New Delhi: For the beleaguered net food importing developing countries, faced with the recent record level of prices for almost all agricultural commodities that led substantially to food inflation, the prospects for any respite in the medium to long term are none too optimistic.
This is the broad conclusion of the Agricultural Outlook, jointly prepared by the Organisation for Economic Cooperation and Development (OECD) and the Food and Agriculture Organisation (FAO) of the UN and released in Paris at the 30-member inter-governmental think tank’s headquarters on Thursday.
As world reference prices in nominal terms for all agricultural commodities today remain at or above previous record levels, OECD said this might come down due to the transitory nature of some of the factors behind the recent hikes. However, it adds: “There is a strong reason to believe that there are now also permanent factors underpinning prices that will work to keep them both at higher average levels than in the past and reduce the long-term decline in real terms”.
In the medium term
Providing a synoptic assessment of agricultural markets covering cereals, oilseeds, sugar, meat, milk and dairy products over the span of 2008 to 2017, the report said the underlying dynamics in supply and demand suggest that commodity prices — in nominal terms — over the medium term would average substantially above the levels prevalent in the last ten years.
When the average for 2008 to 2017 is compared with that over 1998 to 2007, it said, beef and pork prices might be some 20 per cent higher, some 30 per cent for raw and white sugar, 40 to 60 per cent for wheat, maize and skim milk powder, more than 60 per cent higher for butter and oilseeds and over 80 per cent higher for vegetable oils.
Despite record wheat and coarse grain crops in 2007-08 and a sustained moderate rise in production thereafter, grain markets are likely to remain tight in the period to 2017, OECD said. The prolific demand for maize arising from the rapidly expanding ethanol segment in the US has profoundly hit the coarse-grain market since roughly 40 per cent of the US’s maize crop could be destined for energy production by 2017, it noted.
Feed demand
Developing countries such as those in South and East Asia, as well as Nigeria and Egypt, would continue to fuel global wheat demand. Saudi Arabia is also projected to become a major importer. The growth in global demand for coarse grains would be driven by heightened feed demand from thriving livestock industries in developing countries. Imports by these countries as a group are likely to grow to 94 million tonnes, representing nearly 75 per cent of the world total, which compares to less than 70 per cent over the base period.
Global rice production could expand by 10 per cent by 2017, fuelled by larger crops in South and South-East Asian countries. As a share of world production, rice trade is likely to fall slightly, indicating a lessening reliance on the global market that is consistent with a return to more stringent self-sufficiency policies in several countries. Much of the expansion in world imports is fuelled by demand in Africa and Asia, with Thailand forecast to account for around one-third of all rice exports.
Bio-diesel production
OECD said emerging bio diesel production would escalate the consumption of domestically produced palm oil in Indonesia and Malaysia and soyabean oil in Brazil at the expense of exports of vegetable oil or oilseeds originating from those countries. On the ethanol front, a number of sugar-producing countries such as the EU, Japan, Malaysia, Indonesia, India, South Africa, Colombia and the Philippines are embarking on renewable energy programmes for use in the transport fuel sector.
As most of them are expected to use molasses or starch sources rather than raw sugarcane juice as feedstock, OECD said molasses-based bio-ethanol production should not impair sugar production in these countries and might even whet further growth in cane and sugar output.
World ethanol production is likely to increase rapidly to reach some 125 billion litres in 2017, twice the quantity produced in 2007. World ethanol prices are likely to exceed $55 per hectolitre in 2009, as crude oil prices rise, but should fall back to levels around $52-53 per hectolitre over the remainder of the projection span as production capacity expands the world over
This is the broad conclusion of the Agricultural Outlook, jointly prepared by the Organisation for Economic Cooperation and Development (OECD) and the Food and Agriculture Organisation (FAO) of the UN and released in Paris at the 30-member inter-governmental think tank’s headquarters on Thursday.
As world reference prices in nominal terms for all agricultural commodities today remain at or above previous record levels, OECD said this might come down due to the transitory nature of some of the factors behind the recent hikes. However, it adds: “There is a strong reason to believe that there are now also permanent factors underpinning prices that will work to keep them both at higher average levels than in the past and reduce the long-term decline in real terms”.
In the medium term
Providing a synoptic assessment of agricultural markets covering cereals, oilseeds, sugar, meat, milk and dairy products over the span of 2008 to 2017, the report said the underlying dynamics in supply and demand suggest that commodity prices — in nominal terms — over the medium term would average substantially above the levels prevalent in the last ten years.
When the average for 2008 to 2017 is compared with that over 1998 to 2007, it said, beef and pork prices might be some 20 per cent higher, some 30 per cent for raw and white sugar, 40 to 60 per cent for wheat, maize and skim milk powder, more than 60 per cent higher for butter and oilseeds and over 80 per cent higher for vegetable oils.
Despite record wheat and coarse grain crops in 2007-08 and a sustained moderate rise in production thereafter, grain markets are likely to remain tight in the period to 2017, OECD said. The prolific demand for maize arising from the rapidly expanding ethanol segment in the US has profoundly hit the coarse-grain market since roughly 40 per cent of the US’s maize crop could be destined for energy production by 2017, it noted.
Feed demand
Developing countries such as those in South and East Asia, as well as Nigeria and Egypt, would continue to fuel global wheat demand. Saudi Arabia is also projected to become a major importer. The growth in global demand for coarse grains would be driven by heightened feed demand from thriving livestock industries in developing countries. Imports by these countries as a group are likely to grow to 94 million tonnes, representing nearly 75 per cent of the world total, which compares to less than 70 per cent over the base period.
Global rice production could expand by 10 per cent by 2017, fuelled by larger crops in South and South-East Asian countries. As a share of world production, rice trade is likely to fall slightly, indicating a lessening reliance on the global market that is consistent with a return to more stringent self-sufficiency policies in several countries. Much of the expansion in world imports is fuelled by demand in Africa and Asia, with Thailand forecast to account for around one-third of all rice exports.
Bio-diesel production
OECD said emerging bio diesel production would escalate the consumption of domestically produced palm oil in Indonesia and Malaysia and soyabean oil in Brazil at the expense of exports of vegetable oil or oilseeds originating from those countries. On the ethanol front, a number of sugar-producing countries such as the EU, Japan, Malaysia, Indonesia, India, South Africa, Colombia and the Philippines are embarking on renewable energy programmes for use in the transport fuel sector.
As most of them are expected to use molasses or starch sources rather than raw sugarcane juice as feedstock, OECD said molasses-based bio-ethanol production should not impair sugar production in these countries and might even whet further growth in cane and sugar output.
World ethanol production is likely to increase rapidly to reach some 125 billion litres in 2017, twice the quantity produced in 2007. World ethanol prices are likely to exceed $55 per hectolitre in 2009, as crude oil prices rise, but should fall back to levels around $52-53 per hectolitre over the remainder of the projection span as production capacity expands the world over
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