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OECD – FAO expect stronger production, lower prices over coming decade

Strong crop yields, higher productivity and slower growth in global demand should contribute to a gradual decline in real prices for agricultural products over the coming decade.

Friday 3 July 2015 (2 years 11 months 15 days ago)

Strong crop yields, higher productivity and slower growth in global demand should contribute to a gradual decline in real prices for agricultural products over the coming decade, but nonetheless, prices will likely remain at levels above those in the early-2000s, according to the latest Agricultural Outlook report produced by the OECD and FAO.

The OECD-FAO Agricultural Outlook 2015-2024 projects that agricultural trade will increase more slowly than in the previous decade, while its share of global production and consumption will be stable. The Outlook points to further concentration of agricultural commodity exports among a few exporting countries, coupled with a dispersion of imports over an ever-larger number of countries - trends that make it imperative to ensure the smooth functioning of international markets.

Major changes in demand are expected in developing countries, where population growth, rising per capita incomes and urbanization will increase demand for food, according to the report. Rising incomes will prompt consumers to continue diversifying their diets, notably by increasing their consumption of animal protein relative to starches. As a result, the prices of meat and dairy products are expected to be high relative to crop prices. Among crops, the prices of coarse grains and oilseeds, used for animal feed, should rise relative to the prices of food staples.

Commodity Highlights

The build-up of high cereal stocks over the past two years, combined with low oil prices, should lead to a further weakening of cereal prices in the short term. Slowly rising production costs and sustained demand should strengthen prices again over the medium term.

Strong demand for protein meal will drive further expansion of oilseed production, according to the report. This should result in meal being very important in the overall profitability of oilseeds, and would favour further expansion of soybean production, especially in Brazil.

Meat output is expected to respond to an improvement in margins, with lower feed grain prices set to restore profitability to a sector that has been operating in an environment of particularly high and volatile feed costs for most of the past decade.

Ethanol and biodiesel use is expected to grow at a slower pace over the next decade. The level of production is projected to be dependent on policies in major producing countries. At lower oil prices, trade in biofuels should remain small as a share of global production.

 

Wednesday July 2, 2015/ FAO.
http://www.fao.org

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