Global food, commodity prices to remain low as agricultural output increases

Over the next ten years, the prices of food and commodities are expected to remain low across the world, at least on the average, as agricultural output is projected to increase, absorbing any increase in future demands that may even be driven by population growths.

This was a major finding contained in an annual report, the ‘Agricultural Outlook 2019-2028’, a collaborative effort of the Organisation for Economic Co-operation and Development (OECD) and Food and Agriculture Organization of the United Nations (FAO), prepared with input from the experts of their member governments and from specialist commodity organisations.

The report noted that several years of strong supplies have reduced the international prices of most agricultural commodities, with cereal, beef and sheep meat prices showing short-term rebounds. For nearly all commodities covered in the Outlook, real prices are projected to remain at or below current levels over the coming decade, as productivity improvements continue to outpace demand growth.

Global demand for agricultural products is projected to grow by 15 percent over the coming decade, while agricultural productivity growth is expected to increase slightly faster, causing inflation-adjusted prices of the major agricultural commodities to remain at or below their current levels.

“Global agriculture has evolved into a highly diverse sector, with operations ranging from small subsistence farms to large multinational holdings,” José Graziano da Silva, FAO Director-General and Angel Gurría, OECD Secretary-General wrote in the Foreword of the report. Along with providing food, they added, today’s farmers “are important custodians of the natural environment and have become producers of renewable energy.”

They also noted that; in order to meet the high expectations society places on agriculture, public and private decision makers require reliable information on the likely trends of global demand, supply, trade and prices and the factors driving them.

The Outlook projects that yield improvements and higher production intensity, driven by technological innovation, will result in higher output even as global agricultural land use remains broadly constant. Direct greenhouse gas emissions from agriculture, meanwhile, are expected to grow by some 0.5 percent annually over the coming decade, below the 0.7 percent rate of the past 10 years and below the projected output growth rate – indicating declining carbon intensity.

At the same time, new uncertainties are emerging on top of the usual risks facing agriculture. These include disruptions from trade tensions, the spread of crop and animal diseases, growing resistance to antimicrobial substances, regulatory responses to new plant-breeding techniques, and increasingly extreme climatic events. Uncertainties also include evolving dietary preferences in light of health and sustainability issues and policy responses to alarming worldwide trends in obesity.

Worldwide, the use of cereals for food is projected to grow by about 150 million tonnes over the outlook period – amounting to a 13 percent increase – with rice and wheat accounting for the bulk of the expansion. The most significant factor behind the projected growth in food use of staple products is population growth, which is expected to rise fastest in Sub-Saharan Africa and South Asia.

“The Outlook makes abundantly clear that trade is critical for global food security,” said Ken Ash, OECD Director for Trade and Agriculture. “Regions that are experiencing rapid population growth are not necessarily those where food production can be increased sustainably, so it is essential that all governments support open, transparent and predictable agro-food markets.”

CALEB OJEWALE