The recent period of high agricultural commodity prices is most likely over, say The Food and Agriculture Organization of the United Nations (FAO) and the Organization for Economic Cooperation and Development (OECD) in their Agricultural Outlook 2016-2025 report released earlier this week available here.
The 10-year projections reinforce the view that agricultural commodities are emerging from the era of intense volatility unleashed by price spikes and supply tensions in 2007-2008, as faltering global economic growth curbed demand and strong output bolstered stocks. “With supply and demand growth broadly matched, real agricultural prices are projected to remain relatively flat overall in the coming decade,” FAO and OECD said.
However, livestock prices are expected to rise relative to those for crops. As incomes improve, especially in emerging economies, demand for poultry, meat and fish will demonstrate strong growth. This trend will, in turn, create additional demand for feed, particularly from coase grains and protein meals.
Globally, the increased demand for food and feed for a growing and more affluent population is projected to mostly be met through productivity gains. Yield improvements are expected to account for about 80 percent of the increase in crop output. Higher agricultural productivity and slightly larger crop areas in the coming decade will cover rises in food demand, leading to stable prices and a period of more restrained agricultural markets, the Ag Outlook said.
The Outlook said that the bulk of all commodity exports will continue to originate in just a few countries with several commodities forecast to be dependent on one country for more than 40 percent of export flows in 2025, such as Brazil for sugar and soybeans. Imports, however, will be far less concentrated amount countries, although China is projected to remain a critical market for some commodities, such as soybeans. OECD and FAO emphasized the importance of well functioning markets in enabling food to flow from surplus to deficit regions, resulting in improved food security.
Under a “business as usual” scenario, in which agricultural productivity grows at the current trend rate and no major action is taken to reduce hunger, projected growth in food availability would result in a reduction in the number of undernourished people in the world from approximately 800 million now to under 650 million in 2025.
The outlook indicates that in sub-Saharan Africa the rate of undernourishment would decline an estimated 23 to 19 percent, but because of rapid population growth, the rise of the middle class, as well as increased commercial interest in Africa’s resources and farmland, the region would still account for a rising share of the world’s population suffering from hunger. Demand for food in sub-Saharan Africa is expected to grow more than 3 percent over the coming decade, while total agricultural production is projected to rise by only 2.6 percent a year.
