Commodity News & Information |
Kenya buys 150,000 T of maize from U.S., S.Africa
| | Kenya has started importing 150,000 tonnes (1.6 million bags) of maize, more than half the amount it plans to buy to plug a shortfall, from South Africa and the United States, the government said on Monday.
The east African country plans to buy a total 3 million bags of the grain to cover a shortage created during a devastating post-election crisis in January that destroyed harvests or blocked farmers from planting.
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Intra regional trade in cereals to flourish.
| | Trade in agricultural commodities is expected to thrive in Eastern and Southern Africa as a result of harvesting despite export bans which have been imposed by various countries. The Government of Tanzania, Malawi, Zambia and Ethiopia have imposed export bans on agricultural commodities. However, because our borders are porous cross border trading is expected to continue albeit at higher transaction costs |
Significant Increase in World Cereal Production Forecast for 2008, But Prices Remain High
| | FAO reports that early prospects point to the possibility of a significant increase in world cereal production in 2008, but international prices of most cereals remain at record high levels and some are still on the increase, FAO said today. The forecast increase in production follows expansion of winter grain plantings and good weather among major producers in Europe and in the United States, coupled with a generally satisfactory outlook elsewhere, according to FAO's latest Crop Prospects and Food Situation report. With dwindling stocks, continuing strong demand for cereals is keeping upward pressure on international prices, despite a record world harvest last season, the report said. International wheat prices in January 2008 were 83 percent up from a year earlier. Although prices are high, total world trade in cereals is expected to peak in 2007/08, driven in great part by a sharp rise in demand for coarse grains, especially for feed use in the European Union, according the report.
Imports down, food bill up for poorest countries
Cereal imports for all Low-Income Food-Deficit countries in 2007/08 are forecast to decline by about 2 percent in volume, but as a result of soaring international cereal prices and freight rates, their cereal import bill is projected to rise by 35 percent for the second consecutive year. An even higher increase is anticipated for Africa. Prices of basic foods have also increased in many countries worldwide, affecting the vulnerable populations most, the report said. In order to limit the impact of rising cereal prices on domestic food consumption, governments from both cereal importing and exporting countries have taken a range of policy measures, including lowering import tariffs, raising food subsidies, and banning or imposing duties on basic food exports.
New portal
"High food prices and market uncertainties have become major global concerns, and wide access to up-to-date information and analysis is becoming critical," said Henri Josserand of FAO's Global Information and Early Warning system. To address this need for information and facilitate analysis on current developments in world food markets, FAO today announced the launch of a new web portal bringing together relevant FAO studies and data on the world food situation.
2008 cereal prospects
In North Africa, early prospects for the 2008 winter cereal crops are mixed, but in Southern Africa the overall outlook is satisfactory, despite severe localized floods. In several countries of Eastern Africa, another bumper cereal crop was gathered in 2007, but poor secondary crops are expected in Kenya and Somalia, according to the report. In Asia, early indications point to a 2008 aggregate wheat crop around last year's record level. Overall prospects for the 2008 maize crop are satisfactory in South America, although the outlook remains uncertain in Argentina.
Flooding in southern Africa and South America
Heavy rains have caused severe flooding in Mozambique, Zimbabwe, Zambia and Malawi. Farmers in affected areas are in urgent need of seeds and other inputs for replanting during what is left of the main cropping season, which runs from October to April, and to prepare for the next planting season. FAO and its humanitarian partners yesterday launched an appeal for $87 million for emergency assistance to flood-affected populations in the four countries. Of this, over $9 million will support FAO's agricultural relief activities aimed at improving food security in flood-hit regions. In Bolivia, severe floods have adversely affected over 42 000 families, who are in need of emergency humanitarian assistance, with numbers on the increase. Large cropped areas have been partially or totally lost.
Extreme cold weather in central Asia
Exceptionally low temperatures in several central Asian countries, in particular China, Mongolia, Afghanistan and Tajikistan, have caused human casualties and resulted in crop and livestock losses. Worldwide, 36 countries are currently facing food crises, according to the report. Click here for the complete list of countries in need of external assistance.
Source: FAO
Rome
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UN to Spend $7 Million On Post-Poll Violence Victims
| | An international publication reports from Nairobi that relief operations in parts of the country, which were hard-hit by the recent wave of violence got a major boost after the UN approved a $7 million budget for the effort. The money is from the UN's Central Emergency Response Fund (CERF) and will go to financing health, food and shelter. A statement from the UN said initial allocation from the fund, designed to make resources available with speed, will also be used to provide water and sanitation services. Under-Secretary-General for Humanitarian Affairs and Emergency Relief Co-ordinator John Holmes said the UN financing was based on the official figure of 255,000 displaced people. "Our estimate is that up to 500,000 people may be in need of assistance over the coming weeks and months," he said. "The difficulty of assessing the scale of the problem is that people are still moving around, including a steady stream of people moving out of Kenya."
Mr Holmes said the humanitarian consequences of the post-electoral violence were severe not only in terms of the number of people killed and injured but also in those displaced from their homes. In Kenya, UN agencies have been working with the local chapter of the Red Cross Society, national and international non-governmental organisations (NGOs) and faith-based groups. The UN High Commissioner for Refugees (UNHCR) is also monitoring the situation in Uganda, where thousands of Kenyans fled in the wake of the violence. The agency reports that some 3,400 people have so far been registered by the Ugandan Red Cross. Many of the refugees have camped in schools that are set to re-open at the beginning of February.
The UNHCR said it was working with the Ugandan Government to find alternatives. The agency has also made available relief supplies for roughly 100,000 people in Kenya. Meanwhile, the UN Children's Fund (Unicef) expressed concern that hundreds of people were being forced to seek shelter at police stations in the night for fear of attack. "While they go to their homes or to work during the day they do not feel safe enough to sleep in their own beds at night," Unicef's Sara Cameron said. The agency said the political crisis into which Kenya fell last week had left at least 100,000 children displaced. "We know from experience in many countries that fear can have lasting damaging effects on children," Ms Cameron said. "We must prepare to respond to the confusion that many children will feel because of this crisis," she said.
On the possible impact of the crisis on the environment, the UN Environment Programme (UNEP) said the transport system was not yet fully operational and that this may compromise waste collection. "The build up of wastes raises serious public health concerns as a result of increased levels of pests and risks to the local environment including river systems and water supplies as a result of leakages and the clogging of sewers," UNEP spokesperson Nick Nuttall warned. The Nairobi-based agency is monitoring the environmental situation in the country. "While there is likely to be little or no significant environmental impact as a result of the current crisis, impacts on areas such as forests, wildlife and water quality cannot be ruled out if the situation persists and significant numbers of people remain displaced over the medium to long term," he said. Mr. Nuttall warned that this damage "would in the end exacerbate the loss of livelihoods and the humanitarian situation."
Source: AllAfrica.com
Nairobi
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African Continent Needs Trade But Not Aid
| | A regional pulication reports that despite its strong trade orientation in the 1960s, Africa has been the only region to experience erosion of world trade in the last three decades. Africa's share of world trade declined from more than 3 per cent in the 1960s to less than 2 per cent in the mid 1990s. Part of this loss reflected the erosion of the trade share of traditional exports, and also due to policies that discouraged investment and diversification into products for which world demand was growing. Therefore, whereas other developing regions were increasing their shares of world trade, Africa was losing. Researchers like Sachs and Warner (1997) assert that Africa has been left out of the process of globalisation, while the World Bank (2000) states that losses in world trade have cost Africa almost $70b a year, reflecting lack of product diversification and shrinking market shares for traditional goods. Subramanian and Tamirisa (2001) also find evidence for the marginalisation of Africa in world exports.
Separating the continent into two distinct regions, they find that Central and West Africa has exhibited increasingly low trade performance over time, whereas East and Southern Africa has shown average performance with indications that it also may not be keeping pace with global integration. In response to this declining share of world trade, many African countries have embraced trade reforms, especially opening up to international trade and removing domestic impediments to resource allocation, as well as value addition to the local exports. This I think, was in recognition of the fact that a trade regime which is open to the world economy is vital for sustained economic growth, development and poverty reduction.
In addition, trade with the world economy is also 'Pro-Poor' because the type of economic growth which trade promotes is distributional in most African countries, with the exception of a few oil and mineral exporters, the natural comparative advantages of most African countries lies in agriculture. The growth of the agriculture sector makes maximum use of the main assets of the poor; land and labour. Trade allows countries to specialise in producing goods and services in which they have a comparative advantage on world markets, thereby increasing the efficiency of resource use in the economy and improving welfare. Trade is a powerful stimulus to economic growth. The expansion of markets brought about by trade boosts investment and the increase in competition induced by trade improves productivity yet for long, instead of being given a chance to trade, Africa has always been given aid, which aid has its consequences to the economy.
Should African countries therefore reject aid? No. Aid should be accepted and used to build Africa's capacity to trade. To derive maximum benefits from trade, African countries require major government investment in public goods, especially infrastructure as well as in the development of human skills. Trade will make its strongest contribution to growth and development in Africa if producers are linked to markets, both domestic and foreign, through good and reliable infrastructure facilities. There is also a need to make regional trade arrangements work, as a way of main-streaming trade policy into development. Most of African markets taken into isolation are very small and therefore limit investment and growth, but grouping together into trading blocks enlarges African markets. Take for example, if Uganda stayed out of the recently formed EAC; producers in Uganda would be limited to a total market size of about 25 million people but by joining, producers are now exposed to a total market of about 95 million people.
Source: AllAfrica.com
Kampala
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African Governments Should Remove Trade Tariffs
| | A regional publication reports that the long-awaited EU-Africa summit in Lisbon ended in deadlock, with Africans accusing Europeans of attempting to elbow into African markets. This is a missed opportunity for economic growth in Africa but the summit rhetoric obscures a more important point; Africa is never going to get rich while its governments restrict trade between its own countries, EU deals or not. African exports account for just 2% of global trade but according to the World Trade Organisation, only about 10% of these exports are within Africa yet 70% of the tariffs paid by Africans are imposed by governments in other African countries. In addition, sub-Saharan governments are three times more likely to apply non-tariffs barriers than in wealthy countries, World Bank figures show. As a result of grotesque trade distortions, including corruption and tortuous bureaucracy, African countries cannot exploit their best potential markets: their own neighbours. Dropping those barriers could boost inter-African trade by more than 50%, according to the World Bank.
The self-appointed spokesman for Africa, Bob Geldof, missed this point when he lamented before the summit that "international promises to make trade work for Africa have been lost in haggling, acronyms and inadequate will." But if Geldof really wants the poor to "engage with the global economy fairly," he should campaign against governments of poor countries that drive up prices and hinder growth with the world's highest tariff barriers. The disputed Economic Partnership Agreements with the EU do not challenge the trade barriers that prevent Africans from getting products they need most, like medicines or fertilisers. For instance, Ethiopia imposes taxes totalling 20% to 40% on imported medicines, thus taxing the sick, according to the World Health Organisation. Similarly, cheaper imported fertiliser would yield more and cheaper food.
If African governments are serious about meeting the Millennium Development Goals, freeing trade in these areas is not just an economic necessity but a moral imperative. These barriers, however, will be difficult to dismantle while powerful domestic interest groups lobby for protectionism. The Nigerian agricultural sector, under the pretext of "encouraging local substitutes," has gained a ban on imports of wheat, rice, maize and vegetable oil, even though they would be far cheaper for the 11 million Nigerians who are undernourished. But this giant country is still not self-sufficient in food after 30 years of pursuing this delusion.
While domestic protectionist groups are motivated purely by self-interest, they get ethical credibility from the global Trade Justice Movement (TJM), a coalition of "development" non-governmental organisations, including Oxfam. The TJM argues that tariffs allow nascent local industries to grow, shielded from "unfair" international competition. But these "infant industries" rarely grow to become efficient or innovative. Protectionism makes them lazy and old-fashioned, and permanently reliant on taxpayer's subsidies or consumers' high prices. Mobile telephones show what can happen without protectionism.
In countries like Kenya, mobile 'phones have reached millions because the government has not manipulated the market with protectionist tariffs and subsidies. Foreign and domestic companies have, therefore, competed with each other to roll the network even in rural areas. Mobile phones have empowered entrepreneurs, from farmers to taxis, using them to get information on local markets and trading opportunities. A London Business School study recently discovered that for every 10 additional handsets (with reliable signal) per 100 people, GDP can increase by 0.6% annually. But the Ethiopian government prefers the philosophy of the TJM. It thinks the state monopoly Ethiopian Telecommunications Corporation needs a few more years of protection before liberalisation in 2010. This comes after decades of inefficiency and outright failure to provide fixed line connections or mobile coverage to more than 1.2% of the population, especially in cities. It is ironic that African countries are now turning to China for investment.
China spent decades pursuing economic self-sufficiency but its accelerating reforms and its massive unilateral tariff cuts have delivered growth around 9% a year, letting 400 million (and counting) people raise themselves out of poverty. China is now the second-largest economy on earth. Global liberalisation would raise Africa's GDP by US$120 billion a year, according to Oxford Economic Forecasting. However, African politicians and vested interests are afraid of competing with developed economies yet intra-African liberalisation alone would yield a-third of those benefits, a study by the Cato Institute shows. If African countries want to emulate China's growth, they should not cosset local industries and remove tariffs unilaterally. Once they do, Africans will demonstrate that their economies can grow as quickly as anyone else's. The writer is the network director at the International Policy Network.
Source: AllAfrica.com
Kampala
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2008 Promises Good Returns for Farmers
| | African producers of almost all agricultural commodities can expect strong prices on global markets next year, with growing investor interest boosting demand-related increases. Wheat, corn and soy have all rallied in recent weeks and analysts say grains will continue to be hot into the New Year. When Barclays Capital asked 150 clients at a commodities conference this month which sectors they expected to produce the highest returns next year, 45 per cent voted for agricultural markets, well above the 19 per cent going for precious metals. Investor interest, a new phenomenon, is largely thanks to strong fundamentals. Robust demand in emerging economies has drawn down stocks to record lows and despite a record food harvest this year, farmers cannot replenish grain stores fast enough to buffer them from weather-related shocks. In China, cereal stocks fell significantly between 2000 and 2004 and have not recovered in recent years.
Its booming economy means people are spending more on meat, and feeding more animals requires greater amounts of corn and soy. This year China became a net importer of corn, also known as maize. That is one of the reasons why corn prices will stay high into 2008, despite a substantial rise in plantings in the US, says Luke Chandler, a commodities analyst at Rabobank in Australia. The other is the pressure from biofuels. "The US already uses a quarter of its crop for biofuel and there is talk of it increasing this to 40 or 50 per cent by 2020." Corn prices passed record prices of $175 a tonne earlier this year, and although it has fallen from its peak, at $150 a tonne it is still 50 per cent above the average for 2006.
Weather forecasts suggest that next year's production may be hurt by dry weather, says James Nuttall, director of the UBS bank's commodities business in London. "We could see a fairly dry period in some of the corn-growing regions in North America and that could lead to production volatility." All that creates a tempting world market for African farmers who manage to produce a surplus for export. Corn production could decline again this year if farmers switch to growing wheat, now priced at $400 per ton after bad weather conditions in Europe and Australia drastically reduced supplies. Rabobank's Mr Chandler says there could be an extra 40-50 million tons of wheat entering the market next year and that would take much of the squeeze out of the market. Farmers should expect high volatility in pricing however. There may be brakes put on using corn for biofuels in countries like China where food security is a major issue.
Biofuel production is leading a major structural change to the soft commodities market. While cereal use for food and feed increased by four and seven per cent respectively since 2000, the use of cereals for industrial purposes, such as making biofuels, increased by more than 25 per cent, according to a recent report from the International Food Policy Research Institute (IFPRI). That shows the extent to which demand has changed in recent years, and why supply responses must be much quicker. Biofuels are also driving strong investor interest in oilseeds. Palm oil and soybean oil, both sources of alternative energy, are increasingly attractive to clients, says Mr Nutall at UBS.
This year's price movements show why. Average US soybean and soy oil prices have increased 41 per cent this year, while Malaysian palm oil prices are up by 54 per cent and EU rapeseed prices are 20 per cent higher. Soybeans have seen a recent rally based on record crude oil levels serving as a reminder of the need for fuel substitutes. Palm oil is attractive owing to its relatively long growing time, which makes it slower to respond to supply shortages. Cotton has also benefited from biofuel demand, indirectly. Long a loss-making crop in Kenya, prices for the 2007 cotton are expected to jump by up to a quarter as acreage in the US declines with growing production of the higher priced cereals. "Cotton acreage is down 18 per cent and some people expect it to fall even further. That has helped reduce some of the supply and demand imbalance and eroded a build-up of inventories," says Mr Chandler.
A steep increase in prices on the New York Board of Trade suggests traders are counting on more positive fundamentals for cotton too. Consumption is on an upward trend in emerging economies like China and India although there is some evidence that higher prices are dampening demand among processors who can switch to alternatives. "It is very much one of the markets in balance right now," says Mr Chandler. How it works out could be important for the regeneration of Kenya's cotton sector. Like other crops, cotton is being added to a basket of commodities as investors try to hedge against rising inflation. "We're seeing lots of clients looking for long-term exposure," says Mr Nuttall of UBS. "There's very strong appetite for agricultural and soft commodities. They are a natural hedge against food inflation."
There are signs that soft commodities, seeing much less growth beside the agriculturals, are going to pick up too. Coffee has already gained a high profile as prices on international markets surged to near 10-year highs in volatile trade this year. That was mostly fuelled by speculation of a downturn in arabica's biennial production cycle in the world's biggest producer Brazil. It now appears to have produced above expectations. Robusta is more bullish for 2008, says Mr Nuttall, driven by lower output from Vietnam and rising demand in Asia. But higher Arabica quality in Kenya should still leave farmers happy with prices. Opinions on sugar remain divided. The market is one of the main underperformers among the agricultural range thanks to a huge surplus in India and Brazil. The average price for 2007 was down 33 per cent on the prior year.
But there has been some rallying in prices in recent weeks and some traders are bullish on both raw and white sugar based on higher consumption in Asian diets and in ethanol production in Brazil, and a drop in Indian production. Unlike other commodities such as precious metals, softs and agriculturals have much more capacity to react to supply shortages. It can take years to find a new mine and then extract the metal but most crops - apart from coffee and cocoa - can be planted and grown in a year. More elastic supply means prices are unlikely to reach those seen recently in metals. "Prices will keep a premium versus the historical trend but agriculture is cyclical," predicts Mr Chandler. "Supply can respond and prices act as a strong signal to farmers." But rising investor interest is pushing soft commodity prices away from straightforward supply-demand equations. Last year the volume of traded global agricultural futures and options rose by almost 30 per cent, according to IFPRI. The volume is set to keep growing as bullish supply and demand conditions continue into 2008.
Source: AllAfrica.com
Nairobi
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A New Era of Expensive Food Begins Globally
| | After years of falling prices, food suddenly has everyone's attention. Record prices for wheat have led to riots in Morocco, India and Mexico. Governments are halting grain exports to protect domestic food supplies and aid organisations are issuing new appeals for the world's poor. Developing nations are expecting to be hardest hit by food price inflation, especially net food importers. That includes most of the African continent, and those with high numbers relying on food aid can expect more people to be 'pushed over the edge', says Peter Smerdon, public affairs officer for the World Food Programme in Nairobi. But the same countries are also the places with most potential to benefit. Two thirds of Africa's population already works in agriculture. As investors from the rest of the world buy into agricultural commodities for the first time, African governments should also be seeing new value in the sector. "Given Africa's agri-potential, rising food prices suggest an enormous opportunity," says Razia Khan, head of Africa research at Standard Chartered Bank. "Provided the bottlenecks can be overcome, we should see rising rural incomes and much more rapid growth of an African middle class as a result."
The bullish commodity markets have coincided with two years of above-average harvests in East Africa. In Kenya, maize production is expected to reach 3.2 million tonne this year, up from three million tonnes last year, according to FAO forecasts. It will still import some 300,000 tonnes but a record domestic crop has protected it from soaring corn prices. If it can raise yields even more to export on the world market, it could gain from prices of around $150 per tonne , more than 50 per cent above the average 2006 price. "At no other time in the recent past have farmers had this kind of opportunity for competing on world markets," says Abdolreza Abbassian, a grains expert with the Food and Agriculture Organisation.
This new opportunity is being driven by fundamental changes in global demand for cereals. Crucially, they are expected to be lasting changes. China and India are consuming millions of tonnes more cereals each year, mostly indirectly through meat consumption. It takes an estimated seven kilogrammes of corn or soy just to produce one kilogramme of meat. And Chinese consumers now eat 50kg of meat a year, compared with just 20kg in 1985. This is putting huge pressure on global stocks and agricultural yields are unlikely to catch up any time soon, according to experts. Wheat stocks are now at their lowest level since the start of USDA published global inventory data and corn stocks are at their lowest in 33 years, down to 7.5 weeks of consumption.
Production of biofuels in the US and other high energy users like China are compounding the pressure, both in terms of real demand - the US is already diverting a quarter of its corn crop to biofuel production - and in volatility. Many governments are still developing policies on biofuels and this will keep prices firm, even if planting increase on the back of rising prices and the supply-demand balance improves, says Luke Chandler, commodities analyst at Rabobank in Australia. The challenge for agricultural economies, of course, lies in accessing global markets. Most African countries, including Kenya, are net food importers. And so far, Kenya is not showing any signs of contraction in demand, despite a higher food bill. FAO predicts that imports of rice and maize will rise this year, even as domestic production grows.
That is likely down to strong economic growth as well as the sharp appreciation of the shilling against the dollar, suggests Ms Khan. Even if the growth of Kenya's traditional trading partners, Europe and the US, slows down, improving trade in the region means that it will likely be able to keep paying higher prices for food imports, she says. But the focus should not only be on shrugging off the impact of higher food prices but also on benefiting from them. Kenya still imports some maize, and is expected to increase imports this year to 300,000 tonnes, up from 230,000 tonnes. With forecast stocks of 200,000 tonnes, it cannot yet afford to export the crop. "When you look at the balance it is just sufficient for consumption," says Mr Abbassian at FAO. "I don't see a strong reason for Kenya to want to sell maize abroad, especially with elections coming up. They don't want to see prices rise."
But with a further rise in output next year, it could be in a position to export. "Kenya is benefiting from above average yield and increased planting. If they get good weather again next year and can maintain good yields, increasing output by another 200,000 tonnes, they have the potential to export on world markets." That hypothesis carries a large amount of uncertainty. Weather, especially, is only set to become more unpredictable, with many parts of the world on course to become more arid and experience more droughts. But exports from African countries will be snapped up by neighbouring markets keen to reduce the soaring freight costs from the biggest corn exporters, US and Brazil. Malawi, formerly a major recipient of food aid, has proved what can be done when it sold part of a huge maize surplus this year. But much of Africa risks seeing those opportunities pass them by. "Near term, Africa stands to be impacted negatively by rising food prices," says Ms Khan. "The absence of sufficient incentives, working infrastructure, and a conducive business climate suggests the gap will not be easily filled by rising domestic production."
Higher grains prices are, however, here to stay. A recent report from the International Food Policy Research Institute says that in the best-case scenario, maize prices are going to increase by 26 per cent by 2020. If some countries decide to undertake more drastic expansion of biofuel production, maize could go up by 72 per cent. High food prices present African farmers with their best opportunity ever to boost incomes, while governments have huge incentives to invest in agricultural infrastructure. If farmers can increase yields enough to produce a grain surplus, they will tap record prices on world markets. And if they only raise production for domestic consumption, reducing imports, they spare middle class consumers the impact of rising food prices and allow growth to stay on track.
AllAfrica.Com
Nairobi
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Eradicating Poverty Through Trade
| | For almost three decades African, Pacific and Caribbean (ACP) countries benefited from the Lomé conventions, which allowed agricultural, mineral and manufactured exports from these countries to enter the European Community free of duty. Among the most notable benefits of these conventions has been the preferential trading access for products such as sugar and bananas. However, these agreements were deemed incompatible with World Trade Organization regulations. Consequently in 2000 a new treaty was reached - the Cotonou agreement - which provided for regional trade agreements to be concluded by the end of this year between the European Union and the poorer groupings of ACP countries. Those agreements would permit them to continue to benefit from beneficial trading arrangements but would require them to open up their markets to European goods and services by removing duties and other restrictions over a phased period.
Critics of these new agreements argue that they will cause domestic markets in ACP countries to be flooded with lower-cost European goods, some of which are highly subsidised. Another concern was that the Economic Partnership Agreements (EPAs) focus more on trade and less on development. This was raised at the recent Commonwealth Heads of Government Meeting held in Kampala, Uganda, from 23 to 25 November 2007. This biennial meeting of Commonwealth leaders therefore called upon the EU and the ACP group "to put in place EPAs that constitute effective tools for poverty eradication and sustainable development and contribute to the achievement of the Millennium Development Goals."
Heads of Government also urged in their Kampala communiqué that EPAs "take due account of capacity constraints, the need for adequate accompanying measures to be provided on a predictable basis to meet, inter alia, adjustment costs and other potential vulnerabilities and the safeguarding of policy flexibility." The Commonwealth Secretariat has been assisting member states ensure they get a good deal out of the EPAs, placing trade experts in Commonwealth ACP countries to build their capacity to negotiate for better trading deals. In addition, the Secretariat has been facilitating high-level interactions between ministers from both the EU and ACP regions to enable the two sides to meet and discuss the issues before the signing of the new EPAs.
"If there is more political interaction, it would benefit relations and contribute to a better understanding of issues on both sides," said Edwin Laurent, Head of Trade at the Secretariat's Economic Affairs Division. In 2008, one key focus for the Secretariat will be to continue helping countries that have signed to implement the trade deals. Support will also be provided to those that have not signed up but need help in their ongoing negotiations with the EU. Other plans in the forthcoming year relating to trade include assisting member countries that want to draw up new fishing agreements, notably, countries of Southern and Eastern Africa and the Pacific.
Source: Commonwealth News and Information Service
London
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World Bank Says Kenya Unrest Threatens Regional Economies –
| | “Kenyan political unrest threatens to reverse its economic gains and further rattle regional economies that depend on the country's status as a regional hub, the World Bank warned on Thursday. The Bank said other major lenders and western democracies including Canada, Denmark, France, Norway, Sweden and the US had voiced similar concerns as more violence rocked …Nairobi. …The Bank, which helped the country achieve a December growth rate of 7 percent, warned that the violence threatens to undo the gains. …” [Dow Jones/Factiva]
Xinhua notes that “Political unrest in Kenya threatens impressive recent gains in economic growth and poverty reduction, the World Bank warned in a statement on Thursday. … The current situation may have had some negative impact, with ‘estimated 2 billion Ksh (about $29 million) being lost every day,’ according to the Bank. … The Bank also calls for prompt action to avoid any disruptions to the start of the school year next week, which could threaten the significant recent gains in educational access and learning outcomes. …” [Xinhua/Factiva]
Reuters adds that “…The World Bank said the turmoil in Kenya, a regional hub, would have a major domino effect on the rest of eastern Africa. ‘Kenya is the transit point for one quarter of the GDP of Uganda and Rwanda, and one third of the GDP of Burundi,’ it said in a statement ‘This includes the supply of many essential commodities. Hence, the regional impact of the situation in Kenya could be significant.’ …” [Reuters/Factiva]
Source: World Bank Press Reviews
Washington, D.C.
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Organic Agriculture Can Contribute to Fighting Hunger, But Chemical Fertilizers Needed to Feed the World
| | FAO has no reason to believe that organic agriculture can substitute for conventional farming systems in ensuring the world's food security, Dr. Jacques Diouf, FAO Director-General, said here today. Dr. Diouf was commenting on recent press and media reports suggesting that FAO endorses organic agriculture (OA) as the solution to world hunger. "We should use organic agriculture and promote it," Dr. Diouf said. "It produces wholesome, nutritious food and represents a growing source of income for developed and developing countries. But you cannot feed six billion people today and nine billion in 2050 without judicious use of chemical fertilizers."
Organic farming generally bars the use of any chemical inputs. Nearly 31 million hectares, or roughly two percent of the world's farmland, was farmed organically in 2005, generating sales of some US$ 24 billion in the EU, US, Canada and Asia in 2006. In May of this year, FAO hosted an international conference on organic agriculture. One of the papers presented for discussion - not an FAO document - argued that organic agriculture could produce enough food for the current world population.
Insufficient potential
However, according to FAO, data and models regarding the productivity of organic as opposed to conventional farming show that the potential of organic agriculture is far from large enough to feed the world. Organically-grown products generally attract higher prices than conventionally grown ones and therefore represent a good source of income for farmers. However, they must meet certain farming and quality standards and require capacity-building, large investments and efficient organization along the production and marketing chains, which puts them beyond the reach of most resource-poor farmers of developing countries.
Judicious use
Judicious use of chemical inputs, especially fertilizers, could help significantly boost food production in Sub-Saharan Africa, where farmers use less than one tenth of the fertilizer applied by their Asian counterparts, Dr. Diouf said. Much of African soil suffers from constraints such as acidity and lowered fertility and is greatly in need of soil amendments and nutrients. In its annual World Development Report, the World Bank noted this year, that "low fertilizer use is one of the major constraints on increasing agricultural productivity in Sub-Sahara Africa".
Malawi, for years a recipient of food aid, has recently boosted its maize production after adopting a policy of providing small-scale farmers with seeds and fertilizers. "However, chemical inputs must be used with care," Dr. Diouf said. "You have to choose the right inputs, right amounts, and apply them in the right way and at the right time." igher productivity with lower inputs can be obtained from such systems as Integrated Pest Management (IPM) and Conservation Agriculture (CA), Dr. Diouf noted. IPM can reduce pesticide use by 50% in the case of cotton and vegetable production and up to 100 percent with rice. CA and no-tillage agriculture reduces labour requirements by doing away with ploughing and can use 30 percent less fertilizer and 20 percent less pesticides.
The key elements in feeding the world now and in the future will be increased public and private investments, the right policies and technologies, knowledge and capacity building, grounded in sound ecosystem management. "There is no one solution to the problem of feeding the world's hungry and poor," Dr. Diouf concluded. World leaders, international figures and distinguished researchers and academics will examine how to ensure the world's future food supply next year when FAO is due to host a High-Level Meeting on "Feeding the World in 2050".
Source: FAO
Rome
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WFP Says Faces Serious Funding Shortfalls
| | A regional publication states that The United Nations World Food Programme (WFP) said on Monday its Targeted Supplementary Food (TSF) Programme assisting malnourished children and pregnant and nursing women, is facing serious funding shortfalls that could lead to increased risk of maternal and child deaths. In a statement the UN agency said it was seeking urgent contributions from donors to the value of US$9.7million to help purchase 14,000 metric tons of fortified blended food and fortified vegetable oil. It said it needs the money to ensure all vulnerable children and women, identified through the programme's screening exercise as malnourished, receive the necessary food supplements in the first quarter of 2008.
In the first half of 2007, the TSF programme assisted some 664,000 malnourished children and pregnant mothers. "The TSF programme has clearly demonstrated positive impact," said Mohamed Diab, WFP Country Director in Ethiopia, "and we remain confident that our donors and partners will come to our assistance with pledges and contributions as they have done in the past." The Targeted Supplementary Food Programme supports the Ethiopian Ministry of health's Child Survival Initiative, and is based on nutritional screening under the joint WFP/UNICEF Extended Outreach Strategy (EOS)/child Survival Initiative.
"Our biggest worry is that with screening exercises underway, additional cases of malnourished children and women will be identified, and we will not have the resources to assist them," Diab remarked. "It is critical that once children and women have been identified as malnutrition that food supplements are provided as early as possible." A performance Study undertaken for the TSF in three regions in July/August 2007 and covering 900 children showed that 61% of those children recovered in the six month period between the EOS screening and after receiving prompt food supplementation. The Performance Study clearly indicating that timely food supplementation has life saving potential for malnourished children. Under the Targeted Supplementary Food Programme, mothers also receive basic nutrition education n how best to use the food, and on the importance of exclusive breastfeeding in the early months after birth. In the first six months of 2007, 29,669 metric tons of nutritious food was provided by WFP and her parents to TSF programme beneficiaries.
Source: AllAfrica.com
Addis Ababa
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Higher Maize Prices Fatten Omnia Profit
| | THE global scramble for alternative energy sources has been a key driver for chemicals group Omnia in the six months ended September, with a strong performance from its agriculture division helping to buffer it from declining operating profits in its chemical and mining divisions. Higher maize prices due to the insatiable demand for maize to feed a growing biofuels market underpinned the performance of the agriculture division, which contributed 40% to Omnia's operating profit compared with only 11% a year ago. Group revenue increased 26% to R3,1bn, operating profit rose 33% to R192m while headline earnings grew 24% to 224,5c per share. An interim dividend of 83c per share was declared, compared with 70c in the previous interim period. While all three of Omnia's business segments achieved growth in revenues of more than 20%, their performance was mixed.
The agriculture division stands out as the star performer. Traditionally, operating margins are lower in the first half of the year but the division defied the rule and operating margins increased to 8% compared to 2% a year ago, largely boosted by the advance purchase of raw materials at favourable prices. Operating profit rose a massive 375% to R76m, displacing the chemicals business as the prime contributor to the bottom line. And prospects for the rest of the year look good, with farmers likely to be planting more hectares of maize as the maize price remains high. The chemicals division operating profit, affected by the rand exchange rate and lower selling margins, declined from R63m to R60m. The mining division, while continuing to benefit from increased mining activity, came under pressure from rising raw material costs. CE Rod Humphris said the business was reviewing some of its unprofitable contracts.
The division also incurred costs for additional resources relating to new contracts that are yet to deliver volume, while margins were further hit by lost business in Zimbabwe, the inability to secure a continuous supply of shocktube-initiating systems and the stronger rand, which affected exports. As a result, margins declined from 14% to 10%, while operating profit fell 14% to R56m. Omnia, however, said its new shocktube assembly plant, which will overcome supply problems, was expected to be commissioned before the end of the financial year. The cost of new projects also had a negative impact on the operating margins of the divisions they were allocated to in the short term. And the increased share-based payments charge arising from the empowerment employee ownership scheme, which trebled to R12m from R4m, added to the burden. On the upside, Omnia's acquisition of Zetachem, for R133m, yesterday received the approval of the Competition Commission.
Source: AllAfrica.com
Johannesburg
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UN Humanitarian Chief Begins Three-Nation Tour
| | The top United Nations humanitarian official begins a nine-day mission to Africa today that will take him to Ethiopia, Sudan and Kenya to meet with aid agencies and officials coping with emergencies affecting millions of people on the continent. The first stop for Under-Secretary-General for Humanitarian Affairs John Holmes is Ethiopia, where he plans to visit the Ogaden region, UN spokesperson Michele Montas told reporters in New York. Humanitarian conditions in that region have worsened in the past several months due to fighting between the Ethiopian National Defence Forces and the Ogaden National Liberation Front. The situation has resulted in the doubling of food prices, inadequate access to clean drinking water and shortages of medical supplies, according to the UN Office for the Coordination of Humanitarian Affairs (OCHA).
Mr. Holmes, who is also UN Emergency Relief Coordinator, will then travel to Sudan. Following a stop in Khartoum, he is scheduled to go to Nyala and El-Fasher in the strife-torn Darfur region, where he will meet people who have been affected by the conflict there. In the past four years more than 200,000 people have been killed and at least 2.2 million others displaced from their homes because of the violence in Darfur, while an estimated 4 million now depend on humanitarian aid for survival. Mr. Holmes will then wrap up his visit in Kenya with meetings with aid agencies and diplomats working on Somalia, which has been wracked by violence in recent months resulting in the displacement of 1 million people.
Source: UN News Service
New York
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Farmers Need a Financial Umbrella Says World Bank
| | The UN Integrated Regional Information Networks in
Johannesburg reports that helping small-scale farmers in Africa cope with risks such as natural disasters, extreme weather events and price fluctuations should be a priority, according to agricultural experts and the World Bank's annual report, released last week. Exposure to these "uninsured risks ... has high efficiency and welfare costs for rural households" said the World Development Report 2008: Agriculture for Development, the bank's first analysis of agriculture since 1982. "Selling assets to survive shocks can have high long-term costs ... [distress sales of land and livestock] creates irreversibilities or slow recovery in the ownership of agricultural assets."
The agricultural sector is essential to overall growth, poverty reduction and food security, particularly in agriculture-based countries, most of which are in sub-Saharan Africa, where the sector employs 65 percent of the labour force and generates 32 percent of gross domestic product (GDP) growth. "For many [small-scale farmers], asset accumulation is like the game of snakes and ladders: a decade of additions to one's assets can be eroded in a single storm or drought," Harold Alderman, the World Bank's Social Protection Advisor for Africa, told IRIN. "Without programmes to reduce widespread risks, or to insure or otherwise respond to the remaining risks, farmers are often unable to accumulate enough capital to invest," he noted.
"Many studies have confirmed this for Africa, including a number of studies that show the lasting effects of droughts on health (nutrition) and education, leading to an intergenerational transmittal of poverty. Similar studies have shown how conflict leaves the survivors stunted, as well as with fewer years of schooling." Lennart Bage, president of the International Fund for Agricultural Development (IFAD), commented that "Increasing crop failures and livestock deaths are already imposing high economic losses and undermine food security in parts of sub-Saharan Africa, and they will get far more severe as global warming continues." More than 80 percent of the rural sub-Saharan population live in agriculture-based countries.
Call for investment
The World Bank report urges greater investment in agriculture, pointing out that GDP growth originating in agriculture is about four times more effective in reducing poverty in Africa than growth in any other sector. Yet public spending on farming constitutes only four percent of total government spending and the sector is still taxed at relatively high levels. "But where is the investment going to come from?" asked James Breen, an agronomist based in Southern Africa. He said small-scale farmers in Africa were trapped in a "vicious cycle of poverty ... and they cannot raise the working capital as they don't have collateral - they don't even own the land they work on" to cope with risks such as natural disasters and the impact of climate change, which will halve food production by 2020, according to the latest projections of the Intergovernmental Panel on Climate Change (IPCC).
Insurance against risk
The World Bank report acknowledged that, in spite of multiple initiatives, "little progress has been made in reducing uninsured risks in smallholder agriculture" and insurance schemes run by governments had proven "largely ineffective". "Index-based insurance for drought risk, now being scaled up by private initiatives in India and elsewhere, can reduce risks to borrowers and lenders and unlock agricultural finance. However, these initiatives are unlikely to reach a critical mass unless there is some element of subsidy, at the very least to cover start-up costs." Weather-based index insurance, for instance, links insurance to historical weather data on rainfall or temperature, with payouts triggered by the effects of a difference in these during the current growing season. It does not require on-farm inspections, loss assessments or collateral. The insurance could be sold like traveller's cheques or lottery tickets, and presentation of the certificate would be sufficient to claim a payment when one is due.
IFAD is supporting one such project in China, implemented in partnership with the World Food Programme, to provide insurance to poor rural farmers in selected provinces. To ensure strong local ownership, all activities will be planned and implemented in close collaboration with government and donor partners at the country level. "Any such step would be welcome, but it would still involve some investment," Breen said. IFAD's BÃ¥ge called for greater investment from the international community to help "climate-proof" farming systems in developing countries. The World Bank report noted that sharply increased investment was "especially urgent" in sub-Saharan Africa, "where food imports are predicted to more than double by 2030 under a business-as-usual scenario, the impact of climate change is expected to be large with little capacity to cope, and progress continues to be slow in raising per capita food availability".
Adaptation
Most experts agree that emphasis on adaptation is key at this stage. "Indeed, adaptation is at the heart of agricultural growth, even when climate change is not as rapid as projected; technology and institutions are continually adapting to changes in economic environments," said Alderman, of the World Bank. "Similarly, even with no major changes in crop varieties, research is always responding to changes in the diseases that affect plants." Small-scale farmers in Africa are trapped in a vicious cycle of poverty ... and they cannot raise the working capital as they don't have collateral - they don't even own the land they work on - to cope with risks such as natural disasters and the impact of climate change, which will halve food production by 2020
Henri Josserand, chief of the FAO's Global Information and Early Warning Service, said, "If climate change induces greater volatility and unpredictability in weather patterns, African producers will need to rely on a wider and more adaptive range of both 'regular' and coping, or adaptive, strategies. "This will require investment in new technologies, practices, or even productive assets. Given the low level of income of these producers, doing so under risky conditions will be almost impossible." Risk-management instruments, including weather-indexed insurance, would still be needed to help to make the necessary investment in adjusting to change "less costly", he said.
Other strategies could include, for example, better on-farm storage facilities, community cereal banks, community-based credit systems, public social safety nets for the most destitute, and facilities to better move or market livestock in times of drought. "There is no single, simple answer to risk management," Josserand said, but the problem was that African "producers have so far little knowledge of, and access to, such instruments".
Source: UN Integrated Regional Information Networks
Johannesburg
Daniel D. Karanja, Ph.D.
Senior Fellow
Partnership to Cut Hunger and Poverty in Africa
499 S. Capitol Street SW, Suite 500B
Washington, D.C 20003
Tel: 202-479-4501; Fax: 202-488-0590
Web: www.africanhunger.org
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World Bank Report Puts Agriculture at Core of Anti-Poverty Effort
| | An international paper reports that for the first time in a quarter century, the World Bank's flagship annual report on development puts agriculture and the productivity of small farmers at the heart of a global agenda to reduce poverty. Three-quarters of the world's poor still live in the countryside. The World Development Report, released yesterday, is the first on agriculture since 1982. Just a week ago, an internal evaluation unit chided the bank for its neglect of agriculture in Africa and its plummeting financial support for that sector over the past 15 years — support that did not begin to grow significantly until last year. More broadly, the report crystallizes an emerging consensus among wealthy countries, philanthropists and African governments: Increased public investment in scientific research, rural roads, irrigation, credit, fertilizer and seeds — the basics of an agricultural economy — is crucial to helping Africa's poor farmers grow more sorghum, corn, millet, cassava and rice on their miniature plots.
Foreign aid for agriculture has plunged as support for global health and primary education has surged. The fight against AIDS and other diseases is keeping millions of people alive, and rising elementary school attendance is lifting literacy rates. But most poor Africans make their living in agriculture and need to grow more to feed themselves and earn their way out of destitution, many analysts say. "We're not saying health and education aren't important," said Alain de Janvry, one of two authors of the report, "Agriculture for Development," who has taught agricultural economics at the University of California, Berkeley, for 40 years. "But if you look at Africa, there's no alternative to agriculture as a source of growth."
The World Bank is not the first to reach this conclusion. African governments, at a 2003 African Union summit, promised to more than double their own very low public spending on agriculture. In 2005, the United Nations Millennium Project, led by the Columbia University economist Jeffrey D. Sachs, advocated major investments to increase the productivity of poor farmers in Africa. Last year, the Bill and Melinda Gates Foundation joined the Rockefeller Foundation to help bring a green revolution to Africa. The Gates Foundation, known for its work on global health, was motivated in part by an awareness that extreme poverty and malnutrition were underlying causes of much of the sickness and premature death plaguing Africa. But the bank, the world's leading development institution and financier of antipoverty programs, plays a unique role in advising poor countries, and its return to agriculture is likely to influence practical policies across sub-Saharan Africa and South Asia, where hundreds of millions of farmers and landless laborers are still mired in poverty.
The 365-page report was conceived before the arrival of the bank's new president, Robert B. Zoellick, but he embraced its themes yesterday in Washington, while acknowledging the recent critical evaluation of the bank's own performance."To make this successful, we're going to need to increase investment," he said at a forum that was shown live on the Web. Robert S. McNamara, an earlier World Bank president, initiated the last period of ambitious investment in African agriculture, in the 1970s. Internal evaluations found that many of those projects and subsequent ones failed for a variety of reasons. Often, they were complex, devised and run by professionals from outside the countries being helped and not adopted wholeheartedly by poor countries that had little capacity to carry them out independently and, sometimes, little commitment to poor farmers.
In the 1980s, in the era of Ronald Reagan and Margaret Thatcher, the World Bank increasingly withdrew its support from agriculture and expected private markets to spur growth through competition. Bank officials even thought profit-seeking companies would build toll roads in remote parts of Africa. But, as the recent internal evaluation found, private markets often failed to deliver a range of goods and services farmers needed, including improved seeds, fertilizer and credit. In India's green revolution, which began in the 1960s with the introduction of new high-yielding varieties of rice and wheat, the World Bank, the United States and the Rockefeller Foundation encouraged the Indian government to play a pivotal role in the provision of seeds, fertilizer and credit, said Uma Lele, an agricultural economist who worked at the bank for 35 years and evaluated many of its agricultural programs before retiring. The Indian state also set floor prices for wheat and rice to ensure farmers a return on their investments.
In the effort to bring an agrarian revolution to Africa, much of the debate from now on will focus on the role that African governments should play in spurring farm productivity. Economists who have read the World Development Report said there was clearly still a great deal of ferment and disagreement within the bank about many of the particulars. For example, should African governments give farmers subsidies to buy fertilizer, and under what conditions? The report notes that agricultural subsidies have a way of becoming deeply entrenched politically long after their original purpose has been served. The report found, for example, that if European countries, the United States and other wealthy nations removed all tariffs and subsidies for cotton, soybeans and other oilseeds — practices that reduce the world price of those commodities and make it harder for unsubsidized farmers in poor countries to compete — developing countries' share of world trade in cotton and oilseeds would be more than 80 percent in 2015 instead of only about half.
Derek Byerlee, an agricultural economist with the bank who wrote the report with Professor de Janvry, said at a panel discussion yesterday that the United States' subsidies to cotton growers were "directly and negatively impacting African farmers." Professor de Janvry said the report was not meant to settle the complicated and difficult policy questions, but "to change the conversation."
Source: New York Times
By CELIA W. DUGGER
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Historic Surge In Grain Prices Roils Markets
| | Rising prices and surging demand for the crops that supply half of the world's calories are producing the biggest changes in global food markets in 30 years, altering the economic landscape for everyone from consumers and farmers to corporate giants and the world's poor. "The days of cheap grain are gone," says Dan Basse, president of AgResource Co., a Chicago commodity forecasting concern. This year the prices of Illinois corn and soybeans are up 40% and 75%, respectively, from a year ago. Kansas wheat is up 70% or more. And a growing number of economists and agribusiness executives think the run-ups could last as long as a decade, raising the cost of all kinds of food.
In the past, such increases have been caused by temporary supply disruptions. Following a poor harvest, farmers would rush to capitalize on higher crop prices by planting more of that crop the next season, sending prices back down. But the current rally, which started a year ago in the corn-futures trading pit at the Chicago Board of Trade, is different. Not only have prices remained high, but the rally has swept up other commodities such as barley, sorghum, eggs, cheese, oats, rice, peas, sunflower and lentils. In Georgia, the nation's No. 1 poultry-producing state, slaughterhouses are charging a record wholesale price for three-pound chickens, up 15% from a year ago.
What's changed is that powerful new sources of demand are emerging. In addition to U.S. government incentives that encourage businesses to turn corn and soybeans into motor fuel, the growing economies of Asia and Latin America are enabling hundreds of millions of people to spend more on food. A growing middle class in these regions is eating more meat and milk, which in turn is increasing demand for grain to feed livestock. In the U.S., a beef cow has to eat roughly six pounds of grain to put on a pound of weight, and a hog about four pounds. The reversal of a long-term trend toward lower grain prices could have profound effects on the world's ability to feed its poor. Global grain stockpiles are being drawn down to their tightest levels in three decades, leaving the world vulnerable to shocks brought on by bad harvests. And it's far from clear how much more land could be brought into production or to what extent advances in biotechnology might increase crop yields in the future.
American families, which spend 9.9% of their disposable income on food, are facing the fastest-rising food prices in 17 years. The consumer's cost for everything from yogurt and popcorn to breakfast cereal and fast-food french fries is climbing. In U.S. cities last month, the average retail price of a pound loaf of whole-wheat bread was up 24% from a year ago, according to the Bureau of Labor Statistics. Whole milk hit $3.807 a gallon, up 26%. Similar increases are showing up abroad. Italian shoppers are protesting soaring pasta prices, and Mexican authorities have capped the price of corn tortillas. Pakistan is curbing wheat exports to counter rising food-price inflation while Russian authorities, worried about rising bread prices, are considering a similar clampdown. Food companies are struggling to figure out how to pass on higher costs to supermarkets and restaurant chains, which have gotten bigger and thus gained clout since the last prolonged rise in food prices in the 1970s. "We're in uncharted territory," says Christopher Fraleigh, chief executive of the food and beverage division of Sara Lee Corp., which earlier this month raised its bread prices 5%.
The biggest winner is the U.S. Farm Belt, which is primed for an unusually long expansion, even as a nationwide housing slump damps the broader economy. The Agriculture Department expects U.S. net farm income to soar 48% this year to a record $87.1 billion."I sold wheat here just the other day for $7 [a bushel]. That's the first time I've ever done that," says Doyle Johannes, a fourth-generation grain farmer in Underwood, N.D. With prices so high, he bought his first new harvesting combine, a $250,000 Caterpillar decked out with computerized controls and a built-in cooler. An expected spending spree by farmers is igniting the stocks of several farm suppliers. Shares of implement maker Deere & Co. are up about 76% from a year ago, while seed and herbicide giant Monsanto Co.'s stock is up 79%, and fertilizer maker Mosaic Co.'s shares have more than tripled.
The grain rally shows few signs of slowing even though U.S. corn farmers are expecting a record harvest. Futures traders are betting that the price of corn, used for everything from sweetening soda to putting the crunch in snack foods, will climb above $4 next March and stay above that level into 2010. In recent days, Iowa farmers have been selling corn for $3.25 a bushel. Next year is shaping up to be the third in a row in which the world consumes more grain to make fuel, food and livestock feed than it harvests. The trend is helping reduce global grain stockpiles to their lowest point relative to consumption since the mid-1970s, when Asia struggled with chronic food shortages and the Soviet Union suddenly emerged as a big grain importer.
Part of the reason for the drawdown can be seen in China, where soaring demand for milk has increased the number of dairy cattle threefold so far this decade. Half of the world's hogs now live in China, which is importing about 13% of all the soybeans grown in the U.S. to help fatten its livestock. The Chinese government, caught off guard by a nearly 50% rise in retail pork prices, is throwing cash at farmers willing to produce more of the nation's most widely consumed meat. The prospect for a long boom is riveting economists because the declining real price of grain has long been one of the unsung forces behind the development of the global economy. Thanks to steadily improving seeds, synthetic fertilizer and more powerful farm equipment, the productivity of farmers in the West and Asia has stayed so far ahead of population growth that prices of corn and wheat, adjusted for inflation, had dropped 75% and 69%, respectively, since 1974. Among other things, falling grain prices made food more affordable for the world's poor, helping shrink the percentage of the world's population that is malnourished.
The recent grain drain has stirred a new set of worries in the developing world. Developing nations used to complain their farmers were hurt by rich subsidies offered to producers in the U.S. and European Union, which encouraged price-depressing gluts. Now, their concern is shifting to how sharply high grain prices will erode the buying power of the world's hungry. Humanitarian groups are cautioning that their budgets for food aid won't go nearly as far as they did in the past. Roughly 200 million of the 850 million malnourished people in the world's poorest nations receive some food assistance. "My major concern is that we will lose ground against hunger," says Josette Sheeran, executive director of the United Nations' World Food Program. That outlook is increasing the urgency of nascent efforts to end food shortages in sub-Saharan Africa, the one region in which hunger is worsening. "I think we are going to be facing a food crunch," says former U.N. Secretary-General Kofi Annan. "So we have to really take charge and begin to produce our own food," Mr. Annan, a Ghanaian, said during an interview at his Geneva office, where he heads a push by the Bill & Melinda Gates Foundation and Rockefeller Foundation to help bring to Africa the agricultural revolution that spread across Asia and Latin America decades ago.
U.S. farm exports, meanwhile, are climbing, dousing the fears of just a few years ago that the U.S. farm sector was on the verge of generating a trade deficit. Agriculture Department economists expect exports to hit a record $79 billion in the fiscal year ending Sept. 30, up 15% from last year. For food-company executives, life is getting more complicated. "One year it's oil, the next it's grain," says General Mills Inc. Chief Executive Kendall Powell. "But it's all underpinned by one thing: strong global demand for those commodities." The Minneapolis food giant, which had sales of $12.4 billion in its latest fiscal year, expects raw-material costs in the fiscal year ending in May to jump $250 million, mostly due to costlier farm commodities. To cope, General Mills is shrinking the size of its breakfast-cereal packages, effectively raising the price per ounce. At a Dominick's supermarket in suburban Chicago, a 15.6-ounce box of Wheaties recently cost $5.16, more per ounce than the round steak London broil at the meat counter. Grain typically has accounted for a small part of the cost of packaged products like bread and ready-to-eat cereals.
Fast-food chain Burger King Corp. is importing more grass-fed beef to make its U.S. hamburgers, and its Asian outlets are switching to french fries made from cheaper New Zealand potatoes rather than Washington state spuds. So far, the burden of higher grain prices is falling heaviest on small businesses, which don't have the wiggle room that large companies do. Hit by a 35% increase in wheat-flour costs since December, Michael Kalupa, owner of Kalupa's Bakery in Tampa, Fla., said he has put off plans to buy a new walk-in refrigerator. "Guys like us pretty much have to bite the bullet," said Mr. Kalupa, president of Retail Bakers of America, a bakers trade group.
Source: Wall Street Journal
By Scott Kilman
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As Prices Soar, U.S. Food Aid Buys Less
| | Soaring food prices, driven in part by demand for ethanol made from corn, have helped slash the amount of food aid the government buys to its lowest level in a decade, possibly resulting in more hungry people around the world this year. The United States, the world’s dominant donor, has purchased less than half the amount of food aid this year that it did in 2000, according to new data from the Department of Agriculture. “The people who are starving and have to rely on food aid, they will suffer,” Jean Ziegler, who reports to the United Nations on hunger and food issues, said in an interview this week.
Corn prices have fallen in recent months, but are still far higher than they were a year ago. Demand for ethanol has also indirectly driven the rising price of soybeans, as land that had been planted with soybeans shifted to corn. And wheat prices have skyrocketed, in large part because drought hurt production in Australia, a major producer, economists say. The higher food prices have not only reduced the amount of American food aid for the hungry, but are also making it harder for the poorest people to buy food for themselves, economists and advocates for the hungry say. “We fear the steady rise of food prices will hit those on the front lines of hunger the hardest,” said Josette Sheeran, executive director of the United Nations World Food Program. The United States is the biggest contributor to the agency.
She warned that food aid spending would have to rise just to keep feeding the same number of people. But the appropriations bill for the coming year now moving through Congress does not promise any significant increases in the food aid budget. The impact of rising food prices on food aid is part of a broader debate about the long-term impact on the world’s poorest people of using food crops to make ethanol and other biofuels, a strategy that rich countries like the United States hope will eventually reduce dependence on Middle Eastern oil.
Some advocates for the poor say rising food prices could benefit poor farmers in developing countries, providing them with markets and decent prices for their crops. But others warn that the growing use of food crops to make fuel, especially if stoked by large subsidies in rich countries, could substantially increase food prices. That could push hundreds of millions more poor people into hunger, especially landless laborers and subsistence farmers, according to a recent article in Foreign Affairs magazine. The authors were Benjamin Senauer and C. Ford Runge, food policy analysts and professors at the University of Minnesota. Production of food crops to make biofuels will also tend to favor growers with plenty of capital and large land holdings, they say, rather than small-scale, impoverished farmers lacking modern grain storage facilities in poor countries. “The policies put in place are going to be crucial to whether the small producer and the people who live where hunger is concentrated can benefit,” Mr. Senauer said.
But for now food aid is suffering, as are poor people in poor countries, economists say. And their situation may get even tougher next year, relief agencies warn. The United Nations Food and Agriculture Organization is projecting that low-income countries reliant on food imports, including most of sub-Saharan Africa, will see the amount they pay to import cereals rise 14 percent. The world’s ability to absorb fresh price shocks has shrunk along with food stocks. “We’re very worried,” said Henri Josserand, who heads the organization’s global information and early warning system. “World food stocks are much smaller than they used to be.” The food aid declines may also continue. Catholic Relief Services, a major distributor of American food aid, has projected substantial increases in what the federal government pays for food aid next year, based on an analysis of the futures market for the wheat, corn and soybean products that are mainstays of aid. “It’s bad news and it’s not just going to affect U.S. food aid, but food aid from every source,” said Frank Orzechowski, a retired commodity trader who now advises Catholic Relief Services.
This year’s decline in food aid follows a period when the sharply escalating costs of shipping American-grown food aid to Africa and Asia already reduced the tonnage supplied. The United States Government Accountability Officementnd this year that the number of people being fed by American food aid had declined to 70 million in 2006 from 105 million in 2002, mainly because of rising transportation and logistical costs. Now food prices are also playing a role. New data from the Department of Agriculture show that the cost of food for the federal government’s main food aid program, Food for Peace, rose 35 percent over the past two years.
The amount of food bought for American food aid programs has fallen to 2.4 million metric tons this year from 4 million metric tons in 2005 and 5.3 million metric tons in 2000. Thomas Melito, who supervised the Government Accountability Office’s food aid investigation this year, called the escalating costs of food aid “frightening.” “In a situation where there are 850 million hungry people in the world and the program was only providing enough for 70 million people in 2006, the new totals will be even lower,” he said.
Congress is considering changes to the food aid program as part of the omnibus farm bill that some economists and advocates for the hungry say would improve the efficiency of the program and allow it to feed more people. They point to a Bush administration proposal that would allow the government to use up to $300 million of the food aid budget to buy food in African countries close to hunger emergencies rather than shipping it from the United States on mainly American-flagged vessels as current law requires.
In his speech to the United Nations this week, President Bush said the proposal would speed delivery and help provide a market for poor farmers in developing countries. The House version of the farm bill includes no such provision. The Senate Agriculture Committee has not produced a farm bill. “To my mind, that’s the way out of this pincer,” said Emmy Simmons, an agricultural economist and retired senior manager at the United States Agency for International Development. “But the shipping guys are hanging tough,” she added. “They’re defending that little chunk of revenue. They aren’t super concerned whether you feed less people.”
Groups representing shipping companies and agribusiness interests have opposed using the budget of the main food aid program to buy food in developing countries instead of relying on American food shipped overseas. Gloria Tosi, who represents most of the American ship owners involved in the food aid system, said buying commodities abroad would erode domestic political support for the program and lead to lower food aid budgets from Congress. She said it was “politically naïve” to think the food commodity groups and ship owners that have for decades supported food aid in Congress would favor buying commodities abroad. “None of us will be working toward that,” she said.
Source: New York Times
By Celia W. Dugger
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EAC One Border Post to Boost Trade
| | Mary Baine, the commissioner general of the Rwanda Revenue Authority, said the proposed one-stop- border post will boost trade. The East African Community member states want all borders open in order to ease the movement of goods and services in the region. This will be partly achieved when customs and immigration officials from different member countries share one office. Baine said the move would reduce transport costs, improve efficiency and time management, thereby fostering business growth in the region. "The one-stop border concept is an important milestone towards deepening the level of economic integration," said Baine. "Harmonised trade networks are key to the region's quest for economic growth and development."
When the proposal becomes operational, Rwanda-Uganda borders (Gatuna and Katuna) will become a one-stop-border post for both countries, with the same offices offering all boarder-required services including customs offices, Immigration/emigration and security. Other border posts that will be merged include Tanzania- Rwanda (Rusumo), Rwanda-Burundi (Akanyaru), Kenya-Uganda (Malaba & Busia), Uganda-Tanzania (Mutukura), and Tanzania-Kenya (Horohoro, Lungalunga/Holili, Taveta/Sirari, Isebania). The Rwanda-DR. Congo (Gisenyi) boarder is to be considered at a later stage.
Each country would collaborate with the other in sharing all the necessary costs in setting up structures, bridges, linking roads and joint procurement for works and services. The World Bank, the African Development Bank and the European Union (EDF), were identified as potential donors to develop the Rusumo border project. "In the mean time, countries have agreed to exchange their existing procurement laws and procedures in order to facilitate decisions on which law to adopt," said Baine. By October 15th, a lead country, whose laws apply best, will be selected.
Source: AllAfrica.com
Kigali
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Big Potential and Challenges for Biofuels
| | Biofuels offer Africa the chance to supply itself with alternative energy sources, and also to become a major supplier of these sources for developed markets. Yet, challenges -- from creating the relevant infrastructure to competition for biofuel crops from food markets -- remain. "There is huge room for exploitation of clean sources of energy at a time when the entire world is confronted with global warming," said Salvador Namburete, Mozambique's minister of energy.
He was speaking at the First Annual Africa Biofuels Conference & Expo, held in the South African coastal city of Durban; the event concludes Thursday. The European Union (EU) has mandated 10 percent biofuel use by motorists and industry within this region by 2020, and its commissioner for agriculture has told the press several times that 20 percent of that use would probably come from imports.
Europe has preferential trade agreements with Least Developed Countries (LDCs) under the Everything But Arms (EBA) initiative, enabling biofuels from these nations to enter the European market duty- and quota-free. The LDC category was created by the United Nations in 1971 in recognition of how the world's poorest states need special assistance; it presently comprises 50 countries -- including Mozambique -- most in Africa. Certain LDCs have land suitable for growing biofuel crops, and offer prospects to investors who could import the technology for transforming crops into fuel.
In addition, opportunities exist for African-produced biofuels to enter the U.S. market under the African Growth and Opportunities Act, Washington's answer to EBA. Import markets are developing in other major global economies like Japan, and a handful of African countries are looking at biofuel use as well. In the face of these opportunities, however, questions are being raised across Africa about the shortage of infrastructure to cope with biofuel production. "Lack of infrastructure in African countries weighs down opportunities for biofuel use. You can produce it, but if you can't get it to the users at a reasonable price there's no point," said Vinesh Moodly, refinery and deployment manager for D1 Oils Africa Plc, a Johannesburg-based company.
Brazil, the world's largest exporter of ethanol, a fuel produced from sugarcane, is also struggling with infrastructure difficulties. These are not only putting pressure on supplies available for export, but also lowering prices -- because exporters are forced to sell due to a lack of port facilities. Brazil's state-owned petroleum company, Petrobras, and local industry are exploring the development of several intra-state ethanol pipelines to avoid transporting fuel via the country's poor highway network.
A 450-kilometre pipeline from Mozambique's capital, Maputo, to South Africa is already under development, says Namburete, as well as several liquid fuel storage tanks in the country's second-largest city -- Beira -- which is close to where much of Mozambique's biofuel development is currently underway. Many of Africa's most viable biofuel producers -- in terms of production costs for sugarcane, maize or cassava -- are landlocked, however, and don't have the transportation infrastructure in place to enable export of the fuels, or immediate plans for infrastructure investment like Mozambique.
"Another question is how to make sure that the land concession process is monitored in such a way that all land is being used for the purpose that it has been allotted for. We have 36 million hectares of arable land, and until two years ago, only five million hectares were under production," said Namburete. "Since then, we have land requests for five million hectares just for biodiesel. The challenge is to make correct allocations and make sure they truly produce biofuels."
Furthermore, "We have to find out how to ensure an adequate balance between biofuel production and food production." Namburete said Mozambique's 36 million hectares of arable land could be used for biofuel production "without threatening food production", while another 41 million hectares of marginal land would be suitable for raising jatropha, a tree that produces non-edible seeds which can be used for making biodiesel.
The food versus fuel debate is an especially important one in Africa, where harsh climatic conditions, civil disturbance and poor land use patterns cause millions to go without their daily food requirements. When moving forward with biofuel projects, it is vital to ensure the food supply isn't in jeopardy in the region where the project is being developed, according to Justin Vermaak, chief executive officer of the Durban-based Verus Company Group. "Can you imagine my doing a biofuel project in Zimbabwe? No way. How can we produce biofuels where there isn't enough food?...So we need to produce from (crops) that don't compete with food."
According to the U.N's Food and Agriculture Organisation, more than a third of Zimbabweans suffer from food shortages. While the country has been gripped by drought in recent years, its food crisis is mostly ascribed to political and economic mismanagement on the part of the government. Vermaak says biofuels have not created new agricultural production worldwide -- only diverted existing production. "All we've done is taken stock out of the system. There has been no new development, just a new consumer of the same product, putting more stress on the same system."
Several countries in Africa are developing biofuel policies to help state-owned and commercial companies alike bring about biofuel production, and some are creating local markets. Small countries like Rwanda, which are not only landlocked but suffer from high petroleum import costs, are looking at biodiesel production for the local market. "People developing biofuels in Africa hold their information close to their heart, thinking that one tiny bit of information will give them a commercial edge. That's bull. Share it and we'll all do better together," said Vermaak.
Source: AllAfrica.com
Durban
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Cutting Edge Farming Methods Boost Production
| | While increasingly grim forecasts predict agricultural declines in southern Africa due to climate change, a farming method called Conservation Agriculture (CA) is showing promise for subsistence farmers who are already struggling with poor food security. A recent study by economist William R. Cline, 'Global Warming and Agriculture: Impact Estimates by Country,' predicts a 39-47 percent decline in agriculture in southern Africa by 2080 if greenhouse gases escalate at their current pace. That is potentially deadly news for farmers in southern Africa where the population threatened by food shortages almost doubled from 3.1 million in 2006 to nearly 6.1 million in 2007.
"We're losing 400 million tons of soil every year," said James Breen, the regional emergency agronomist for the UN's Food and Agriculture Organization (FAO). "The production of this year's food crop is shockingly low and it's going to get worse with global warming. We really are facing a meltdown," he added. The FAO and an increasing number of NGOs and regional governments have started promoting CA as an answer to years of conventional farming methods that have left vast areas of soil utterly depleted. CA is a method of farming that minimises soil disturbance, applies more precise timing for planting and utilises crop residue to retain moisture and enrich the soil. Over the past 50 years in southern Africa, overall soil fertility has dropped while erosion has increased. Heavy ploughing and repeatedly growing the same crop on the same plot eventually strips the soil of nutrients and allows wind and water to wash away nutrient-rich topsoil. A downward spiral in food production follows.
Conservation agriculture (CA) aims to achieve sustainable and profitable agriculture. The basics:
· Minimal soil disturbance - Farmers either use a method called basin tillage in which they dig basins that capture water and plant nutrients or they use an ox-pulled plough-like "ripper". They can also use hand planters. The ripper opens just a very small furrow in the soil's surface instead of upturning an entire field which increases moisture loss and erosion.
· Exact timing for planting and effective weeding - Generally, farmers are taught to dig their basins, fertilise them with manure or manufactured fertilizer, allow the first rains to fall and collect in the basin's soils and then plant. This is a shift from the conventional methods of rushing to plant when the rains begin.
· Ground cover - Instead of burning off the previous year's crop residues, farmers are encouraged to keep the soil covered which preserves moisture and serves as a mulch that enriches the soil while decreasing presence of weeds.
· Crop rotation and inter-cropping - Mixing and rotating crops even within one field so that one year's maize patch will be legumes the next. Other plants can be grown in between the maize rows to provide additional ground cover.
But Breen sees conservation farming as a way to improve food security, and early harvest statistics are promising. "We're pushing CA as hard as we can... It's one of the ways we can scratch back from some of these losses." "It's simple," John Weatherson, emergency coordinator for FAO in Swaziland, told IRIN. "And it has to be simple to work here. In certain areas this year, it was very, very evident that crops produced using CA inter-cropping methods were much more successful than crops produced using conventional methods."
Weatherson said the most effective way to spread the CA message was to have farmers look at the results elsewhere. He recalls a recent visit to a farmer in Tanzania who had been using conservation techniques for 10 years. When the farmer began, he was harvesting three bags of maize per acre. Two years later, three became five and today, Weatherson said, the man was reaping an average of 25 bags from his dark, fertile soil. "What we need here [in Swaziland] is a 10-year programme with funding and it will take off," he said. The funding would go toward the basic tools - hand planters or plough-like implements called rippers - and enough personnel to train farmers. Ideally, more drought-resistant seeds and fertiliser to revive and enrich the soil would be available for the first few years.
Growing Harvests
In southern Africa the conservation farming techniques have best taken root in Zambia and Zimbabwe. At Zambia's Golden Valley Agricultural Research Trust, a joint research and training programme with the government and the national farmers union, researchers designed the 'Magoye Ripper', similar to a plough but causing minimal soil disruption. In Zimbabwe, the International Crops Research Institute for the Semi-Arid Tropics recorded harvest figures for the 2004-5 and 2005-6 seasons from farmers using conventional methods and a basin tillage CA method that involves digging basins that capture water. In seven out of eight districts it was tested in during the first year the basin tillage system provided a higher yield. By the 2005-6 season, 11 districts were being monitored and every one reported larger harvests from basin tillage methods.
In 2005-6 in the Hwange district in the North West of Zimbabwe, maize yields were 1,700 per hectare with conventional farming methods compared to 2,500 kg per hectare when CA methods were applied. In 2004-5, farmers yielded approximately 790 kilograms per hectare with conventional farming and 1,100 kg per hectare with basin tillage. CARE, a humanitarian NGO, has been conducting CA training in Zimbabwe and reported that 154 farmers began using conservation techniques in 2004 in the South Eastern Masvingo district. Their substantially improved yields have convinced others to try and now there are 1,081 farmers using CA in Masvingo. Tafadzwa Choto, press officer for CARE Zimbabwe, said the number of people needing emergency food assistance in the area has dropped dramatically in two years.
"We'd like to see more farmers getting involved," said James Bedell, a UN World Food Programme (WFP) field officer in Lesotho. "Some are still sceptical because it's a different way and digging the holes for the first time is labour intensive because the ground is so hard. So we try to provide food assistance while they are preparing the fields." Bedell said WFP is also considering a 'crop insurance' program for next year where the organisation will guarantee a minimum amount of maize that will be grown if a farmer agrees to try CA methods.
Taking CA forward
According to Breen there is an effort to establish a regional committee to promote CA. "We're trying to make people aware of the benefits of it," he said. "I believe we're living in a period of extreme complacency about food security in the world. We have to go and increase conservation agriculture practices not just here but across the world." FAO is currently training farmers in Zambia, Malawi, Zimbabwe, Mozambique, Swaziland, Lesotho, Angola and Namibia. CARE and other NGOs are also teaching CA methods throughout southern Africa. "Those people who've been at it for a few years are doing well," said Weatherson. "There is light at the end of the tunnel." [ This report does not necessarily reflect the views of the United Nations]
Source: UN Integrated Regional Information Networks
Johannesburg
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US Senate Draft for Food Aid Gets Mixed Reviews
| | A new U.S. Senate blueprint on food aid, which would boost funding for long-term assistance and experiment with buying crops from foreign farmers, received mixed reviews this week from U.S. farm and aid groups. "We're fairly pleased" with the proposal on trade and food aid from Sen. Tom Harkin, chairman of the Senate Agriculture Committee, said Jennifer Spurgat, who is keeping tabs on the congressional debate on the 2007 farm bill for the National Association of Wheat Growers. The farm bill, which would overhaul U.S. farm law, typically spends far less money on trade and food aid than it does on crop supports and food stamps. Still, the trade section of the bill has been a battleground over how the United States, the top donor of food aid, should feed the world's hungry.
U.S. food aid, which goes to violent and famine-prone places like Sudan and Ethiopia, has come under attack this year as inefficient and downright wasteful. A government watchdog found this year that overhead consumes about 65 percent of emergency food aid funding, which has totaled about $2 billion annually in recent years. Both Harkin's plan, a copy of which was obtained by Reuters, and a bill passed in July by the House of Representatives, seek to make food aid more effective. For example, it would allow more U.S. crops purchased for the program to be stored overseas, near countries at risk of food shortages.
But Harkin's draft, expected to be taken up by the Senate Agriculture Committee in coming weeks, differs from the House bill is several key sections. It would set aside $600 million a year to longer-term food aid programs designed to bolster agriculture and health in fragile countries, rather than just responding after crises have hit. That is $150 million a year more than what the House bill provided. It also gives $100 million over four years to a controversial pilot program to purchase U.S. food aid from farmers overseas, deviating from long-standing procurement rules that require U.S. crops.
The Bush administration has been pushing for years to get a share of aid funding freed up to buy crops close to disaster areas, which it believes will bring help more quickly, but that idea has been a perpetual loser among U.S. farm groups and shippers who have a stake in the current system. If members of Congress want these foreign purchases, "they should look to the (U.S. Agency for International Development) budget, not the agriculture budget," said Chris Garza, who monitors trade for the American Farm Bureau Federation, the country's largest farm group.
But Ellen Levinson, who heads a group of charities that deliver long-term aid, sees it as a prudent step. The entire plan provides "predictable levels for both chronic and emergency needs and it makes very constructive changes," she said. "It an excellent title." The Harkin plan also increases funding for Food for Progress, a smaller food aid program, and it increases money available to replenish an emergency trust fund. Harkin's blueprint also includes a modest increase to market access programs. When the farm bill will be in place is still unclear. Acting Agriculture Secretary Chuck Conner urged lawmakers to pass a "reform-oriented" farm bill this year. The White House has already threatened a veto of the House version of the bill on grounds it increases taxes on some businesses and does not rein in crop subsidies sufficiently.
Source: Reuters
By Missy Ryan
Washington, D.C.
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Comesa, EAC Unify Standards for Maize
| | Comesa and the East African Community have crafted common standards for maize to be adhered to by farmers and traders. According to the secretariat of the two trading blocks, the standards will apply to all member states, and target millers, food aid agencies, and maize importers and exporters. It will regulate the crop's key attributes with regard to colour, grades, rotten and diseased grain, moisture content and packaging, among others. The agreement follows the merging of the East African Standard (EAS) and the Comesa Harmonised Standard (CHS) to improve production and distribution of maize.
The standards will now have to be adopted by Comesa and EAC structures, before member states are compelled to adopt them. They will replace the existing national ones for each member country. The two regional blocks also resolved to educate players at all levels of the maize production and marketing chain to conform to the standards. According to the secretariats of the two economic blocks, the agreement will educate small farmers, who form the bulk of maize producers, on the new standards of production, storage and packaging.
The farmers will first be required to adhere to the new regulations when selling their produce at the national and regional level. The Comesa secretariat said some countries had already implemented parts of the regulations, adding that the Warehouse Receipt System and The Agricultural Commodity Exchanges linked farmers directly to the commercial market. "Grain traders, millers and other users of maize must equally be sensitised on the new standard," the two regional blocks said in a statement. The agreement was reached at a recent meeting on harmonisation of maize standards held in Uganda. The meeting was attended by representatives of Burundi, Egypt, Ethiopia, Kenya, Malawi, Rwanda, Sudan, Tanzania, Uganda and Zambia also attended the meeting. Other came from the Eastern Africa Grain Council, East Central, and Southern Africa Regional Health Community Secretariat, and the Regional Agricultural Trade Expansion Support (RATES) programme of Comesa programme.
Source: AllAfrica.com
Nairobi
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Food Prices Buoyed By Biofuel Affect Aid
| | Maize and wheat prices have shot up to their highest levels since 2000 in the past few months, according to the UN Food and Agriculture Organisation (FAO), which says an increased demand for biofuel production may keep prices above historic levels for the next 10 years and have an impact on food aid. "Market prices for these commodities affect food aid," said Merritt Cluff, senior economist in FAO's commodities section. "Since budgets for food aid are largely fixed, and determined as part of a budgeting process, higher prices mean that less can be purchased."
The price of yellow maize doubled from an average of US$88 per metric tonne (mt) in 2000 to $177 per mt in February 2007, while the price of wheat increased from an average of $119 per mt in 2000 to $277 per mt in August 2007. Temporary factors, such as droughts in wheat-growing regions and low stocks largely account for the recent hikes in farm commodity prices, according to the Agricultural Outlook 2007-2016, a joint report by the FAO and the Organisation for Economic Cooperation and Development (OECD), which works to promote democracy, good governance and the market economy.
But when the focus turns to the longer term, "structural changes are underway, which could well maintain relatively high nominal prices for many agricultural products over the coming decade". Reduced crop surpluses and a decline in export subsidies are other factors influencing prices, as well as the growing use of cereals, sugar, oilseeds and vegetable oils to produce fossil fuel substitutes, like ethanol and bio-diesel. "This is underpinning crop prices and, indirectly through higher animal feed costs, also the prices for livestock products." Expanding cereal use for ethanol production has led to reduced acreage planted to oilseeds, particularly in the US, in favour of maize, according to the Outlook. "In the US ... maize use for fuel production, which has doubled from 2003, will increase from some 55 million mt, or one-fifth of maize production in 2006, to 110 million mt or 32 percent" by 2016.
Decline in food aid
There has been a general trend indicating a decline in the use of maize as food aid by the US over the last five years, said Catherine Grant in her paper, Bio-fuels and Food Aid: The Impact on Southern Africa, produced for the Regional Hunger and Vulnerability Programme, which assists policy-makers and practitioners concerned with food security and social protection in southern Africa. The result is that food and energy now compete for the same stocks in these countries. The trend of high oil prices in 2006, combined with extensive support programmes for the biofuels sector, both had an impact on the diversion of increasing amounts of corn [maize] crops to ethanol in the US. "In 2004 the US provided a total of 300,500 [mt] of corn [maize] as food aid, and in 2001 a total of 847,700 [mt] ... This decline mirrors, to a certain extent, the increase in the use of corn [maize] in the US for the production of ethanol."
Grant noted that the US and the European Union (EU) were leading the global trend towards greater biofuel production, but were still two of the biggest players in global food markets. "The result is that food and energy now compete for the same stocks in these countries. The trend of high oil prices in 2006, combined with extensive support programmes for the biofuels sector, both had an impact on the diversion of increasing amounts of corn [maize] crops to ethanol in the US," Grant commented. "There was no immediate effect on the amount of corn that was imported and exported by the US, but there was a considerable decrease in the amount donated as food aid."
Global effect
Cereal price fluctuations in the US, where maize is used to produce ethanol, also affect the world market, as has been the case with maize prices in South Africa, according to the latest USAID-funded Famine Early Warning Systems Network (FEWS-NET). Demand-driven maize prices are rising worldwide, and are expected to remain high for the rest of the year. In dollar value, the price of white maize in South Africa has shot up by 186 percent in the last two years, from US$89 per mt in May 2005 to $254 per mt in August 2007, according to Phumzile Mdladla, who heads FEWS-NET's Southern Africa office. "But demand for biofuel is not the only reason for the increase, it is a combination of factors: the drought last season, high fuel prices and an increase in demand."
Rising prices could also increase the number of food-insecure people, Grant pointed out in her paper, particularly in developing countries where people spent over 50 percent of their household budget on food. However, Jean-Claude Mukadi, the livelihood emergency response manager in Southern Africa for World Vision, dismissed the inference as "too simplistic", as food insecurity could not be pinned down to any one reason. "People could be food insecure for a number of reasons: the rains might have failed that year, people might not have got their agricultural inputs on time. If the rains are on time, livelihoods will improve, then affordability increases," he said. Besides, an upward global food price trend might prove beneficial for small-scale farmers in the developing world, he added. "It could work both ways, couldn't it?" [ This report does not necessarily reflect the views of the United Nations ]
Source: UN Integrated Regional Information Networks
Johannesburg
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Fight Against Hunger Requires Enlightened Policies
| | Policies that spur subsistence farmers to start growing crops for profit rather than survival and that expand market opportunities for private traders enhance agricultural productivity and reduce hunger in the developing world, according to U.S. government officials seeking to enhance food security. "Underlying our agriculture strategy is the assumption that there has to be a market," says George Gardner, senior agricultural economist at the U.S. Agency for International Development (USAID). "We're trying to get producers linked to markets. We don't work with command economies."
William Hammink, who directs the USAID's Food for Peace program, says that getting a subsistence farmer to think in terms of profits requires a cultural shift. "Small holders, who have been subsistence growers for thousands of years, must start thinking about growing things besides basic staples, such as maize, sorghum or millet," he told USINFO. Hammink said that the farmers need to diversify, think about market demands, fertilize their land and increase yield. He added that the experience in Uganda, Senegal and Mali -- three African countries that have increased food production and diminished hunger -- has shown that boosting competition for private traders has brought about the most change in that direction.
To invest in their land and make it more productive, farmers need to know that they have legal rights to it. Gardner told USINFO that issuing farmers titles to land creates land markets, where none existed previously, and provides the tillers with collateral to get agricultural credits and loans to buy fertilizer, seeds and other inputs. A major impediment to good agricultural policy in Africa is that governments tend to favor urban areas over rural areas. "African governments learned long ago that hungry consumers in urban areas bring down governments long before rural scattered producers do," Gardner said. "Urban consumers are more vocal. They can block the road to the airport."
Although the vast majority of Africans live in rural areas, their governments do not spend enough on agricultural sectors, according to Gardner. "We have been trying to get African governments to invest proportionately in the agricultural sector, which typically employs 60 to 80 percent of the labor force and produces 50 to 60 percent of the gross domestic product," he said. "If a national budget allocates only 5 percent of resources to the agricultural sector, you'll never catch up with investments needed for irrigation, roads, information services and so forth."
John Thomas, the director of the Office of Agriculture in USAID, said policy commitments by African governments to develop their agricultural sectors are necessary if the continent is to create a "green revolution" similar to the one that took place in South Asia. Thomas said the tremendous increase in agricultural productivity in South Asia was a result of commitments made by Pakistan and India back in the 1970s to invest in roads, fertilizer and improved seed varieties. "It takes first a country that is committed to invest in agriculture and supporting the enabling environment for agriculture," he told USINFO.
Thomas praised the Comprehensive Africa Agriculture Development Program (CAADP), which the countries of sub-Saharan Africa wrote and adopted, as an initiative "being built from the bottom up by African countries" to develop their agricultural sectors. CAADP calls for each African government to devote 10 percent of its budgetary resources to agriculture in a manner tailored to each country's needs. Policies unrelated to agriculture also can have decisive effects on reducing food and alleviating hunger. Sometimes getting the national budget under control and refraining from pursuing inflationary policies are sufficient, but often governments must do more.
For example, Ron Croushorn, the director of the food assistance division at the U.S. Department of Agriculture, said that Ghana, a leader in West Africa, has done a lot to improve its investment climate, both foreign and domestic. Kenya and Tanzania have had dramatic increases in stock markets, he added, and noted that all three governments have educated their citizens about the opportunities for investment. Croushorn told USINFO that infrastructure improvements and electrification allow farmers to increase production dramatically.
A key element of introducing beneficial policy reforms is finding a "policy champion," an influential lawmaker who can convince the government of the need for reforms. "It's really important to find a champion, somebody who is aggressive and can understand the impact of bad policy and can help influence people within the government that changes are necessary and present some options," Thomas said. Gardner said such a champion in Kenya was instrumental in removing the restrictions against the internal transportation of maize, which had been in place since colonial days as a measure intended to prevent the spread of plant disease. Gardner said the champion was able to show that there was no scientific basis for the restriction and get it rescinded. As a result, maize production and trade increased. (USINFO is produced by the Bureau of International Information Programs, U.S. Department of State.
Web site: http://usinfo.state.gov)
Source: United States Department of State
Washington, DC
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COMESA Maize Standard Set
| | MAIZE traders from East and Southern Africa are set to earn big, after the successful introduction of a uniform grading system for the commodity. The absence of a uniform quality standard has been one of the technical barriers hampering the export of maize. And this has brought about deficits and surpluses of this widely traded and consumed commodity in the region. Speaking at a regional consultative meeting on maize standardization at Imperial Botanical Hotel in Entebbe, State Minister for Industry Prof Ephraim Kamuntu said; "As we continue to press for better access to international markets, it is important that our partner states re-examine the opportunities for utilizing regional trade to increase exports".
He said issues related to standards and trade should be handled with utmost consideration by all Comesa partners. For this would help them compete better even at the international market. True, maize is an important crop for all the people of East and Southern Africa. But the regions' demand is characterized by deficits and surpluses. Currently Comesa produces 22-23 million metric tones of maize annually. Of this 18 million metric tones are consumed. This indicates 4 million metric tones of surplus. Yet still an estimated 2 million metric tones of maize is imported. Mr Stephen Kauri Njukia, a commodity specialist with the Regional Agricultural Trade Expansion Support Programme (RATES) said; "The variation in standards has hindered the movement of maize from the areas where it's in plenty to areas in shortage".
Some countries, he added, produce plenty of maize but it becomes very expensive to supply the commodity to such areas because of the poor infrastructures. To rectify the situation, the two regional blocs of East African Community (EAC) and Comesa have joined efforts to harmonise into a single standard. Initially, EAC had specific standards used by traders but they were not able to supply countries in Comesa yet there member states because of the variation in standards. "EAC countries were able to trade amongst each other. But some Comesa member countries could not. That's why you would hear of a deficit in Zambia or Zimbabwe. Now Comesa is adopting the same standard and this problem will be solved," Njukia said.
However, Njukia said having a uniform standard would not mean a fixed price. Prices will be determined by the market forces in respective countries. The maize standards agreed on are grade 1 and 2, depending on the nutritional value. In the region, Ethiopia is the largest producer, followed by Kenya, Tanzania and Zambia. Other producers include Uganda, Zimbabwe, Burundi and Rwanda among others. Meanwhile, dealers in maize have welcomed the initiative saying it was long over due. Uganda Commodity Exchange (UCE) Manager Mr Alex Rwego said: "We welcome the uniform standard because it will promote quality produce and trade". UCE is a government agency responsible for the promotion of quality commodities.
Source: AllAfrica.com
Entebbe
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Commodity Boom Eats Into Aid For World's Hungry
| | An international media house reports that Food donations to the world's hungry have fallen to their lowest level since 1973 as surging grain and shipping prices outpace the aid budgets of rich nations. The United Nations has cut food rations in places like Uganda and Cambodia, and the situation has raised alarm among aid groups, who worry aid will come up short for the world's 850 million hungry people. The United States, the largest donor of food aid, which spends about $2 billion a year on donations to Ethiopia, Sudan, Afghanistan and other vulnerable nations, is watching as soaring costs eat into aid budgets.
In 2004, the United States paid an average of $363 to buy a tonne of food aid and ship it to the developing world, officials say. This year, delivering that same tonne of aid abroad will cost an estimated $611, an increase of 68 percent. Part of the story behind that jump is growing demand for corn-based ethanol, an alternative to gasoline, which helped push spot maize prices to a 10-year high earlier this year. There's also burgeoning demand for grains and food in emerging markets like India and China -- wheat is at an 11-year high on U.S. markets and global rice prices have jumped 50 percent since 2000 -- and recent record crude oil prices.
Little is certain this early into the price boom, but aid professionals are already clear who will lose out unless donor countries move to increase aid budgets in step. "The amounts available will come down, and you're going to be able to feed fewer people. This is the worry," said Charles Uphaus, who tracks foreign aid at Bread for the World, a U.S.-based advocacy group. Indeed, global food aid in 2006 was around 6.7 million tonnes, the lowest level in 34 years, the UN says, while the number of hungry people has grown by 4 million each year since the mid-1990s. Aid officials are worried, too, by more frequent food emergencies, often driven by violence and war. The recent price trends "are going to really put pressure on willingness and abilities of governments to provide food aid," said Stuart Clark, a policy advisor at the Canadian Foodgrains Bank, which delivers the bulk of Canadian food aid.
Smaller Shipments, Stretched Aid
The run-up in prices adds another wrinkle to an ongoing debate over U.S. food aid, under scrutiny this year as Congress writes new legislation for farm programs, food stamps, and food aid. A report earlier this year from an independent government watchdog found that as much as 65 percent of U.S. emergency food aid funds are spent on transport and overhead. With prices rocketing in the space of weeks, some major aid groups, like Atlanta-based CARE USA, find themselves in a pinch when they receive crop donations that are significantly smaller than the amount originally approved by the government. "They come back to us and say, 'Sorry, we're not going to give you the full amount," said Bob Bell, who heads CARE USA's food resources team. Last year, CARE received 14 percent less wheat aid in Mozambique than it was promised.
The price trend can cut off some needy communities entirely, aid groups say, and only exacerbates budget cuts for longer-term assistance. They also see knock-on problems for the nutrition and agriculture projects they operate and even in paying staff on the ground. Yet for charities who bank on sales of donated U.S. crops in poor countries to fund their development work, higher prices can be welcome news. David Evans, a vice president at Food for the Hungry, a U.S.-based charity, said higher prices bring more money for the nutrition, water and sanitation, and other assistance projects the group runs in Bolivia, Rwanda, Mozambique and elsewhere.
Soaring shipping prices -- which have increased 63 percent per tonne of U.S. aid since 2004 -- are particularly troublesome because U.S. law prohibits buying crops abroad. The European Union shifted to providing its assistance in cash years ago, and other donors, like Canada, allow up to half of food aid funds to buy crops in the developing world. That allows the Canadian Foodgrains Bank, for example, to sidestep the price crunch to a certain degree, Clark said.
Roots of The Problem
Many believe the cycle of famine and hunger will end only when agriculture in fragile countries becomes more productive and competitive. That could, eventually, increase supplies on world markets and help ease prices. "If the U.S. is serious about addressing world hunger, the way to do that is increasing production, not shipping U.S. commodities ... around the world," Uphaus said. But agriculture development has fallen off in recent years as aid budgets target HIV/AIDS, education and other new priorities.
There are competing priorities even within food aid. "Donors seem to put their money in high-profile operations, cutting rations for victims of AIDS and TB and their families. This is actually dangerous," the UN official said. Suresh Babu, an economist at the International Food Policy Research Institute, believes donor countries can arrest hunger only by bolstering poor countries' agriculture sectors. That will happen, he said, "maybe not next year, but five to ten years down the road." (additional reporting by Lisa Haarlander in Chicago)
Source: Reuters
Washington, D.C.
By Missy Ryan
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Single Currency Market Proposed for East Africa Community
| | A common market and a single currency will now take centre stage as the East African Community (EAC) moves towards a political federation. This decision has been reached at by the 6th Summit of the Heads of State of the EAC. But the position has been adopted after most Tanzanians rejected the proposal to fast track the EAC political federation. The decision to put the fast-tracking process on the backburner has also been informed by evidence, which has seemed to suggest over the past 12 months that the political federation process was moving ahead of a common market and a monetary union, crucial ingredients for any kind of union. The common market would allow the free circulation of goods and movement of the people within the now expanded EAC. To ease movement, one common passport will be used within the five countries. The summit decided that it was paramount to achieve a common market and a monetary union by 2012 before the fast tracking is given much weight.
Presidents Yoweri Museveni of Uganda, Jakaya Kikwete of Tanzania, Mwai Kibaki of Kenya, Paul Kagame of Rwanda, Amani Abeid Karume of Zanzibar (as an observer), Burundi Vice President Gabriel Ntisezerana and EAC secretary general ambassador Juma Mwapachu. Ambassador Mwapachu said the postponement should give room to the newly introduced members Rwanda and Burundi ample time to gauge their people's views on the EAC. Mwapachu said the EAC secretariat ought to explore the possibility of achieving the threshold of the Customs Union before fast tracking was fully relied on. He said the EAC secretariat should quickly propose an East Africa Industrial and Investment Strategy supported by an institutional decision making authority, with a view to promoting equitable industrial development in the region before the community funds the fast tracking exercise. Sources at the summit said it was nec |
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