OECD-FAO Agricultural Outlook (2012-2021)

The Agricultural Outlook is prepared jointly by the Organization for Economic Co-operation and Development (OECD) and the Food and Agriculture Organization (FAO) of the United Nations. The main purpose of the report is the attempt to build consensus on global prospects for the agriculture, fisheries and food sectors, and on emerging issues which affect them. According to the latest Agricultural Outlook international agricultural commodity markets appear to have entered calmer conditions after record highs last year, food commodity prices are anticipated to remain on a higher plateau over the next decade, underpinned by firm demand but a slowing growth in global production. The report suggests that in addition to population growth higher per capita incomes, urban migration and changing diets in developing countries, as well as rising requirements for biofuel, feedstocks, are underpinning demand pressures. At the same time, agricultural output by traditional exporting developed countries has been slow to respond to higher prices in the last decade. Higher demand will be met increasingly by supplies that come to market at higher cost. With farmland area expected to expand only slightly in the coming decade, additional production will need to come from increased productivity, including by reducing productivity gaps in developing countries. Global agriculture is increasingly linked to energy markets. Oil price projections contained in the macroeconomic assumptions are on average about USD 25 above those used last year (ranging from USD 110 to USD 140 per barrel over the outlook period). These higher oil prices are a fundamental factor behind the higher agricultural commodity price projections, affecting not only oil-related costs of production but also increasing the demand for biofuels and the agricultural feedstocks used in their production. Despite strong prices The Outlook anticipates that agricultural output growth will slow to an average of 1.7 percent annually over the next 10 years, down from a trend rate of over 2 percent per year in recent decades. Higher input costs, increasing resource constraints, growing environmental pressures and the impacts of climate change will all serve to dampen supply response. Much of the projected growth will come from developing countries, which will increasingly dominate in the production of most agricultural commodities, and also take on a more important role in commodity trade. Based on their greater potential to increase land devoted to agriculture and to improve productivity, developing countries will provide the main source of global production growth to 2021. Annual production growth in developing countries is projected to average 1.9% p.a. compared to 1.2% p.a. in developed countries. An additional 680 million people are expected to inhabit the planet by 2021 with the fastest population growth rates in Africa and India. Rising incomes and urbanisation will lead to changes in diets that shift consumption to more processed foods, fats and animal protein. This will favour higher value meats and dairy products, and drive the indirect demand for coarse grains and oilseeds for livestock feed. Emerging economies will capture an increasing share of the expanding world trade in agriculture. Most prominent are countries like Brazil, China, Indonesia, Thailand, the Russian Federation and the Ukraine that have made significant investments to boost agricultural production capacity. By 2021, developing countries will account for the majority of exports of rice, oilseeds, vegetable and palm oil, protein meals, sugar, beef, poultry meat, fish and fish products. The Outlook further bring the attention to the problem of land degradation and shortage of natural resources as water; soil etc. it notes that 25 percent of all agricultural land is highly degraded. Critical water scarcity in agriculture is a fact for many countries. Several fish stocks are over-exploited or at risk. Governments should encourage better agronomic practices, create the right commercial, technical and regulatory environment and strengthen agricultural innovation systems (e.g. research, education, extension, infrastructure), with attention to the specific needs of smallholders. Creating the right enabling environment also means ensuring that the business climate is conducive to domestic and foreign investments, so governments should limit trade restrictions as well as those domestic support schemes that distort incentives for production and investment in agriculture. There is a need to develop national investment schemes and increased development assistance to agriculture for research and development, innovation adoption and infrastructure development. Developing countries should promote agricultural infrastructure investment in rural areas to improve storage, transportation and irrigation systems, as well as electrification, information and communication systems. Investment in human capital is equally important and depends on more public spending on health care, education and training.