Rising global food trade competition set to depress prices, UN-backed report

Global competition among exporters of wheat, rice, oilseeds, sugar and livestock is expected to intensify over the next 10 years among both developed and developing countries, resulting in a further drop in real prices for most basic food commodities, according to a new United Nations-backed report released today.

Farmers will thus have to make continued efforts to improve efficiency while policy reforms could help improve agricultural markets, according to the Organization for Economic Co-operation and Development's (OECD) latest Agricultural Outlook, produced for first time in collaboration with the UN Food and Agriculture Organization (FAO).

With increasing export supplies by low cost non-OECD countries and a continued high degree of protection in many of the rich markets of the 30 developed member states of OECD, rising demand growth in developing countries will result in an increase in their share of the global trade in farm products, the report says.

It estimates that total world cereal output will increase by over 1 per cent annually with most of the growth occurring in the non-OECD area. Although increasing imports by China and other Asian countries could drive nominal prices higher in the near term, international wheat prices are expected to fall in real terms by around 11 per cent over the next 10 years.

But in a rebound from recently low levels, real world rice prices are expected to increase over the projection period, reversing the downward trend of the past 30 years.

With the growing importance of China and India in global markets, small shocks to either demand or supply in these large countries could lead to substantial external adjustments, the report adds.

Similarly, conditions in the key emerging suppliers, particularly in South America, will be increasingly critical to the evolution of world markets. With rapidly increasing production and trade of livestock products, animal disease outbreaks also provide for an important source of uncertainty, according to the report.