OECD-FAO Agricultural Outlook Published for 2012-2021

The 18th edition of the Agricultural Outlook was launched on 11 July. The report presents projections for the coming decade on global agricultural production and commodity prices taking into account projected economic growth, population growth, inflation, energy prices and policy implications. For the eighth time, the Outlook has been prepared by the OECD and the FAO together and relies on data gathered from the Agricultural Market Information System (AMIS). However, this is the first time it provides an analysis of the environmental implications in their projections, in a supplementary chapter entitled ‘achieving sustainable agricultural productivity growth’.

‘Increased productivity, green growth and more open markets will be essential if the food and nutrition requirements of future generations are to be met. Governments should renounce trade distorting practices and create an enabling environment for a thriving and sustainable agriculture underpinned by improved productivity’. OECD Secretary General, Angel Gurría.

A brief overview

According to the Outlook report, global agricultural production is projected to continue growing at a slower pace over the coming decade at an average 1.7 per cent per year, down from an average 2.6 per cent. Although slower than the previous decade, this projected growth rate is anticipated to be greater than the forecast population growth. Particularly in Latin America and Eastern Europe, where production growth is expected to grow at a faster rate than the global average due to an increased area of production, higher yields and greater investments.

An overview of the commodity production projections shows:

  • Bio-ethanol and biodiesel production from agricultural feedstocks have the highest forecast growth (between 4.8 and 5 per cent), with the EU set to dominate the latter, accounting for 47 per cent of this expected increase, and the US the former accounting for 82.8 per cent of the expected increase.
  • Global cereal production is expected to continue growing but at a slower rate than the previous decade (an annual average 1.1 per cent growth as opposed to the previous annual average of 2.5 per cent). This growth is slightly slower than the projected growth in consumption thus indicating possible future impacts on cereal prices. In nominal terms, cereal prices are expected to be above those from the previous decade (for example, wheat prices are projected to increase by an annual average of 1.5 per cent); however, in real terms, a moderate decline is forecast for the coming decade. See Figure 4.1 to view this evolution of prices.
  • Sugar production is forecast to grow at an annual average of 1.9 per cent, a higher rate than the previous decade of 1.7 per cent. The projections indicate that 95 per cent of this growth is expected to occur in developing countries.
  • Global meat prices are expected to increase making the sector more profitable and consequently more productive. This projected increase is expected to be particularly great in developing countries with livestock production expected to more than double over the next decade in these areas. The increase in production is expected to be led by poultry, followed by sheep, beef and pig meat production.
    • Milk production is expected to continue growing at a slightly lower annual rate of 2 per cent (from 2.1 per cent pa in the previous decade).
    • Aquaculture is forecast to become the largest source of fish supply for human consumption by 2018.

Achieving sustainable agricultural productivity growth

These forecast trends provide a context for the subsequent analysis on achieving sustainable agricultural productivity growth, which additionally takes into account the demographic changes of a growing population and a shift from rural to urban communities, income growth and changing dietary patterns. In this context, the report refers to estimates given by the FAO in the 2012 revision for World agriculture towards 2030/2050 that agricultural production will need to increase globally by 60 per cent by 2050 over 2005 production levels: meaning a further 940 million tonnes of cereals and 200 million tonnes of meat a year by 2050.

To meet this growth the outlook notes that increased production levels must continue to be met by improved yield. However, market volatility and resource constraints pose significant threats on the capacity to increase production levels. The volatility stems for example from weather hazards, fluctuating fuel prices and other macroeconomic conditions. One of the most pressing resource constraints may be water availability for agricultural use which is likely to decline from 70 per cent to 40 per cent by 2050. In order to manage these threats, the Outlook argues that in addition to becoming more economically resilient the agricultural sector must intensify production sustainably and recommends greater investment in research and development.

Furthermore, the sustainability chapter provides some examples of best practices for increasing sustainable agricultural productivity growth. A few examples of ‘no-regrets’ options are: more efficient use of irrigation water through better timing and reliability and harvesting runoff; better plant nutrient management and crop protection; and breeding resistant crops to potential weather hazards.

The OECD-FAO Agricultural Outlook for 2012-2021 can be viewed here.

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25 Jul 2012