A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
Focus on issues

New UN report projects steady decline in food prices over next decade

UN News Centre

The new OECD-FAO report on the agricultural outlook for the period 2015-2024 has just been published
1. For both agencies, the prices of agricultural produce are expected to continue to decline over the next decade, a decline which started two years ago due to improved yields, combined with lower oil prices, which affects the cost of fertilizer and energy.

However, agricultural prices “should remain at a higher level than in the years before the 2007-2008 price spikes”, while it “is very likely that international markets will experience at least one serious shock in the ten years ahead”. An illusory lull that meets the conclusions, warnings and precautions advanced in a recent USDA report on “the major forces and uncertainties of future agricultural markets” for the next decade.

If some OECD-FAO forecasts should be verified (in particular the gradual trend towards the concentration of production factors in certain geographical areas with comparative and competitive advantages), agricultural markets remain exposed to multiple risks, whose adverse effects on price stability are exacerbated by the unregulated liberalization of agricultural markets. That both agencies recognize an upcoming potential shock amounts to accepting this as a fact.

Finally the only certainty is the intrinsic volatility of agricultural markets, while the projected capacity forecasts must be used with care.

momagri Editorial Board

Real prices for global agricultural products will continue their gradual decline over the coming decade due to a combination of strong crop yields, higher productivity and slower growth in global demand, according to a new report issued by the United Nations Food and Agricultural Organization (FAO).

Released in conjunction with the Organisation for Economic Co-operation and Development (OECD), the OECD-FAO Agricultural Outlook 2015-2024 notes that as the low cost of oil pushes energy and fertilizer costs down and removes incentives for the production of first-generation biofuels made from food crops, food prices will continue to slope downwards over the next ten years.

In Asia, Europe and North America, additional agricultural production will be driven almost exclusively by yield improvements, whereas in South America yield improvements are projected to be complemented by additional agricultural area. Modest production growth is expected in Africa, although further investments could raise yields and production significantly.

Among the various commodities enjoying a decline in market costs, according to the Outlook, are cereal prices which – due to the concurrence of high cereal stocks and low oil prices – are expected to weaken in the short term. Over the medium term, however, slowly rising production costs and sustained demand may strengthen prices again.

For its part, high sugar demand in developing countries will likely boost prices for the commodity and spur further investment in the sector. The report suggests that the market outcome will nonetheless hinge on the ongoing competition between the profitability of sugar versus ethanol in Brazil, considered to be the world's leading producer.

Despite the advantageous scenario regarding global food pricing, prices will likely remain at levels above those at the beginning of the 2000s, the report adds.

Major changes in demand are, in fact, expected throughout the developing world amid a growing population, rising per capita incomes and urbanization which, says the Outlook, will increase demand for food.

The report further explains that 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.

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Paris, 16 June 2019