Commodity prices will fall from their high 2010-11 levels as markets respond to these prices and the opportunities for increased profitability that they afford, a joint report by OECD and UN body FAO said.
But, for achieving it, harvests this year are critical, the report — OECD FAO Agricultural Outlook 2011-12 —— released today said.
“A good harvest this year will be critical in bringing more stability to commodity markets,” it said.
It, however, said restoring market balances may take some time.
“Until stocks can be rebuilt, risks of further upside price volatility remains high,” the report added.
Commodity prices rose sharply in August 2010 as crop production shortfalls in key producing regions and low stocks reduced the available supplies and the resurging economic growth in developing and emerging economies underpinned the demand.
High and volatile commodity prices and their implications for food insecurity are clearly among the important issues facing governments today, the outlook said.
This was well reflected in the discussions at the G-20 Summit in Seoul in November 2010 and in proposals for action being developed for consideration at its June 2011 meeting of agriculture ministers in Paris.
The main purpose of the joint report of OECD (Organisation for Economic Co-operation and Development) and the FAO (Food and Agricultural Organisation) is to attempt to build consensus on global prospects for agriculture, fisheries and food sectors and on emerging issues which affect them.
OECD is an international organisation that helps governments tackle the economic, social and governance challenges of a globalised economy.
The forecast maintains that agricultural commodity prices in real terms are likely to remain on a higher plateau during the next decade compared to the previous decade.
“Prolonged periods of high prices could make the achievement of global food security goals more difficult, putting poor consumers at a higher risk of malnutrition,” it said.
The OECD and FAO outlook said agricultural production is expected to increase in the short-term, assuming normal weather, as a result of an expected supply response to current high prices.
“Commodity prices should fall from the highs of early 2011, but in real terms are projected to average up to 20 per cent higher for cereals (maize) and up to 30 per cent for meat (poultry), over the 2010-20 period, compared to the last decade,” the outlook said.
Global agricultural production is projected to grow at 1.7 per cent annually on an average compared with 2.6 per cent in the previous decade, it said.
The fishery sector is projected to increase its global production by 1.3 per cent annually in 2020 slower than over the previous decade due to lower growth of aquaculture (2.8 per cent against 5.6 per cent for 2001-10) and a reduced or stagnant fish capture sector.
Per capita food consumption will expand most rapidly in Eastern Europe, Asia and Latin America where incomes are rising and the population growth is slowing, it said, adding that vegetable oils, sugar, meat and dairy products should experience the highest increase in demand.
Trade is expected to grow by 2 per cent per year which is slower than over the previous decade with only modest production increases by traditional exporters and higher domestic productivity by importers.
The use of agricultural output as feedstock for biofuels will continue its robust growth largely driven by biofuel mandates and support policies.
By 2020, an estimated 13 per cent of global coarse grain production, 15 per cent of vegetable oil production and 30 per cent of sugarcane production will be used for biofuel production.
“Higher oil prices would induce further growth in use of biofuel stocks and of sufficiently high oil prices, biofuel production in many countries becomes viable even in the absence of policy support,” the outlook added.