Export prices for food stagnate, indicating tough times ahead

By Ahmed ElAmin

- Last updated on GMT

Related tags: International trade, World trade organization, European union, Europe

Weak and stagnating prices for food, agricultural raw materials and
manufactured goods in 2005 could mean further bad news for
exporters this year, according to a World Trade Organisation

The share of agricultural products in world merchandise exports decreased to a historic record low of less than nine per cent, the international body said in its latest outlook report.

Export prices for food products actually declined last year by less than one per cent according to the WTO's figures. Meanwhile prices for beverage exports increased by about three per cent. Prices for agricultural raw materials rose by about the same.

Overall, world trade began 2005 with sluggish growth and then regained momentum to end the year registering six per cent growth in the volume of goods traded, WTO economists say. The economists predict that global trade may grow seven per cent in real terms this year.

"There are a number of uncertainties on the horizon for 2006, with signs of a stronger investment climate mixed with fragile prospects for consumption and employment, particularly in Europe,"​ they stated this week.

Exports are expected to benefit from a slightly stronger economic growth, in particular in the European Union. However US economic growth could falter due to higher real interest rates and energy costs, and the EU recovery may not gather momentum to recover, they stated.

WTO Director-General Pascal Lamy said that the global trading system was in a period of transition and restrictions needed to be lifted.

"The global trading system is undergoing a period of transition,"​ he said in the report. "Shifting economic circumstances, major advances in technology and the emergence of new players on the global scene all underscore that we are on the cusp of big changes. Persistent imbalances, driven largely by macro-economic factors continue to be a cause for concern in some major economies. In such a climate of uncertainty, one thing is certain, member governments must strengthen the global trading system by making it more equitable and relevant for those who trade in the 21st century."

Lamy called on member states to relax the barriers through the Doha round of trade talks.

The six per cent growth in 2005 follows an exceptional nine per cent expansion recorded in 2004. The slowdown reflected a weaker world economy, and was observable from mid-2004.

The value of world merchandise exports rose by 13 per cent in 2005, compared to 21 per cent in 2004 and exceeded the US$10 trillion mark for the first time.

Europe's trade performance was sluggish in 2005, in line with its overall economic performance. Export and import growth were weaker than in all other regions in terms of both goods and services. The rise in North America's merchandise and services exports remained slightly below the global expansion rate.

Europe's four major economies, France, Germany, Italy and the UK, all recorded sluggish economic growth in 2005, ranging from near stagnation in Italy to a meagre 1.8 per cent growth for the UK.

Economic growth in the 10 new EU members was close to four per cent, holding out the possibility of new opportunities for food manufacturers.

The strongest economic growth of all regions in 2005 was reported by the Commonwealth of Independent States. Substantial gains from sharply higher export earnings stimulated public and private expenditure and resulted in gross domestic product growth of 6.6 per cent or twice the global average.

In 2004 exports of agricultural raw materials expanded faster than those of food, which represented a departure from past trends. Europe's exports of agricultural products rose somewhat less than global trade, and accounted for 47 per cent of world exports in 2004.

Related topics: Ingredients

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