Evolving agricultural markets: Recent and projected trends Highlights from the OECD-FAO Agricultural Outlook 2018-2027 Jonathan Brooks, OECD 2018 ATPC OECD ICTSD FAO Workshop Policies, Challenges and Opportunities for Agriculture and Food Systems Development Nanjing, 24 October 2018
The food price crisis, ten years later Index 2002-04 = 100 200 150 FAO Food Price Index (real) Real prices to be contained by strong supply growth, ample stocks and weakening demand growth 100 50 Prices spiked due to a «perfect storm» of market shocks reinforced by policy responses 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
1.0 0.0-1.0-2.0 Declining real prices are expected for almost all commodities % Annual real price change over the coming decade 2.0-3.0 Wheat Maize Other coarse grains Rice Soybean Other oilseeds Vegetable oils Protein meals White sugar Raw sugar Poultry Pork Beef Sheep Butter Cheese Skim milk powder Whole milk powder Fish Ethanol Biodiesel Cotton Cereals Oilseeds Sugar Meat Dairy Biofuels
Outlook is consistent with the long term trend But multiple long term projections are possible! USD/t Real price Long term trend OUTLOOK LS-low LS-high 1 600 1 400 1 200 1 000 800 600 400 200 0 Long term wheat price
And agricultural markets are always uncertain Structural uncertainty Policy Uncertainty Demand Income growth (esp in Africa) Biofuels (esp in China) Supply Oil prices Pests and disease (e.g. Fall Armyworm) Food and health policies Regulation of new plant breeding techniques Increasing policy uncertainties are adding to market risks Climate risk Potential of precision agriculture Trade Emergence of new market players (esp Russia & Ukraine) Trade disputes Bilateral and regional trade agreements (CTTP, NAFTA, Brexit)
Despite downward trend, risk of temporary price increases remains USD/t 350 Real maize price: Baseline and 90% interval 300 250 200 Grey range includes 90% of simulated prices from the stochastic analysis 150 100 50 0 2008 2011 2014 2017 2020 2023 2026
4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Growth in demand for agricultural commodities to slow except for dairy Average annual growth rate in demand (%) % Due to per capita demand growth (food & other uses) Due to population growth 5.0 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 Cereals Meat Fish Fresh dairy Sugar Vegetable oil
Most additional food demand will come from Sub-Saharan Africa, India and China Growth in demand Mt/decade Rest of World MENA China India Sub-Saharan Africa OECD 160 140 120 100 80 60 40 20 0-20 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 Cereals Meat Fish Fresh dairy Sugar Vegetable oil
Biofuel growth slows down, reducing the demand growth for feedstocks bln L 140 World ethanol production World biodiesel production % 25 Maize used for biofuels Sugarcane used for biofuels Vegetable oil used for biofuels 120 100 20 80 15 60 10 40 20 5 0 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 0 2000 2003 20062009 2012 2015 2018 2021 2024 2027
Crop and meat production will increase without major changes in total land use Yield (t/ha) 12.0 10.0 8.0 6.0 4.0 2.0 0.0 MENA Western Europe 2015-17 2027 Eastern Europe and Central Asia Maize Americas Sub-Saharan Africa South and East Asia 0 20 40 60 80 100 Area harvested (Million ha) Ruminant meat production (Million tonnes) 50 40 30 20 10 0 Western Europe Oceania Ruminant meat 2015-17 2027 South and East Asia Eastern Europe and Central Asia MENA Americas Sub-Saharan Africa 0.0 0.2 0.4 0.6 0.8 1.0 1.2 Pasture (billion ha)
As demand growth slows down, so do agricultural trade volumes Annual growth rate of trade volumes (%) 2008-17 2018-27 % 10 8 6 4 2 0 Wheat Maize Rice Soybean Poultry Pork Beef Skim milk powder
Trade: Specialisation between regions is increasing over time 150 Agricultural trade balances by region, in constant value, 1990-2027 (bln USD) Americas 100 Oceania 50 0-50 -100 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 Eastern Europe and Central Asia Western Europe Sub-Saharan Africa MENA South and East Asia
Exporter concentration remains high Country shares of global agricultural exports by commodity, 2027 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Soybean Pork Maize Skim Milk Powder Poultry Whole Milk Powder Sheep Vegetable Oils Protein Meals Rice Butter Sugar Cheese Wheat Beef Cotton
Importer concentration less pronounced except for some products Country shares of global agricultural exports by commodity, 2027 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Soybean Cotton Sheep Pork Vegetable Oil Protein Meal Butter Skim Milk Powder Beef Cheese Maize Whole Milk Powder Poultry Sugar Rice Wheat
Market and policy linkages With an Outlook for declining real prices, we might expect increased demand for farm support and protection Little appetite to remove market distortions in developed countries Rising demands for support in emerging economies Trade will be important for food security => need for open and predictable markets Yet countries will need to find effective policies for managing domestic and international price volatility Strong supply growth will come from intensification and efficiency gains There is a window to make sure that growth is achieved sustainably
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