OECD-FAO: agri commodity prices to fall to pre-2008 levels

The bodies’ joint annual agricultural report, the Agricultural Outlook, predicts that agriculture prices will continue to fall from recent peaks and will stabilise at pre-2008 levels on the back of increased production globally.

Agricultural commodity prices will continue to fall from their recent peaks and will stabilise at pre-2008 levels, according to predictions in the latest annual Agricultural Outlook report from the Organisation for Economic Co-operation and Development (OECD) and the UN’s Food and Agriculture Organisation (FAO).

The report notes that the fall in prices is linked to increased agricultural production globally, which is projected to rise continually over the next decade. Changing diets as a result of urbanisation and a rising middle class population around the world has led to increased demand for dairy, sugar and protein globally.

Furthermore some 75 percent of additional agricultural output is expected to be produced in developing regions over the next 10 years, with Latin America and Asia leading the way, according to the report.

Cereal production experienced record highs in 2013, according to the report. This is influencing downward pressure on global cereal prices as a result of surplus stocks, and this is expected to continue in the medium term. Production increases over the next decade are expected to come from yield increases rather than area expansion, with land devoted to wheat only increasing by one percent a year in the coming decade.

Meat production has seen a great deal of investment activity in the last half year, particularly in China. However, the report concludes that the profitability of the sector is not expected to rise because input costs such as feed will remain high until the next decade.

In the dairy sector, China is the major story. Chinese self-sufficiency in dairy production has declined significantly in recent years, making it a key international market for dairy exporters globally. But Chinese dairy producers will try to improve their production levels to satisfy domestic demand over the 10 years, added the report.