OECD-FAO: world food prices will stabilize in the next ten years

Growth in demand for agricultural products will slow down

In the next decade, world prices for most agricultural commodities, including food, will stabilize. This is stated in a report prepared by the Organization for Economic Cooperation and Development (OECD - OECD) in conjunction with the Food and Agriculture Organization of the United Nations (FAO).

The strongest price growth dynamics was observed in April 2021; by the beginning of May, food prices had risen by 4.8%, breaking a ten-year record. UN Senior Economist Abdul-Reza Abbasian blamed the sharp increase in demand for corn in CHINA, a severe drought in Brazil and a global increase in the consumption of vegetable oils and SUGAR in the world. Global inflation is driving up the price of more than just food. In OECD countries, prices in April broke a 12-year record: there has not been such an increase in prices since 2008.

According to the report, global food prices were rising due to increased global biodiesel consumption, reduced MEAT consumption, a drought in Brazil that led to a reduction in sugar production, a sharp increase in demand for corn in China, and also due to the fact that production palm oil by exporting countries has not kept pace with the growing needs of its consumers. However, according to experts, in the coming years, prices will adjust, and then, against the backdrop of increased production and a slowdown in demand growth, they will slightly decrease.

In the next 10 years, the demand for agricultural products will increase more slowly than usual - by an average of 1.2% per year, while in the last 10 years it has increased by 2.2% per year, the document says. At the same time, world production during this period will grow by 1.4% per year. Of the expected growth in agricultural production by 2030, 87% will be provided by dynamics in crop production, 6% by expanding land use and 7% by increasing the intensity of crop cultivation, analysts say. It is also expected that a large proportion of the projected growth in livestock and fish production will be driven by increases in productivity. An increase in the number of livestock will also make a significant contribution to the growth of livestock production in emerging economies and low-income countries,

The authors of the report predict that grain yields will grow by an average of 1% per year due to an increase in the variety of seeds and an increase in the efficiency of the use of resources. Production growth will be constrained by limited access to new technologies and a lack of investment. According to forecasts, over 10 years of grain production in the world will increase by 336 million tons. The main increase in wheat is expected at the expense of India, RUSSIA and Ukraine, the increase in corn production will be provided by the usa , Chinaand Brazil. Soybean production in the world by 2030 will reach 441 million tons, which will more than double the total yield of other oilseeds, which will be at the level of 179 thousand tons. The global supply of meat by 2030 will grow to 374 million tons. China, Brazil will provide most of the increase and the United States, analysts predict. The main driver of the sector will be poultry meat.

World MILK production will increase by an average of 1.7% per year - faster than most other sectors - and will exceed 1 billion tons.

Daria Snitko, HEAD of the Center for Economic Forecasting at Gazprombank, said she agreed with the predicted dynamics of prices and demand for agricultural products by the OECD and FAO. “There is a slight decrease in prices for the main positions of agricultural products, while, although it is seasonal, that is, it reflects an increase in estimates of this year’s harvest, it also has fundamental factors: in the long term, agricultural production in the economy grows faster than consumption,” commented the expert.

Farmers will be able to trade directly from the field 

According to Natalya Shagaida, DIRECTOR of the RANEPA Center for Agro-Food Policy, price surges for basic products are periodically replaced by decreases. “It is useful to recall the dynamics of prices on the world market until the summer of 2020, when the food price index was falling, although the pandemic was already recognized by the world community,” the expert said. — The food market is very volatile, it is influenced by many factors. Large importers have also drawn their own conclusions.” Shagaida also said that China announced in its White Paper for 2021 that it would increase grain production and create a grain belt, as some countries restrict exports during extreme periods. "So there will be changes - price reduction or stabilization - we'll see," she concluded.

And this fact will be taken into account when preparing the monthly analytical report Meatinfo.ru  

At the end of June, it became known that the government was working on creating a system to protect against rising world prices for a number of food products, ferrous and non-ferrous metals and fertilizers. If the cost of goods in the world will overcome the "red line", response mechanisms will come into force. Under the protection system, in particular, sugar, sunflower oil, grain, poultry, pork, milk , fish should fall. The system consists of two parts: a block for forecasting world prices and a block for reacting to prevent the acceleration of domestic prices.