Changing diets in emerging countries will boost global demand for meat and dairy products in the next 10 years, shifting grain supply towards livestock feed as use of crop-based biofuel is curbed by lower oil prices, the FAO and OECD said.
In their annual Agricultural Outlook report released on Wednesday, the United Nations Food and Agriculture Organization and the Organisation for Economic Cooperation and Development confirmed a broad trend set out last year of moderate food prices due to production gains and less vigorous demand.
Prices of all major agricultural products are set to decline in real terms over 2015-2024, although they will remain above levels seen before a surge in 2007-2008 that heralded a period of high volatility, the institutions said.
Within the overall picture of more restrained markets, partly due to tepid economic growth, a dietary shift towards animal protein would be a major feature.
“We see consumption of staples reaching saturation in many countries including many emerging economies,” Jonathan Brooks, an economist at the OECD’s trade and agriculture directorate and one of the report’s authors, told a news conference.
“At the same time we see meat and dairy demand increasing relative to demand for crops, and that will push up meat and dairy prices relative to crop prices.”
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Animal protein consumption would in turn boost use of grains and oilseeds for livestock feed.
Animal feed demand would account for 70 percent of growth in world consumption of coarse grains – mainly corn (maize) – in the next 10 years, double its share in the previous decade when it lagged the near 40 percent contribution of biofuels, the report said.
Biofuel demand would be capped by lower oil prices, which have made it unprofitable, and ceilings in government blending targets, with the notable exception of Brazil which is supporting further use of ethanol made with sugar cane.
The FAO and OECD, among critics of subsidised biofuel schemes blamed for contributing to tensions in food supply and prices, said technology was now available to use various plants, which could offer a more sustainable outlet for farmers.
South America and Brazil in particular would benefit from rising demand for protein products, given their potential to raise output of meat and soybeans for livestock meal.
Brazil, already the world’s second-largest largest agricultural exporter after the United States, was expected to be the biggest supplier of additional global demand, the FAO and OECD said.
Overall exports will remain dominated by a small group of countries, the report said, noting that a Russian embargo on Western food products had altered some flows by generating more South American shipments to Russia and more EU and U.S. exports to Asia.