on Climate Change (IPCC) confirm some global warming and indicate that water scarcity, which was already a major constraint, may worsen substantially. Because of continued drought between 1999 and 2001, Algeria, Morocco, Tunisia, Turkey, Jordan, Iran and the Gulf countries saw an important decline in their agricultural output, especially in cereals and livestock. Drought adversely affected the livelihoods of much of the rural population, especially dryland farmers and nomadic livestock owners, particularly in Iran. The incidence of poverty in the region went up significantly toward the end of the decade because of drought with a proportion of the population living on less than $2 per day increasing from 25 to 30% (FAO, 2002).

The unpredictable and variable climate prevailing in the region and the different farming practices aggravate the risk of disease and pest epidemics across CWANA. Pests, including sunn pest, Hessian fly and cyst and root lesion nematodes, significantly damage cereal production. For this reason, the development of disease- and pest-resistant wheat varieties has been a key component of breeding programs to improve food security across CWANA. Agricultural production in CWANA is increasingly threatened by exotic pests, such as the peach fruit fly (Bactrocera zonata), red palm weevil (Rhynchophorus ferrugineus) and Bayoud disease of palm (Fusarium oxysporum fsp. albedinis), among others, indicating a lack of adequate phytosanitary controls.

Animal diseases are a major threat to livestock production in CWANA countries. In addition to screwworm infestation, at least three animal diseases have major economic impacts, especially in North Africa, the Middle East and the Arab Peninsula: foot-and-mouth disease, rinderpest in the Middle East, including Egypt and Sudan; and brucellosis, endemic in the whole region. These diseases seriously affect the potential in the region for livestock production. Their elimination would require well-focused pest and disease control, still lacking in most countries.

In CWANA, agricultural risks are related to the management of natural resources, such as water. The region's irrigation systems are under considerable environmental strain, with almost all countries experiencing problems with salinity and waterlogging. A major concern is the overexploitation of groundwater, particularly in the Persian Gulf region (FAO, 2002). The current water crisis calls into question the sustainability of most irrigation systems.

Drought and water scarcity place substantial strains on the environment, causing significant damage to biological diversity. As the FAO report points out, "wildlife has been severely affected as a result of the shortage of drinking water, lack of feed, dried wetlands and degradation of wildlife habitats. . . in the Hamoun wetlands of Iran, which are of international importance, aquatic life has disappeared. Herbivores are among the first animal species to be affected by a lack of feed. Drying of wetlands and natural lakes has also occurred in Morocco, as well as other countries of the region, causing similar and probably irreversible environmental damage. In Jordan, the continued drought during 1999 and 2000 caused visible damage to the natural and artificial forest" (FAO, 2002).

Risks affecting agriculture in CWANA increasingly re-

sult from rapid changes in input and output markets. Many farmers still practice subsistence agriculture. When a farm household's production is barely sufficient for its own consumption, market risks are clearly not important. But the increasing integration of farm producers in national and international markets place them at risk if there is price instability. Market risks faced by farm producers in CWANA are related to poorly organized national marketing circuits, significant increases in input prices and production costs, state intervention in pricing basic food products, difficult access to export markets from growing competition for fruit and vegetables and increasingly severe safety and quality requirements.

2.2.5.2 Risk management to reduce farm household income variation

The extremely variable climate prevailing in the region and economic liberalization affecting agricultural policies make farm producers particularly vulnerable. In this highly risky environment, farm households have developed strategies to mitigate risks and reduce income variation. Two strategies are ex ante risk management and ex post coping (Dercon, 2000). Ex ante involves crop management, technological choice, diversification of income by spreading risk among activities and market strategies. Risk coping deals with the consequences (ex post) and involves self-insurance through precautionary savings; informal insurance, such as kin sharing risk; and informal credit. Coping strategies may involve attempting to earn extra income to compensate for losses, selling livestock and making use of government aid.

In CWANA, drought is by far the greatest risk. Recent droughts have seriously affected dryland farmers and herders, resulting in severe loss of income through loss of harvests and partial loss of flocks. Sales of animals and off-farm activities are among the most common strategies adopted to cope with drought. Loss of harvests pushes farmers to rely on purchased animal feed to avoid further livestock losses. Harvest losses make it necessary for farms to rely more on short-term bank credit or informal credit to meet farm costs the following year, resulting in increased indebtedness.

Fall in income caused by drought leads small-scale farmers to give out their land to sharecroppers, a way to cope with little money and secure part of the expected farm production. Small-scale farmers also rely on state aid programs, such as seed and animal feed distribution, to reduce the hardship caused by drought. In hardship, family networks are used by farm households. They allow transfer of money from family members working in urban areas or abroad. These coping strategies, however, are not available to all farm households. The same holds for off-farm work, which has decreased in most countries of the region because of economic restructuring.

Among ex ante strategies in CWANA, farmers are diversifying farm production to reduce climate and economic shocks. Most farmers in the Maghreb countries combine livestock, mainly small ruminants, with cereal crops and olive trees. In this system, livestock allows better management of the farm treasury through the sale of animals to finance farm inputs and household expenses. In addition to combining livestock and crops to minimize risks, farmers in