OECD outlook signals 'era of high prices is likely over'

By Agri-Pulse staff

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, July 27, 2016 - The decline in prices for food and feed crops, livestock and fish products in 2015 signals that “an era of high prices is quite likely over for all sub-sectors,” economists at the Organization for Economic Cooperation and Development (OECD) say.

Developed jointly with analysts at the UN Food and Agriculture Organization (FAO) in Rome, the Paris-based OECD projected in its Agricultural Outlook 2016-2025 that most agricultural prices would hold steady over the next decade as productivity continued to increase in most parts of the world.

Lets Talk Food

The report cites several factors behind the decline in meat prices from their 2014 record highs, the continuation of a three-year decline in milk product prices and continued erosion of field crop prices that began after the 2012 peak. Among them: “several years of robust supply growth, weakening demand growth due to the overall economic slowdown, lower oil prices and further accumulation of already abundant stocks.”

The 10-year outlook sees growth in demand for food slowing progressively even as demand for meat, fish and dairy product continues to be strong. That, in turn creates additional demand for feed in the form of coarse grains and protein meals. Increased protein consumption also improves nutrition, Jonathan Brooks, head of OECD's Agri-Food Trade and Markets Division, said in a video feed to OECD's Washington office this morning.

“Demand for agricultural commodities for biofuel production is projected to stagnate due to the lower energy prices and more conservative biofuel policies in several countries,” the analysts say.

The report paints a somewhat brighter picture for undernourished populations, projecting a decline in the global proportion of people who are underfed from 11 percent to 8 percent over the next ten years, “with the total numbers of undernourished declining from 788 million to less than 650 million.”

Despite global gains, hunger in sub-Saharan Africa remains high, it says, projecting that more than one-third of the global total of undernourished will be in that region compared with just over 25 percent today. This region accounts for more than 950 million people, or some 13 percent of the global population.

The report acknowledges, “Many countries will be confronted with a complex burden of undernourishment (too few calories), obesity, and micronutrient deficiency (with unbalanced diets a common problem).” Consumption of sugar, oils and fats is projected to increase faster than consumption of staples and protein, “largely as a result of people consuming more processed food products,” the report concludes.

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Another optimistic feature of the outlook is its belief that the increased food demand will be satisfied through productivity gains, with only modest changes in crop area and livestock herds. Yield improvements are projected to account for 80 percent of the increase in crop output, with only small increases in planted area in Latin America (soybeans) and Africa (cereal grains).

“Yield growth is expected to be slower in the main producing countries, as it becomes progressively more difficult to shift the technological frontier forward,” the analysts assert. “But there are large yield gaps in many developing countries, especially in sub-Saharan Africa, and bridging these gaps could add significantly to global supplies.”

The authors acknowledge that their outlook is “subject to a wide range of uncertainties, including variations in oil prices, yields and economic growth,” positing “a strong chance of at least one severe price swing within the next 10 years.” Climate change and government policies are factors that may add to the uncertainty, they say.

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