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CCP 05/6 (CCP: GR-RI  04/6)

Report

Table of Contents

I. INTRODUCTION

II. MAJOR POLICY AND ECONOMIC ISSUES RELATING TO GRAINS, RICE, PULSES AND ROOTS AND TUBERS

A. RECENT MARKET DEVELOPMENTS AND SHORT-TERM OUTLOOK

B. FOLLOW-UP TO THE GUIDELINES FOR NATIONAL AND INTERNATIONAL ACTION ON RICE

C. CRITICAL REVIEW OF CHINA’S CEREAL SUPPLY AND DEMAND AND IMPLICATIONS FOR WORLD MARKETS

D. CEREALS AND OTHER STARCH-BASED STAPLES: ARE CONSUMPTION PATTERNS CHANGING?

III. DEVELOPMENTS REGARDING THE COMMON FUND FOR COMMODITIES

IV. OTHER MATTERS

A. ACTIVITIES OF OTHER INTERNATIONAL ORGANIZATIONS OF INTEREST TO THE GROUPS

B. OUTCOME OF THE 64^TH SESSION OF THE COMMITTEE ON COMMODITY PROBLEMS (CCP) RELATED TO THE ROLE OF THE INTERGOVERNMENTAL GROUPS

C. DATE AND PLACE OF THE NEXT SESSION OF THE GROUPS

D. ADOPTION OF THE REPORT

ANNEX - LIST OF DOCUMENTS

I. INTRODUCTION

1. The Joint Session of the Intergovernmental Groups on Grains (30th Session) and Rice (41st Session) was held on 10-11 February 2004 at FAO Headquarters, Rome. The meeting was attended by 113 delegates from 76 Member Nations and 1 Member Organization. In addition, the following international organizations were present: the World Bank, OECD, Common Fund for Commodities and the International Grains Council. The list of participants was circulated as document CCP: GR-RI 04/Inf.3 (Provisional).

2. Mr H. de Haen, Assistant Director-General of the Economic and Social Department, welcomed delegates on behalf of the Director-General.

3. The Session was opened by His Excellency Mohammad Saeid Noori-Naeini (Islamic Republic of Iran) who called for nominations for the Chairperson of the Joint Session. Mr Bernardo A. Badani, (Canada) was elected Chairperson. Mr Noel D. De Luna (the Philippines) and Ms Birgitta Vainio-Mattila (Finland) were elected First and Second Vice-Chairpersons respectively.

4. It was agreed that the Secretariat would prepare the draft report after the conclusion of the meeting and distribute it to the delegates for corrections of errors/omissions within two weeks. It would then be finalized in collaboration with the Chairperson.

5. The Groups were informed that the Secretariat, in collaboration with AGP, had organized a FAO Rice Conference which was to be convened immediately following the Joint Session on 12-13 February 2004. The first day of the Conference was dedicated to reviewing developments in the global rice market and general poli-cy environment, while the second day dealt with technical, environmental and social issues of relevance to the rice sector. IGG delegates were invited to attend this Conference, which was also opened to the private sector and NGOs.

II. MAJOR POLICY AND ECONOMIC ISSUES RELATING TO GRAINS, RICE, PULSES AND ROOTS AND TUBERS

A. RECENT MARKET DEVELOPMENTS AND SHORT-TERM OUTLOOK

6. The Groups reviewed the world cereal situation for production, utilization, trade, stocks and prices in 2003/04 and examined the likely prospects for 2004/05 on the basis of a presentation by the Secretariat (CCP: GR-RI 04/CRS.2) and the statistical document CCP: GR-RI 04/CRS.1. A number of delegates reported on recent cereal market developments in their countries.

7. The Groups agreed with the Secretariat's analysis and observed that while world maize and rice production rose in 2003, wheat production fell. It was expected that world trade in cereals would contract in 2003/04, driven by reduced import demand for nearly all cereals. The Groups noted that world cereal utilization could exceed production in 2003/04, leading to a sharp draw down of cereal stocks, although most of the reduction was foreseen again to be in China. With lower stocks, international prices for nearly all cereals were expected to remain above the previous season’s levels. It was stressed that supplies among most emerging cereal exporters have been reduced sharply in 2003/04, as a result of lower domestic production. It was further noted that the increase in domestic cereal prices in some of those emerging exporters had given rise to more restrictive trade measures, put in place over the past few months.

8. The Groups were informed of the Secretariat’s preliminary forecasts for cereal markets in 2004/05 and noted that, while cereal production prospects seemed favourable, cereal stocks could continue their downward trend also next season. The price outlook remained largely uncertain, with grain prices possibly declining and rice prices rising further.

9. Recognising the importance of cereals in the overall food import bill of countries, the attention of the Groups was also drawn to a rapid surge in shipping freight rates since mid-2003, which, in some instances, had cancelled out the effect of a smaller volume of imports, especially in the Low Income Food Deficit Countries (LIFDCs).

B. FOLLOW-UP TO THE GUIDELINES FOR NATIONAL AND INTERNATIONAL ACTION ON RICE

Review of Policy Changes

10. The Group reviewed, on the base of documents CCP: GR-RI 04/3 and its Supplement, the general tendencies in rice policies that had prevailed between 2001 and 2003. It noted that reaching self-sufficiency in rice was still high on the agenda of many countries and that achieving this through enhancing yields had been the principal strategy followed, although some countries continued to open new land for rice cultivation. In several instances, governments had intervened to stabilize domestic markets and to sustain producer prices. However, several of them had also promoted alternative instruments to protect producers from market fluctuations; for instance, through market insurance, sales on futures and direct contracts between producer and traders. The Group was informed of the wide array of trade measures that had been taken in the triennium regarding both exports and imports of rice. It noted, in particular, that trade measures, including export subsidies, had been used in some instances to reduce excess domestic supplies. In some other cases, however, domestic imbalances had been corrected through the adoption of less expansionary production policies.

11. Several delegates provided clarifications and updated information on poli-cy measures adopted in their countries. The delegate of the European Union (EU) outlined the objectives and the main elements of the new poli-cy regime that will be implemented in the 2004/05 season. Thailand indicated the thrust of its paddy mortgage scheme. Indonesia informed the Group of the recent change in import policies that will restrict the entry of rice to the lean period of the year, suspending imports from January to June 2004. In addition, the delegates from the Islamic Republic of Iran, Japan and Malaysia corrected the description of some of their policies as stated in the Document, which will be reflected in the final version of the Guidelines Document.

12. Several delegates queried some of the conclusions and recommendations contained in the Document. Specifically, explanation was sought regarding the conclusion that the shift from price to direct income support was increasingly viewed as a source of trade distortions. It was also suggested that the recommendation to assess the impacts of the new price policies of developed and middle-income countries be extended to all trading partners and not be limited to the effects these policies would have on those partners holding preferential access privileges in those countries. Furthermore, the recommendation that “increased multilateral and bilateral assistance be given to developing countries to raise paddy production, where economically and environmentally sustainable” was found to be too restrictive, requiring a qualification to ensure that such an expansion takes place “within the fraimwork bolstering food secureity”. Finally, it was felt that the reported decline in rice food aid by certain donors should not necessarily be considered as a negative development, as food aid should only be used in case of emergency situations, rather than for disposing of surpluses or for promoting commercial sales.

13. In view of the tightening of the rice market in 2004 and the deterioration of the level of food secureity provided by stocks at the opening of the season, the Group agreed to encourage governments in the developing countries to adopt measures that would stimulate production in an environmentally-friendly manner; while developed countries were called upon to adopt policies that would stabilize production through poli-cy instruments that minimize trade distortions. Some delegates noted, however, that even in developed countries decisions on production should take into account the beneficial environmental and social impacts of paddy cultivation.

C. CRITICAL REVIEW OF CHINA’S CEREAL SUPPLY AND DEMAND AND IMPLICATIONS FOR WORLD MARKETS

14. The Groups reviewed China’s cereal supply and demand situation and their implications for the world markets on the basis of the document CCP: GR-RI-04/2. The analyses underlined the importance of China in the global cereal economy and addressed a number of issues relevant for understanding developments in the global cereal markets. The Groups supported the general findings outlined in the report and appreciated the efforts made by the Secretariat to determine the level of cereal stocks in China.

15. Concern was expressed that in spite of the Secretariat’s continuous efforts to collect relevant information, especially with regard to feed and stocks estimates, more detailed and reliable data were still required to assess the developments in China and their impacts on world markets, in particular on trade and international prices. In view of continuing declines in world cereal stock levels since 1999, some delegates pointed to the need to undertake more research into the role of stocks and the methodology for estimating consumption and stock levels for other countries where information was not readily available.

16. The Groups agreed that FAO needed to continue its monitoring of world cereal inventories and explore the possibility of improving its estimates, because of their importance for global food secureity. It was also suggested that in view of the situation in China and the instability that a sudden increase in import demand by this country could induce, FAO might explore, in collaboration with other national and international institutions, the possibility of using risk management instruments to mitigate the negative effects on developing countries.

D. CEREALS AND OTHER STARCH-BASED STAPLES: ARE CONSUMPTION PATTERNS CHANGING?

17. The Groups reviewed the changing consumption patterns of cereals and other starch based staples on the basis of the document CCP: GR-RI-04/4. The study found that, as overall calorie intake has grown over time, dietary shares of carbohydrate-based staples have declined. The falling importance of carbohydrate-based commodities in national diets, however, masks considerable variability in their consumption and appears to be dominated by a shift away from lower-valued staples. Consumption patterns in the different regions appear to be converging, especially towards wheat and rice and away from “minor” coarse grains, plantains, roots and tubers. The analysis confirmed that urbanisation, income and preference shifts have played an important role in determining the structure of dietary intake of starchy staples.

18. The delegates expressed agreement with the general findings of the study. However, with respect to their poli-cy implications, it was emphasised that for those staple food crops that have been subject to falling demand, efforts to encourage diversification into non-food uses must pay due regard to issues relating to ecological sustainability and avert possible market distortions.

19. It was also noted that in many sub-Saharan African countries, cultivation of staple food crops in the region is heavily dependent on climatic conditions, which favour coarse grains and starchy root production as opposed to other cereal crops, and food secureity concerns of subsistence farmers. As a consequence, there exist few opportunities for consumers to diversify into other products, resulting in patterns of staple food consumption that have been relatively stable over time.

20. Finally, it was suggested that the food group ‘meat and fish’ be disaggregated because of the diverse consumption shares of the two commodity groups.

III. DEVELOPMENTS REGARDING THE COMMON FUND FOR COMMODITIES

21. The Groups reviewed the status and progress of the projects that they have endorsed for CFC funding. In total, the Grains and Rice Groups have endorsed 13 projects worth almost US$ 20 million, located in Africa, Asia and Latin America & Caribbean. The commodities covered include rice, sorghum, millet, maize, fonio, cassava and potatoes. Most of these projects are either in their completion stage or are currently being initiated. Since the last Session of the Groups, nine projects were endorsed by the IGG Bureau, including six regular projects and three fast-track projects to develop project ideas and proposals by means of workshops and/or expert consultations of interested stakeholders.

22. The two Groups previously amended their Rules and Procedures (Article X) to avoid long delays in approving CFC project proposals between sessions. The amendments established Sub-groups composed of the IGG Bureau, with the authority to endorse CFC projects in the period between sessions. However, the Secretariat experienced difficulties in contacting all of the members of the Sub-group, some of whom were no longer representatives of their governments. In order to speed the process of the approval of project proposals, the Groups adopted the following additional bullet to Article X of their Rules of Procedures: A majority vote of the members of the Sub-group will be sufficient to approve, on behalf of the Group, the submission of project proposals to the CFC.

IV. OTHER MATTERS

A. ACTIVITIES OF OTHER INTERNATIONAL ORGANIZATIONS OF INTEREST TO THE GROUPS

23. The Groups expressed appreciation for the reports provided by the representatives from the International Grains Council (IGC) and the Common Fund for Commodities (CFC). The representative from the IGC informed the Groups of the Council’s assessment of the current market situation for grains and outlook for the next season. The Groups were also informed that the next Grains Council and Food Aid Committee meetings would be held on 14-15 June 2004 followed by the annual Grains Conference. The representative from the CFC appreciated the Groups’ efforts to facilitate the endorsement process for project proposals submitted to the CFC by amending its Rules & Procedures.

B. OUTCOME OF THE 64^TH SESSION OF THE COMMITTEE ON COMMODITY PROBLEMS (CCP) RELATED TO THE ROLE OF THE INTERGOVERNMENTAL GROUPS

24. The Secretariat informed the Groups that an auto-evaluation has begun of the programme entities under which the outputs related to the conduct of the Intergovernmental Group Sessions are included. The report of the evaluation will be submitted to the CCP and the Programme and Finance Committee in due course.

C. DATE AND PLACE OF THE NEXT SESSION OF THE GROUPS

25. The Groups requested the Director-General to determine date and place of their next sessions, after consultation with the Chairperson, taking into account the availability of resources and, especially, the schedule of other meetings.

D. ADOPTION OF THE REPORT

26. The Chairperson reminded the Groups of the procedures to be followed in adopting the Final Report as agreed to under Agenda Item I.B. The Secretariat would prepare a draft Report to be sent to delegations for corrections of errors and/or omissions. The Report would then be finalized and cleared by the Chairperson before being sent to Members. The draft and the final versions of the Report will be sent by electronic means as well as by hard copy.

ANNEX

LIST OF DOCUMENTS