martin von lampe trade and agriculture directorate, oecd › img › pdf ›...

Organisation for Economic Cooperation and Development

UncertaintiesUncertainties in in thethe MacroMacro--EconomicEconomic Environment Environment ––ImplicationsImplications forfor MediumMedium--Term Term PerspectivesPerspectives forfor

Agricultural Agricultural MarketsMarkets

Martin von Lampe

Trade & Agriculture Directorate 1

Martin von Lampe

Trade and Agriculture Directorate, OECD

Conference on Prices and Market Risks: Farmers Faced with VolatilityCentre de conférences Pierre Mendès France – Paris – France, November 23-24, 2009

• Agricultural Outlook - a set of conditional projections published in an OECD-FAO annual report

OECDOECD--FAO Outlook 2009FAO Outlook 2009--20182018


• The datasets are available at www.agri-outlook.org

Key macroeconomic assumptionsKey macroeconomic assumptions

• 2009 global economic

recession

• 2010 global economic

recovery

• 2% annual inflation in


• 2% annual inflation in

OECD; higher in BRICs

• stronger US dollar

• stable policy regime

• crude oil prices increasing

from end-2008 low

60

80

100

120

140

160

Real prices at or above historical levelsReal prices at or above historical levels

% change relative to 1997-2006 average


-20

0

20

40

60

Wheat Coarse grains

Rice Oilseed Veget. Oil

Raw sugar

Beef (pacific)

Pigmeat (pacific)

Butter SMP Crude oil

Average 2007-08 Average 2009-18

20

30

40

50

60

%

World Production Non-OECD Production

Steady growth of global productionSteady growth of global production

Production Growth from 2006-08 average to 2018


0

10

20

Whe

at

Coa

rse

grai

ns Ric

e

Oils

eeds

Veg

et. O

ils

Sug

ar

Bee

f

Pig

mea

t

Pou

ltry

But

ter

Che

ese

WM

P

2018

2006-08

2018

US

AE

U

20%

Demand shares - WORLD (2018 )

Biodiesel increasingly important Biodiesel increasingly important

demand driver for vegetable oildemand driver for vegetable oil


0 5 10 15 20 25 30 35

2006-08

2018

2006-08

Million tonnes

non-biofuel use

biofuel useInd

on

esi

a + 90 Mt 80%

…while feed and fuel push coarse grain demand up…while feed and fuel push coarse grain demand up

+ 50 Mt

2006-08

2018

2006-08

2018

Food useFeed useBiofuelsOther

No

n-

OE

CD

No

n-

OE

CD

OE

CD

8%

56%

24%

11%

Demand Shares (2018) - OECD


0 100 200 300 400 500 600 700

Million tonnes

0 200 400 600 800 1000 1200 1400

2006-08

2018

Wo

rld

19%

56%

12%

13%

Demand Shares (2018) – World

• Economic projections have changed a lot

• Timing/speed of recovery critical

• Energy prices important but highly uncertain

Underlying macroeconomic assumptions uncertain Underlying macroeconomic assumptions uncertain


• Energy prices important but highly uncertain

• Role of exchange rates

• Credit markets in turmoil

1. The impact of alternative GDP projections

2. The impact of alternative crude oil prices

How sensitive are agricultural marketsHow sensitive are agricultural markets

to changes in the macro environment?to changes in the macro environment?



3. The impact of alternative exchange rates

GrowthGrowth projections projections revisedrevised regularlyregularly

Revisions of GDP growth March 2009 vs. Dec. 2008

3%

4%

5%

6%

7%

8%

An

nu

al

cha

ng

e i

n r

ea

l G

DP

OECD: Base

OECD: Lower GDP

slow recovery


-4%

-3%

-2%

-1%

0%

1%

2%

2000 2003 2006 2009 2012 2015 2018

An

nu

al

cha

ng

e i

n r

ea

l G

DP

slow recovery

Non-OECD: Base

Non-OECD: Lower

GDP slow recovery

Lower income growth impacts Lower income growth impacts

livestock prices morelivestock prices more


… which is partly linked to income elasticities,… which is partly linked to income elasticities,

but also to slower production adjustmentsbut also to slower production adjustments


… so feed consumption has strong impact on crop use… so feed consumption has strong impact on crop use


70

80

90

100

110

120

130

140

150

US

$ p

er

ba

rre

l

WTI Brent

OilOil pricesprices highlyhighly unpredictableunpredictable


10

20

30

40

50

60

70

US

$ p

er

ba

rre

l

Oil price assumption Oil price assumption relativelyrelatively lowlow

60

80

100

120U

SD

per

bar

rel


0

20

40

60

1981 1985 1989 1993 1997 2001 2005 2009 2013 2017

US

D p

er b

arre

l

Outlook 2008Outlook 2009

20

30

40

50

2009-10 2018

%

Impact of higher oil prices on commodity pricesImpact of higher oil prices on commodity prices


0

10

20

8%

10%

12%

14%

Ch

an

ge

in a

ve

rag

e w

orl

d p

rice

s,

-20

17

Medium-term impact of oil price at ~USD100 instead of USD70

Impact of higher oil prices on commodity pricesImpact of higher oil prices on commodity prices

-- What is the relevance of biofuels?What is the relevance of biofuels?


0%

2%

4%

6%

Wheat Maize Veget. oils

Ch

an

ge

in a

ve

rag

e w

orl

d p

rice

s,

20

13

-

Agric. Production Costs Biofuel Price Impact Biofuel Demand Effect

Note: Results not exactly comparable to those in previous slide as based on 2008 baseline

What if the Euro was 10% weaker?What if the Euro was 10% weaker?

What if the Dollar was 10% stronger?What if the Dollar was 10% stronger?


• Agriculture relatively resilient to changes in economic prospects compared to other sectors

• Food as necessity

• Larger sensitivity for livestock markets than for crop markets

• Crude oil prices are increasingly important for

ConclusionsConclusions


• Crude oil prices are increasingly important for agricultural markets

• Agricultural production costs

• Demand as energy carrier

• Exchange rates remain crucial

Thank You

Trade and Agriculture Directorate


www.oecd.org/agriculturewww.oecd.org/agriculture

[email protected]

Visit our website:

Contact:

martin von lampe trade and agriculture directorate, oecd › img › pdf ›...

Documents