Food commodity prices to remain low in next decade, OECD and FAO latest outlook says

Asia and Sub-Saharan Africa will drive global growth from the demand side

Eva González Paris (France), 10 July, 2017

Demand growth in a number of emerging economies is expected to slow down and biofuel policies will have a diminished impact on markets. Both facts are the main reasons why global food commodity prices are expected to remain low over the next decade compared to previous peaks.
Asia and Sub-Saharan Africa will drive global growth from the demand side.
Current prices are now almost back to their levels before the 2007-08 food price crisis.
Those are some of the outcomes included in the latest 10-year agricultural outlook published today by the OECD and FAO.

OECD/FAO agri-food 10 year outlook. © OECD/FAO

“Real prices of most agricultural and fish commodities are expected to decline slightly over the ten-year Outlook period,” OECD Secretary-General Angel Gurria said at the launch event in Paris. “As we have seen in the past, unexpected events can easily take markets away from these central trends, so it is essential that governments continue joint efforts to provide stability to world food markets. It is equally important that we look ahead as we seek to meet the fundamental challenge facing world food and agriculture: to ensure access to safe, healthy, and nutritious food for a growing world population, while at the same time using natural resources more sustainably and making an effective contribution to mitigating climate change.

“The report foresees that the average calorie availability per person per day will increase in least developed countries and in most emerging economies,” said FAO Director-General José Graziano da Silva. “But we also know that more food alone is not enough to eliminate undernourishment and other forms of malnutrition. Access to the additional calories is extremely important. More challenging is the fight against malnutrition: Fighting malnutrition requires a diversified, safe and nutritious diet, ideally produced with a lower environmental footprint.”

By 2026, average calorie availability is projected to reach 2,450 kcal per person per day in least developed countries, and to exceed 3,000 kcal in other developing countries. Food insecurity and malnutrition in all its forms will nonetheless remain a persistent global problem, requiring a coordinated international approach, according to the report.

Growth in demand for food, to remain flat

The report foresees per capita demand for food staples remaining flat, except in least developed countries, mainly in Asia annd Sub-Saharan Africa.

OECD/FAO agri-food 10 year outlook. © OECD/FAO

Additional calories and protein consumption over the outlook period are expected to come in great prat from vegetable oil, sugar and dairy products. Growth in demand for meat is projected to slow, with no new sources of demand projected to maintain the momentum previously generated by China.

Other facts cutting price growth

The replenishment of cereal stocks by 230 million metric tonnes over the past decade, combined with abundant stocks of most other commodities, should also help limit growth in world prices, which are now almost back to their levels before the 2007-08 food price crisis.

OECD/FAO agri-food 10 year outlook. © OECD/FAO

The demand growth for ethanol and biodiesel has weakened due to lower fossil fuel prices and fewer incentives from government policies. Even though energy prices are projected to increase, the derived demand for biofuel feedstocks, especially maize and sugarcane for ethanol and vegetable oil for biodiesel, will grow slowly, leaving aside key developing countries where demand increases are driven by more pro-active domestic government policies.

Agri-fish trade rise at half that of the previous decade

The growth in agriculture and fish trade is projected to slow to about half the previous decade’s growth rate, and average less than 2 percent per year in volume terms for most commodities.

Food imports are becoming increasingly important for food security, particularly in Sub-Saharan Africa, North Africa, and the Middle East. While for some countries this may reflect greater demand but insufficient natural resources for growing food domestically, in other cases it may indicate agricultural development problems which need attention.

OECD/FAO agri-food 10 year outlook. © OECD/FAO

Net exports are projected to increase from the Americas, Eastern Europe and Central Asia, while net imports are expected to increase across other Asian and African countries. Exports remain concentrated in a few supplying countries contrasting with widely dispersed imports. This may imply a greater susceptibility of world markets to supply shocks, stemming from natural and policy factors, rather than demand shocks

Agricultural trade is expected to remain more resilient to economic downturns than trade in other sectors.

Crop, meat and dairy production rises will come from…

Future growth in crop production is projected to be mainly attained through higher yields (90% of the increase in maize production is expected to come from increased yields and just 10% from area expansion).

OECD/FAO agri-food 10 year outlook. © OECD/FAO

Growth in meat and dairy production, by contrast, is expected to come from both larger herds and higher output per-animal. Milk production growth will accelerate when compared to the previous decade, most notably in India and Pakistan.

OECD/FAO agri-food 10 year outlook. © OECD/FAO

Aquaculture is expected to dominate growth in the fish sector. In fact, farmed fish production will be the fastest-growing protein source among all commodities analysed in the Outlook.

Image over the headline.- Agricultural trade fair in Sudan. UN Photo/Isaac Billy Gideon Lu’b

Related external links:

OECD-FAO Agricultural Outlook (compare your country tool)

OECD-FAO Agricultural Outlook (executive summary)