Normalcy seems to have returned to the global food markets, which suffered a number of serious shocks in the last few years. However, governments still remain concerned about the food situation with prices fluctuating sharply in many products. However, the OECD-FAO Agricultural Outlook for the period 2010-2019 indicates that the commodity projections in 2010 are more positive than in 2009, though higher oil prices are expected to increase input and production costs of agriculture.
On the positive side, the report points out that though high cost structure would push up agriculture prices in regions where energy inputs are used extensively in agriculture, the average crop prices over the next few years, though higher than the levels of the decade prior to the 2007-08 peaks, will most probably remain below the peak levels. However, growth in production will push up food stocks, especially of rice, wheat and coarse cereals.
Average wheat and coarse grain prices are projected to be 15-40% higher in real terms relative to 1997-2006. And in the case of vegetable oil, the real prices are likely to be more than 40% higher. The report also points out that though short-term volatility of food prices increased considerably since 2006-08, the evidence so far is still inconclusive whether and how price volatility has changed over the long term for major food crops.
Developing countries will be the main source of growth in production, consumption and trade. The increasing affluence and an expanding middle class has made food consumption in these countries less responsive towards food shocks, which implies that larger changes in prices and incomes will be required for consumption to adjust to any unforeseen shocks, points out the report.
Projections till 2019 show that OECD countries will continue to dominate exports of wheat (52%), coarse grains (59%), pig meat (80%), butter (80%) and cheese (63%) while developing countries will dominate exports of rice (88%), oil seeds (56%), protein meals (80%), vegetable oils (91%), sugar (90%), beef (57%) and poultry (63%).
The report also points out that market price support as a policy option has been found to be inefficient in many countries as it masks signals to producers, destabilises world markets and most importantly acts as a regressive tax on the poor by raising consumer prices. A better remedy would be targeted direct income support to farmers and investments for enhancing productivity.