Agro Perspectiva

40% rise in food prices by 2020

23.06.2010 11:16 "Agro Perspectiva" (Kyiv) — Growing demand in emerging markets and biofuel production are expected to increase farm commodity prices, which would increase food insecurity, according to the latest outlook on global agricultural markets. Though farm commodity prices have declined from their record peak about two years ago, they are unlikely to drop back to their average levels of the past decade, according to the Agricultural Outlook 2010–2019, which was jointly prepared by the Organization for Economic Co-operation and Development (OECD) and the United Nations (UN) Food and Agriculture Organization (FAO). The report, published yesterday warned that the average wheat and coarse grain prices would be between 15–40 percent, which would increase in real terms (adjusted for inflation) over the next 10 years compared to their average levels from 1997 to 2006. Real prices for vegetable oils are projected to be more than 40 percent higher and dairy prices have soared up by an average of 16–45 percent. The report covers biofuels, cereals, oilseeds, sugar, meats and dairy products from 2010 to 2019. Its market assessments are based on «a set of underlying assumptions regarding macroeconomic factors, agricultural and trade policies and production technologies» and assume normal average weather conditions and long-term productivity trends. It stated, «Sustained economic growth in emerging markets is an important factor underpinning growing demand and higher prices,» it noted. Expansion of biofuel production, driven by government targets, is also expected to create additional demand for wheat, coarse grains, vegetable oils and sugar. A recent NGO report argued that millions of people could starve if EU member states deliver on the EU’s target of sourcing 10 percent of its transport fuel from biofuels as a way of tackling climate change since industrial biofuels are currently produced from maize, wheat, sugar cane and oil seeds such as palm oil, soy and rapeseed, which compete with crops grown for food. Meanwhile, the OECD-FAO outlook projects that global agriculture output «remains on track with previous estimates to meet the 70 percent increase in world food production required to meet the market demand of estimated population levels in 2050.» Global growth in the sector is expected to be led by Latin America, Eastern Europe and some countries in Asia. The report notes that Brazil is «by far the fastest-growing agricultural producer» with output expected to rise by more than 40 percent between now and 2019. Production growth of over 20 percent is expected in China, India, Russian Federation and Ukraine. Nevertheless, the report observed that recent price spikes and the economic crisis have contributed to a rise in hunger and food insecurity, and that "agricultural production and productivity would need to be stepped up. A well-functioning, rules-based trading system is needed to ensure fair competition and free flow of commodities from surplus to deficit production areas.