largest role in production growth.

Even as the non-OECD countries would account for the bulk of the increase in world production, this would not be enough to meet the growth in their demand with the shortfall covered by increased imports from OECD countries, the Outlook cautioned.

World production of agricultural products is forecast to expand more rapidly over the outlook span than during the second half of the 1990s. Global wheat, coarse grains and rice production in total is estimated to rise by 1.6 per cent annually to 2006, c ompared to 1.3 per cent per annum for the 1995-99 period, but with a smaller increase in foodgrains. World oilseed production is set to expand at close to 2 per cent per annum to 2006.

Stating that massive farm support measures in the OECD area still swayed markets, OECD said the recent progress on agricultural policy reform had been ``mixed''. For the United States, greater reliance on market outcomes intended under the FAIR Act (Fede ral Agriculture Improvement and Reform) of 1996 had subsequently been wound back by measures taken to shield producers from market realities. The European Union (EU) had embarked on further reforms for some crop sectors and began it for others under the Berlin Agreement, but had postponed decisions on more fundamental change in some of the heavily regulated and supported agricultural industries.

OECD referred to a new Basic Plan by Japan as also its five-year work programme on Food, Agriculture and Rural Areas in 2000 to implement the basic laws enacted in the previous year. This programme, which brings together all existing and new policy measu res, had the potential to move the reform process forward in Japan, though further efforts would be needed to increase the exposure of the agriculture sector to world market signals.

Though market price support and output-related payments had decreased over time in OECD countries, they still comprised more than 70 per cent of support to producers. Guaranteed prices and market intervention purchases backed up by tariff protection in t he European Union and marketing loans in the US effectively insulated their producers from a decline in world prices. This distorted domestic production, market prices and world trade, OECD said.

Overall, the pace and depth of agricultural policy reform across OECD countries had been ``mixed''. While reform has been substantial in some countries it had now slowed or come to a halt in others. Over the outlook period, many national farm programmes were scheduled for review and a new multilateral agreement on agriculture in the WTO was anticipated.

Many Governments would likely be challenged by a growing number of emerging policy issues on their domestic agenda, OECD said adding that the outlook for higher prices and farm incomes could be further reinforced if member Governments of the OECD design agricultural and allied policies to achieve their economic, environmental and social goals in ways that were both effective and which had no or minimal distortions to production and trade.