Food security cited as priority at meeting of commodity experts

20 March 2013

Amid the complex interplay of factors affecting the production of basic farm goods and industrial raw materials, it is vital to ensure that sufficient, affordable food is available in developing countries, an expert meeting has heard.

The UNCTAD Multi-year Expert Meeting on Commodities and Development runs until 21 March. The purpose of the meeting is to look at recent developments and new challenges in commodity markets, and policy options for commodity-based inclusive growth and sustainable development.

UNCTAD Secretary-General Supachai Panitchpakdi said, in opening the session, that the historically volatile global commodities market had outdone itself over the last decade. The situation had featured price spikes, a food crisis, extreme volatility in prices, and severe swings in weather, including, last year, the worst drought in 25 years in the United States corn belt, the source of 40 per cent of the world's crop.

"In the agricultural commodities and food sector," he said, "ensuring sustainable access to staple foods, especially grain, particularly in net food-importing countries, should be the main priority."

In addition to high and volatile prices in the commodities sector, Mr. Supachai said that there had been advances in technology affecting especially the energy industry, led by fracking, which promises to greatly expand production of natural gas but raises health and environmental issues. In addition, there continued to be concerns about the relationship between economic growth, energy use, and climate change, all of which require careful decision-making by nations and the international community.

"It is hoped that a greater proportion of energy can come from renewable sources," he said. "It is urgent to step up international efforts to curb carbon and greenhouse gas emissions and to mitigate the challenges posed by climate change."

Samuel Gayi, Head of UNCTAD's Special Unit on Commodities, then provided an overview of the two days of expert discussion. UNCTAD's All Food Commodity Price Index had remained high in 2012, he reported, indicating that the decade-long boom in commodity prices was continuing.

"Weather-induced supply concerns and disruptions constituted the single most important factor contributing to price movements for food and agricultural commodities in 2012," he said, "although other important factors, such as demand, stocks, and the exchange rate of the dollar against other currencies also played an important role."

Mr. Gayi also said that national and international actions related to commodities should focus as a first priority on "enhancing food security for low-income net food-importing countries, in particular at a time of high food prices."

"It can be done," he said, "by improving domestic productive capacity, by channelling more internal and external funds into the agricultural sector, and through appropriate trade policies by food-exporting countries."

Mr. Gayi said that UNCTAD recommends the establishment of emergency food reserves, for example on a regional basis, as already has been done in Asia. The organization also recommends that steps be taken by developing nations to move up the commodity value chain. If basic farm goods and industrial raw materials are not simply exported from these countries to be upgraded elsewhere, he said, but instead are increasingly upgraded domestically, then greater profits, greater numbers of jobs, and less economic vulnerability can result.

He also said that it was vital for governments and those acting internationally to take steps to help smallholder farmers - to help them organize, for example, so that they have greater bargaining power, "improving their access to finance and market information and securing a fairer return for the commodities they produce and trade."

In the energy and minerals sector, Mr. Gayi said that current high prices should stimulate major, well-designed efforts by producing countries to use the windfall profits to broaden and diversify their economies.

Citing UNCTAD's first Commodities and Development Report, released last year, he noted that "many of these countries tend to favour the reduction of external debt and accumulation of foreign assets over domestic spending and investment."

To enhance the link between higher commodity prices and domestic income growth, commodity-dependent developing countries should seek a better balance between using their revenue to improve financial stability and investing it in the domestic economy for diversification and broad-based economic and social development, Mr. Gayi said.