NEW DELHI—Better crop yields and a slower growth in global demand will lead to a gradual decline in real prices of major crops over the next decade, said the Agricultural Outlook 2015 to 2024 released on Wednesday.
However, crop prices are likely to remain at levels above those in the early 2000s, observed the report released by the Organisation for Economic Co-operation and Development (OECD) and UN’s Food and Agriculture Organization (FAO).
A major factor driving lower food prices globally is lower oil prices that is pushing down energy and fertilizer costs, the report said, adding, this will remove incentives for production of biofuels.
The report further said that global trade in agri-products is likely to remain sluggish and increase at a rate slower than the last decade.
However, the next decade will see an increased concentration of exports by a handful of countries that could possibly increase market risks due to natural disasters or disruptive-trade practices, it said.
“The outlook for global agriculture is calmer than it has been in recent years, but there is no room for complacency, as we cannot rule out the risk of new price spikes in the coming years,” said Angel Gurría, secretary-general of OECD, while releasing the report in Paris.
Governments should take advantage of the current situation to concentrate on policies that raise productivity, boost innovation and better manage risk, Gurría said.
Within the global commodity basket, the report estimated that meat and dairy prices will be higher relative to crop prices, driven by rising incomes and urbanization.
Meat production is expected to respond to an improvement in margins, with lower feed prices set to restore profitability to the sector, the report said.
Exports of dairy products will further concentrate among four countries—New Zealand, the European Union, the US and Australia—where opportunities for domestic-demand growth are limited, it said.
The report said that high cereal stocks in the past two years together with low oil prices will further weaken cereal prices in the short term. But higher demand for sugar in developing countries will help prices recover from the present low levels and lead to further investment in the sector.
Global cotton prices in 2024 are projected to remain below the levels reached in 2012 to 14, the report said.
The good news is that lower staple food prices will help developing countries improve their nutritional standards, said José Graziano Silva, director general of FAO in a release.
Global agricultural production grew at an annual average of 2.2 percent in the last decade, the report said, adding, growth in global agriculture is projected to slow to 1.5 percent annually in the next decade.
This will be due to slower growth in all regions, notably in Eastern Europe and the Russian Federation (1.3 percent); Asia and Pacific (1.7 percent). But Africa and Latin America will lead global growth in agriculture at 2.4 percent and 1.8 percent, the report said.