OECD-FAO Agricultural Outlook

Jonathan BrooksMexico City, 6th November 2014

2

Context

» High food prices in 2007-08 caught most by surprise, but such events are not unprecedented.

» Since then there has been a strong supply response and prices have fallen back, although maize prices peaked again in 2012/13 due to drought in the United States.

» Good harvest for most crops in 2013-14, with reduced crop price volatility

» Meat prices peaked in 2014, while dairy prices fell sharply from historic highs

» Low oil prices

» Uncertainty on future of biofuel mandates

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Real food prices still high but returning to levels of the mid-1990s

19701972

19741976

19781980

19821984

19861988

19901992

19941996

19982000

20022004

20062008

20102012

2014

0

100

200

300

400

500

600

700

800

IMF food Index Maize Rice Wheat

Source: IMF

Commodity price volatility back to pre-crisis levels(Number of commodities whose volatility was above 25%)

199819992000200120022003200420052006200720082009201020112012201320140

3

6

9

12

15

18

21 1

2

01

5

0

8

5

17

14

45

0

21

Source: Baffes (2014) from ICE, CME, and World Bank calculations.

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Highlights of the Outlook

» Real food prices expected to decline slightly, but remain above levels before food price crisis.

» Changing relative prices:› Coarse grain and oilseed prices increase relative to food staples

– feed and fuel demand› Meat and dairy prices increase relative to crops – higher

incomes and protein demand

» Agricultural markets expected to be less volatile than in recent years (recovery in stocks)

» Optimistic outlook for India – despite doubts about the viability of government food programmes.

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200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023

0.4

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2CEREALS DAIRY MEAT OILSEEDS

Index, 2011-2013 = 1, Based on Production Value

Modest declines in real prices

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Outlook assumes constant policies and “normal” market conditions, but there are risks:

» Slower economic growth in emerging economies (BRIICS)

» Energy prices & links to commodity markets

» Agricultural and trade policies

» Trade agreements

» Biofuel policies

Long-term structural uncertainties:

» Rate of agricultural productivity growth

» Consumption patterns (including waste)

» Natural resource constraints & environmental impacts

» Climate change

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200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023

0

50

100

150

200

250

300

350

Nominal maize price (US$/t), 2000 - 2023

10th to 90th percentile range (coefficient of variation in 2023 = 12.2%)

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Policy settings need to be robust to alternative future outcomes

» Medium-term Outlook will be influenced by how we address long- term challenges: global food security, sustainable resource use, climate change

» Agenda needs to focus more on public good provision and move away from income support and associated distortions

» Improve agricultural productivity sustainably – raises farmers’ incomes and lowers food prices

» Keep markets open:

› Market information can help countries avoid rash responses (AMIS and Rapid Response Forum)

› Importance of multilateral reform and post Bali WTO agenda

» Avoid policies that contribute to higher and more volatile food prices

For more information

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Access the OECD-FAO Agricultural Outlookwww.agri-outlook.org

Visit our websiteswww.oecd.org/tad

http://www.fao.org/economic/en/

Connect with uswww.twitter.com/OECDagriculture

Contact ustad.contact@oecd.org

EST-Projections@fao.org