United Nations Conference on Trade and Development

9th MULTI-YEAR EXPERT MEETING ON COMMODITIES AND DEVELOPMENT

12-13 October 2017, Geneva

OECD-FAO Agricultural Outlook 2017-2026

By

Sergio René Araujo Enciso

Economist– Medium-term Outlook and Market Analysis

Trade and Markets Division (EST)

UN Food and Agriculture Organization

The views expressed are those of the author and do not necessarily reflect the views of UNCTAD.

FAO Medium-Term Projections

Sergio René Araujo Enciso

Economist– Medium-term Outlook and Market AnalysisTrade and Markets Division (EST)

OECD-FAO Agricultural Outlook 2017-2026

Forward looking analyses

• Forward-looking policy and market analyses to support evidence-based policymaking

• Promote and foster a model-based dialogue on global prospects for food and agriculture between stakeholders and FAO

OECD-FAO Agricultural Outlook

• Produced annually from December to June

• Ten-year consensus projection of global supply, demand and trade

• Assessment of driving factors in commodity markets

• Theme Chapter – shared messages for FAO-OECD

• Collaborative effort between various organizations

5

Going beyond the OECD-FAO Outlook…..

• Detailed country outlooks and capacity building for member countries

• Support to country and regional projects in HQ, decentralized offices and partner institutions

• Scenario analysis

• Customized input in downstream analyses

OECD-FAO Agricultural Outlook 2017-2026

Agricultural commodity markets in 2016/17

• Above-average capital investments in recent years

• Record production and abundant stocks of most commodities in 2016

• Prices of cereals, meats and dairy products continued to decline from peaks experienced in the last decade

• Oilseeds, vegetable oils, and sugar provide exceptions to this trend, with prices rebounding in 2016

Market Summary - Cereals

8

Cereal production, utilization and stocks 2007/08 to 2017/18

Global production remains flat, due to a decline in wheat offset by an expansion in maize.

Utilization is projected

at a record level, wheat

is projected to decline,

whereas the total uses

of coarse grains and

rice are expected to

grow.

World trade is forecast

to decline by around 5 million tonnes.Source: FAO Food Outlook, June 2017

Key macroeconomic assumptions

• Global population growth slow down to 1% p.a., but strong regional differences remain

• Economic recovery in most industrialized countries, but growth prospects in large emerging countries diverge

• Real currency appreciation expected in major exporters

• Crude oil reference price rising from $44 to $90

Consumption Outlook

10

Main Messages

• Global consumption continues to expand and evolve toward higher value commodities

• Growth will slow down compared to previous decade

• China, India and Sub-Saharan Africa drive global growth

• Convergence in per capita food consumption patterns remains limited

Consumption by commodity

11

Annual growth in demand for key commodity groups, 2007-16 and 2017-26

Global consumption growth slows down

Total demand mainly driven by population growth

Per-capita food demand limited by:

• Saturation• Access

For fresh dairy products, vegetable oil and sugar strong per-capita increase expected

-

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

200

7-16

2017

-26

200

7-16

2017

-26

200

7-16

2017

-26

200

7-16

2017

-26

200

7-16

2017

-26

200

7-16

2017

-26

200

7-16

2017

-26

Cereals Meat Fish Freshdairy

Roots andtubers

Sugar Vegetableoil

%

Due to per capita consumption growth or non-food consumption growth

Due to population growth

Calorie consumption per capita

12

Per capita caloric availability in 2006, 2016 and 2026

Increasing trend in caloric availability per capita to continue

• Bridging caloric availability levels between developing countries and OECD

• China reaches the overall level of the OECD caloric availability.

• India makes substantial progress

Cereals remain to be the most important source of calories across the world.

Bulk of additional calories from sugar and vegetable oil

Dietary preferences persist and influence nutrition patterns

-

500

1.000

1.500

2.000

2.500

3.000

3.500

200

6

2016

2026

200

6

2016

2026

200

6

2016

2026

200

6

2016

2026

200

6

2016

2026

Sub-SaharanAfrica

India China SoutheastAsia

OECD

kca

l/d

ay/p

erso

n

Cereals Roots and tubers Vegetable oilsMeat Sugar DairyFish Other

Protein consumption per capita

13

Protein availability remains diverse

Key difference is the level of animal protein consumption between regions

• low levels in Sub-Saharan Africa, India, and Southeast Asia

In India, main animal protein is coming from the fast expanding fresh dairy product consumption

In Southeast Asia, fish consumption is important

Limited income growth in poor rural and urban households and the slow development of a retail infrastructure for animal protein are seen as the main constraints to animal protein consumption growth

-

20

40

60

80

100

120

200

6

2016

2026

200

6

2016

2026

200

6

2016

2026

200

6

2016

2026

200

6

2016

2026

Sub-SaharanAfrica

India China SoutheastAsia

OECD

g/d

ay/p

erso

n

Cereals Meat Dairy Fish Other

Per capita protein availability in 2006, 2016 and 2026

Production Outlook

Main Messages

• Yield growth will be the main driver of food crop and feed production

• Growth due to 80% yield and 20% land

• Diverse growth in livestock and fish production

• Intensive and extensive production systems coexist

• Developing countries lead the agricultural production growth

14

Crop production

Yield improvements main driver of crop production growth

Wheat: – 9% yield growth– 2% net area gain (4 million ha)

mostly in in Russia and India

Maize: – 11% yield growth, large yield gap

remains, – 2% area growth (4 million ha), all in

Africa and Latin America

Rice: – 12% yield growth, – small net area gain globally (2

million ha), shift into LDC with low yield base

Soybean: – 9% yield growth, yield gap small

and closing, – 14% area net growth, 16 million

ha,

15

0

5

10

15

20

25

Wheat Maize Rice Soybean

Gro

wth

20

14-1

6 t

o 2

026

(%

)

Area Yield

Relative growth shares of area and yield

75%

0,3

5,3

2,71,53,1

25%

12,0

7,9

6,40

5

10

15

20

25

30

35

40

45

Beef Pork Poultry Sheep Beef Pork Poultry Sheep Total

Developing Developed Increase

Meat production

16

Total meat, 13% growth globally

46% of it in poultry, becoming leading meat

Pigmeat production expansion slowed by increased environmental regulations and animal welfare concerns

Beef production expands in Argentina, China, Brazil,

India

Sheepmeat sector global growth of 22%, faster than last decade

39 million tons of additional meat produced by 2026

Mt (c.w.e / r.t.c)

Trade Outlook

17

Main Messages

• Growth in trade is closely matched with output growth in the coming decade

• High concentration in export markets persists

• Growing import demand from developing countries

• Role of trade continues to differ by commodity

-100

-50

0

50

100

150

2006 2011 2016 2021 2026

Bil

lio

n c

on

stan

t U

SD

(20

04

-06

bas

e)

Regional net trade in agricultural products

Americas Sub-Saharan Africa

Asia Other

North Africa/Middle East

Trade by region

18

• The Near East and Africa increasingly dependent on agricultural imports

• Eastern Europe and Central Asia region now established as main exporter, due to high exports of cereals

• Regional net trade flow evolution reflects continuing changes in regional production and consumption patterns

Projections of commodity prices

19

Supply and demand fundamentals keep international reference prices in line with inflation

Most commodity group prices follow similar trends due to substitutability and complementarities

Meat prices have historically followed a somewhat different path, meat prices are expected to fall in real terms to levels similar to those in the early 2000s

50

100

150

200

250

300

350

400

1990 1995 2000 2005 2010 2015 2020 2025

20

02

-04

= 1

00

Projected FAO Food Price Indexes - Nominal

Cereals Sugar Vegetable oils

Meat Dairy Total Agriculture

0

500

1000

1500

2000

2500

1900 1909 1918 1927 1936 1945 1954 1963 1972 1981 1990 1999 2008 2017 2026

US

D (

2010

bas

e)

Wheat Maize Rice

Long term trend of real commodity prices

20

• Prices follow the long run declining trend, with an average price decrease of about 1.5% per year in real terms

• Prices of agricultural commodities are subject to considerable volatility and may show large deviations from their long-term trends for an extended period of time

• Prices eventually returned to their long-term trend

Key takeaways and policy challenges

Consumption Production

• Slowing demand growth • Few sources of demand to replace

China & biofuels• Rising demand for milk, sugar and oils

Policies to combat malnutrition

• Output gains mostly from yield increases

• Important sustainability challenges –esp. in SE Asia

• Big yield gaps in poorest countriesInvest in sustainable productivity growth

Trade Prices

• Trade growth to slow• Main cause is weak demand• Export trade to remain concentrated

Need for open and reliable markets

• Real prices at or below current levels• Always a risk of specific price swings!

Market information and risk management

22

Thank You

Download the publication from: http://www.fao.org/publications/oecd-fao-agricultural-outlook/2017-2026/en/

Access the full database at: http://www.agri-outlook.org/data/

Contact us for further information at: est-projections@fao.org