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High and volatile agricultural prices for the next 10 years
High prices : On 29th May 2008 the FAO and OECD published the report “Agricultural Outlook 2008-2017”. According to the report, prices should fall slightly after the historic peaks witnessed in the last few months but they will remain high (above the average of the last decade) for the next 10 years.
On average, compared to the last 10 years, real prices should increase by less than 10% for rice and sugar, by less than 20% for wheat, around 30% for butter, secondary cereals and oil seeds and up to 50% for vegetable oils.
Several structural factors account for continuing high prices, especially the high price of oil, changes in diet, urbanisation, economic growth and the increase in the world’s population.
Volatile prices : The report forecasts high volatility. Stocks will remain low and a part of the demand will become less sensitive to price increases. Volatility will be further increased by speculation with a growing number of investment fund operations on the agricultural futures markets, and by variations in production volumes caused by climate change.
Required investment : Farmers in developing countries can benefit from price increases provided they can be helped to invest. Investment will also be required for increasing production which would enable the impact on the poorest consumers to be limited.
A change in world flows of agricultural products : The epicentre of the world’s agricultural production will continue its shift away from the countries of the OECD towards developing countries. The latter are showing a faster rise in consumption and production for all types of produce with the exception of wheat. By 2017, they are expected to dominate the production and consumption of most basic commodities.
For further information about the FAO-OECD Agricultural Outlook 2008-2017 : click here
