OECD-FAO Agricultural Outlook 2018-2027

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OECD–FAO Agricultural Outlook 2018–2027 The Agricultural Outlook 2018-2027 is a collaborative effort of the OECD and FAO prepared with input from the experts of their member governments and from specialist commodity organisations. It provides a consensus assessment of the ten-year prospects for agricultural and fish commodity markets at national, regional and global levels. This year’s edition contains a special chapter on the prospects and challenges of agriculture and fisheries in the Middle East and North Africa.

Executive Summary Prices of agricultural commodities are expected to remain broadly at current levels

A decade after the food price spikes of 2007-8, conditions on world agricultural markets are very different. Production has grown strongly across commodities, and in 2017 reached record levels for most cereals, types of meat, dairy products, and fish, while cereal stock levels climbed

Agricultural 8‑2027

to all-time highs. At the same time, demand growth has started to weaken. Much of the impetus to demand over the past decade came from rising per capita incomes in the People’s Republic of China (hereafter “China”), which stimulated the country’s demand for meat, fish and animal feed. This source of demand growth is decelerating, yet new sources of global demand are not sufficient to maintain overall growth. As a result, prices of agricultural commodities are expected to remain low. Current high cereal stock levels also make a rebound unlikely within the next few years.

Figure 1.  Medium-term evolution of commodity prices in real terms Index (2015-17=100)

Cereals

Dairy

Meat

Oilseeds

180 160 140 120

EASt AnD nOrth AFriCA 100

80 60 40

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

Note: Price indices for commodity groups calculated using a constant weighting of commodities within each aggregate, using the average 2015-2017 production value as weights.


Global food demand follows population growth as per-capita consumption of many food items levels off

The weakening of demand growth is expected to persist over the coming decade. Population growth will be the main driver of consumption growth for most commodities, even though the rate of growth is forecast to decline further. Moreover, per capita consumption of many commodities is expected to be flat at a global level. This is notable for staple foods such as cereals as well as roots and tubers, where consumption levels are close to saturation levels in many countries. By contrast, demand growth for meat products is slowing due to regional variation in preferences and disposable income constraints, while demand for animal products such as dairy is set to expand faster in the coming decade.

Growing need for animal feed pushes global crop mix towards maize and soybeans

For cereals and oilseeds, demand growth will come from feed, closely followed by food. A large share of additional feed demand will continue to come from China. Feed demand growth is nevertheless projected to slow globally, despite livestock production intensification. Much of the additional food demand will originate in regions with high population growth such as Sub-Saharan Africa, India, and the Middle East and North Africa.

Additional feedstock demand for biofuels mainly from blending mandates in emerging economies

The demand for cereals, vegetable oil and sugar cane as inputs into the production of biofuels is expected to grow much more modestly than in the last decade. Whereas in the past decade the expansion of biofuels led to more than 120 Mt of additional cereals demand, predominately maize, this growth is expected to be essentially zero over the Outlook period. In developed

Rising consumption of processed and convenience foods rich in sugar and oil causes health concerns

The exceptions to the broad pattern of slowing per capita demand growth come from sugar and vegetable oils. The per capita intake of sugar and vegetable oil is expected to increase in the developing world, as urbanisation leads to a rising demand for processed and convenience foods. Changes in levels of food consumption and the composition of diets imply that the “triple burden” of undernourishment, over-nourishment and malnutrition will persist in developing countries.

countries, existing policies are not likely to support much further expansion. Future demand growth will therefore come predominantly from developing countries, several of which have introduced policies favouring biofuels use.

Figure 2.  Regional contributions to food demand growth, 2008-17 and 2018-27

Million tonnes

Rest of World

MENA

China

India

Sub-Saharan Africa

OECD

160 140 120 100 80 60 40 20 0

2008-17

2018-27

Cereals

2008-17

2018-27

Meat

2008-17

2018-27 Fish

2008-17

2018-27

Fresh dairy

2008-17

2018-27

Sugar

2008-17

2018-27

Vegetable oil


Growth in crop and livestock production based mainly on intensification and efficiency gains

Global agricultural and fish production is projected to grow by around 20% over the coming decade, but with considerable variation across regions. Strong growth is expected in Sub-Saharan Africa, South and East Asia, as well as the Middle East and North Africa. By contrast, production growth in the developed world is expected to be much lower, especially in Western Europe. The growth in production will be achieved primarily through intensification and efficiency gains and partially through an enlargement of the production base via herd expansion and the conversion of pasture to cropland.

Imports of basic foods expanding most in countries with rapid population growth

With slower consumption and production growth, agriculture and fish trade is projected to grow at about half the rate of the previous decade. Net exports will tend to increase from land abundant countries and regions, notably in the Americas. Countries with high population densities or high population growth, in particular in the Middle East and North Africa, Sub-Saharan Africa and in Asia, will see rising net imports.

High concentration of exports keeps markets vulnerable to supply shocks

For nearly all agricultural products, exports are projected to remain concentrated among stable groups of key supplying countries. A notable change is the emerging presence of the Russian Federation and Ukraine on world cereal markets, which is expected to persist. The high concentration of export markets may increase the susceptibility of world markets to supply shocks, stemming from natural and policy factors.

Increasing uncertainties in the agricultural trade policy environment

As a baseline projection, the Agricultural Outlook 2018-2027 assumes policies currently in place will continue into the future. Beyond the traditional risks that affect agricultural markets, there are increasing uncertainties with respect to agricultural trade policies and concerns about the possibility of rising protectionism globally. Agricultural trade plays an important role in ensuring food security, underscoring the need for an enabling trade policy environment.

Figure 3.  Regional trends in production Growth in agriculture and fisheries production, 2015-2017 to 2027 (right axis) %

2027

1800

35

1600

30

1400

25

1200 1000

20

800

15

600

10

400

5

200 e

a n

Eu

ro p

ni Oc ea

Western Sub-Saharan Oceania Europe Africa South and Middle East and Eastern Europe East Asia North Africa and Central Asia

150

100

50

0

-50

W es te r

ic as Eu Ce r nt op ra e a lA n si d a

er

n

N Af ort ric h a

Am

st er

Ea dl e

Ea

st a

nd

st A Ea d

an M id

th So u

Su b

-S ah

ar an

Af

ric a

si

a

0

Americas

Billion constant USD (2004-6 base)

Billion constant USD (2004-6 base)

2015-17

Figure 4.  Regional net trade in agricultural products

Note: The figure includes commodities covered in the Outlook as well as projections for the value of other agricultural commodities included in FAO estimates of net-value production (FAOSTAT)

-100

2007

2012

2017

2022

2027

Note: The figure only includes commodities covered in the Outlook


Middle East and North Africa Resource scarcity and political instability threaten food security in the MENA region

This year’s special chapter focuses on the Middle East and North Africa, where rising food demand and limited land and water resources lead to increasing import dependence for basic food commodities. Many countries spend a large share of their export earnings on food imports. Food security is threatened by conflict and political instability.

Cereals remain central to the region, in production, trade and diets

The region’s agriculture and fish production is projected to increase about 1.5% p.a., mainly through productivity improvements. Policies in the region support grain production and consumption, with the result that 65% of cropland is planted with water-thirsty cereals, in particular wheat, which accounts for a large share of calorie intake. Overall, diets are projected to remain high in cereals and sugar, with low protein intake from animal sources.

Alternative policy approaches could promote sustainable rural development and healthier diets

OECD‑FAO A Outlook 2018

An alternative approach to food security would reorient policies away from supporting

cereals towards rural development, poverty reduction and support for production of higher-value horticulture products. Such a change would also contribute to more diversified and healthier diets.

Figure 5.  Self-sufficiency ratio for basic foodstuffs for the Middle East and North Africa %

Production/Consumption

2015-17

2027

100 90 80 70 60 50 40 30 20

SpECiAl FOCuS: MiDDlE

10 0 Cereals

Wheat

Coarse grains

Rice

Oilseeds Vegetable oil

Roots

Sugar

Meat

Beef

Poultry

Sheep

Milk

Fish

Figures’ source: OECD/FAO (2018), “OECD-FAO Agricultural Outlook”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-outl-data-en.

OECD‑FAO Agricultural Outlook 2018‑2027 The joint OECD-FAO Agricultural Outlook provides market projections for major agricultural commodities, biofuels and fish. Each yearly edition contains a special country or regional focus. The Agricultural Outlook 2018-2027 is a collaborative effort of the Organisation for Economic Co-operation and Development (OECD) and the Food and Agriculture Organization (FAO) of the United Nations. It brings together the commodity, policy and country expertise of both organisations as well as input from collaborating member countries to provide an annual assessment of the prospects for the coming decade of national, regional and global agricultural commodity markets.

SpECiAl FOCuS: MiDDlE EASt AnD nOrth AFriCA

Hubertus Gay (TAD.Contact@oecd.org)

Trade and Markets Division Food and Agriculture Organization of the United Nations

Trade and Agriculture Directorate Organisation for Economic Co-operation and Development

Consult this publication on line at http://dx.doi.org/10.1787/agr_outlook-2018-en. This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org for more information.

iSbn 978‑92‑64‑29721‑0 51 2018 04 1 p

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OECD‑FAO Agricultural Outlook 2018‑2027

Holger Matthey (EST-Projections@fao.org)

or visit our website: www.agri-outlook.org

OECD‑FAO Agricultural Outlook 2018‑2027

This year's Special Feature will focus on agricultural development in the Middle East and North Africa.

© OECD/FAO, 2018 CA0064EN/1/07.18

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