Growing demand from emerging markets and biofuel production are expected to drive up farm commodity prices leading to increased food insecurity, warns the latest outlook on global agricultural markets.
While farm commodity prices have fallen from their record peaks of two years ago, they are "unlikely to drop back to their average levels of the past decade," stresses the Agricultural Outlook 2010-2019, jointly prepared by the Organisation for Economic Co-operation and Development (OECD) and the UN Food and Agriculture Organisation (FAO).
Instead, the report published yesterday (15 June) warns that the average wheat and coarse grain prices will be between 15-40% higher in real terms (adjusted for inflation) over the next ten years compared to their average levels during the 1997-2006 period.
Real prices for vegetable oils are projected to be more than 40% higher and dairy prices have soared by an average of 16-45%.
The report covers biofuels, cereals, oilseeds, sugar, meats and dairy products over the 2010-19 period. Its market assessments are based on "a set of underlying assumptions regarding macroeconomic factors, agricultural and trade policies and production technologies" and assume normal average weather conditions and long-term productivity trends.
Emerging markets, biofuels driving demand
"Sustained economic growth in emerging markets is an important factor underpinning growing demand and higher prices," notes the report.
Expansion of biofuel production driven by government targets is also expected to create additional demand for wheat, coarse grains, vegetable oils and sugar.
A recent NGO report argued that millions of people could starve if EU member states deliver on the EU's target of sourcing 10% of its transport fuel from biofuels as a way of tackling climate change, because industrial biofuels are currently made from maize, wheat, sugar cane and oil seeds such as palm oil, soy and rapeseed, which compete with crops grown for food (EURACTIV 15/02/10).
Production on track, but hunger prevails
Meanwhile, the OECD-FAO outlook projects that global agriculture output "remains on track with previous estimates to meet the 70% increase in world food production required to meet the market demand of estimated population levels in 2050".
Global growth in the sector is expected to be led by Latin America and Eastern Europe and, to a lesser extent, by certain countries in Asia.
The report notes that Brazil is "by far the fastest-growing agricultural producer," with output expected to rise by more than 40% between now and 2019. Production growth of well over 20% is expected in China, India, the Russian Federation and Ukraine.
Nevertheless, the report underlines that recent price spikes and the economic crisis have contributed to a rise in hunger and food insecurity, and that "agricultural production and productivity will need to be stepped up" and "a well-functioning, rules-based trading system" is needed to ensure fair competition and free flow of commodities from surplus to deficit production areas.