127. Current Economic Developments1
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FAO REPORTS ON WORLD FOOD SITUATION; UNITED STATES MODIFIES PLEDGE TO WFP
Release of the 1966 report of the Food and Agricultural Organization again highlights the increasing demands placed on the world’s supply [Page 381] of food. According to the report, The State of Food and Agriculture, 1966,2 world food production failed to rise in 1965/1966, but population increased by about 70 million persons, causing a reduction in per capita food production of four to five percent in the developing regions of Africa, Latin America and East Asia. Although early reports are inconclusive, it appears that this year’s crop will be no better. This will place even heavier stress on the world’s ability to feed itself, and, notes the report, “will give greater urgency to the re-thinking already under way about the role of food and its provision on a surer basis than that of chance surpluses.”
American concern for the problem was evidenced anew on October 24, with announcement that the United States would increase its contributions to the World Food Program, an international aid organization sponsored jointly by the UN and its specialized agency, the FAO.3 Through the revised US pledge, all contributions in unrestricted cash or commodities made toward the program after July 31, 1966 by other contributors will be matched by the United States. It is likely that this version will result in a greater drawdown on the $130 million of commodities, cash and services which the US originally pledged in January 1966.
Current Food Situation
Surveying production records for the major regions of the world, excluding Communist China, the FAO report finds that a decrease in the world’s food supply for 1965/1966 was averted only by good harvests in North America. Yields in all areas of the world except North America, Western Europe and the Middle East dropped. The most serious development in 1965/1966, the report said, was an estimated drop of more than two percent in total grain production, which makes up about one-third of all agricultural production. World production (excluding Communist China) of wheat, barley, rice, sugar, apples, groundnuts, cocoa, and tobacco fell by between four and eight percent. For most other products there was a small rise. Increases in soy-beans and coffee ranged from 15 to almost 50 percent.
The poor harvests of the past year, the report noted, were all the more serious since they came, not in the midst of plenty, but after a long period in which production has only barely kept up with the rapidly mounting population. Until recently, large stocks of grain accumulated in North America had provided a cushion against emergencies. Large-scale shipments of these stocks made it possible to avert disaster in India [Page 382] and other drought stricken areas in 1965/1966. Such shipments, however, along with recent import needs of Communist China and the Soviet Union, and the greater success of the US in limiting its production, “have reduced North American grain stocks to their lowest level in well over a decade,” and made the world food situation “more precarious now than at any time since the period of acute shortage immediately after the Second World War.”
Major Trends
In a survey of major trends in the food situation, the FAO report notes that the increase in demand slowed slightly along with the general retardation of growth of the world economy as a whole. Demands for consumption in light of the poor harvests were satisfied by imports from surplus areas, however, and world food stocks declined to the point where “they could no longer be considered excessive in relation to requirements.” The value of world trade in agricultural, fishery and forest products declined slightly, after a steep rise in 1964, as a result of a more or less stable volume of world trade and a slight fall in average prices. The average drop in the level of agricultural prices was one percent, with a six percent drop recorded for the prices of agricultural raw materials. While prices to farmers in most countries rose in 1965, smaller crops in many countries meant that the increase in receipts failed to offset increased farm expenses.
Prospects for 1966/1967
The report is cautious about prospects for this year’s crop. It was not yet possible, on the basis of data available up to July 15, to assess the extent to which production might recover. Excess rainfall had reduced winter wheat plantings in Europe and the Soviet Union, and US wheat production was expected to be down 7 percent from last year’s crop. Drought has hit wheat crops in India and Pakistan, and widespread drought was reported in Communist China. Shortage of rain was also expected to reduce wheat production in northwestern Africa and a number of Near Eastern countries. Although early information, especially from developing countries, tends to stress droughts and disasters, it is only later that reports on average or good harvests come in.
Food Aid and Food Production
Stagnation in food production and the sharp reduction of stocks has forced a sweeping reappraisal of the role of food aid and its dependence on “chance surpluses” from the developed nations. In addition to its revised pledge to the WPF, the US had already taken steps to return some unused farmland to production. The problem as seen by the FAO, however, is not only one of increased aid, but of increased production in the recipient countries. The Indicative World Plan for Agricultural Development, [Page 383] now being drawn up by FAO, will provide a clearer idea of the contribution needed from agriculture for sound national growth, and make it easier to assess the amount and type of aid needed by the developing countries. Through a cooperative program set up with the International Bank which establishes joint IBRD/FAO team to identify projects suitable for investment, the FAO is becoming more directly concerned with obtaining financial aid for agricultural development. The US, with its Food for Peace Act (see page 11 this issue)4 has made its food aid independent of surpluses as well as conditional upon measures by recipient countries to improve their own production.
US Revises WFP Pledge
In reaction to the ever deepening crisis facing the world’s food suppliers, the United States announced on October 24 that it was revising its pledge to the World Food Program, an aid distributing organization jointly sponsored by the UN and the FAO. Under the US commitment, all contribution of restricted cash or commodities made toward the program after July 31 will be matched with commodities by the United States. In addition, the US will pay the shipping costs for all commodities it provides. The effect of this revision of the terms of the US pledge will be to offer commodities and related shipping costs not only against commodities pledged by others, but also as a match for new unrestricted cash pledges. This offer revises the matching provisions with respect to the $130 million that the US had already pledged for the next three years. The WFP now has available $153.8 million toward the goal of $275 million in pledges which it set for itself at the pledging conference in January of this year.
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- Source: Washington National Records Center, RG 59, E/CBA/REP Files: FRC 72 A 6248, Current Economic Developments. Unclassified. The source text comprises pp. 18–19 of the issue.↩
- The report was published by the Food and Agricultural Organization of the United Nations in 1966.↩
- For an extract of this announcement made by George L. Killion, Alternate U.S. Representative to the United Nations, see American Foreign Policy: Current Documents, 1966, p. 147.↩
- Reference is to the article, “Congress Extends Food for Peace Act for Two Years,” pp. 11–12, which summarizes the legislative compromise leading to enactment of the Food for Peace Act of 1966, approved November 11, 1966. (P.L. 89–808; 80 Stat. 1526)↩