Global food prices to remain high over next decade

Increased productivity, sustainable practices necessary to maintain food security

While international agricultural commodity markets appear to have entered calmer conditions after record peaks in 2011, food commodity prices are anticipated to remain on a higher plateau over the next decade, underpinned by firm demand but a slowing growth in global production, according to the latest OECD-FAO Agricultural Outlook 2012-2021.

The joint Organization for Economic Cooperation and DevelopmentFood and Agriculture Organization report suggests that in addition to population growth, higher per-capita incomes, urban migration and changing diets in developing countries, as well as rising requirements for biofuel feedstocks, are underpinning demand pressures. At the same time, agricultural output by developed, exporting countries has been slow to respond to higher prices in the last decade. Higher demand will be met increasingly by supplies that come to market at higher cost. With farmland area expected to expand only slightly in the coming decade, additional production will need to come from increased productivity, including by reducing productivity gaps in developing countries, said the report.

The outlook anticipates that agricultural output growth will slow to an average of 1.7 percent annually over the next 10 years, down from a trend rate of over 2 percent annually in recent decades. Higher input costs, increasing resource constraints, growing environmental pressures and the impacts of climate change will all serve to dampen supply response. Much of the projected growth will come from developing countries, which will increasingly dominate in the production of most agricultural commodities, and also take on a more important role in commodity trade.

The Outlook notes that 25 percent of all agricultural land is highly degraded. Critical water scarcity in agriculture is a fact for many countries. Several fish stocks are over-exploited or at risk. There is a growing consensus that extreme weather events are becoming more frequent and climatic patterns are changing in many parts of the world.

Beyond its call for complementary policies to address productivity and sustainability, the report recognizes that the private sector will play the lead role in agriculture going forward. Governments should encourage better agronomic practices, create the right commercial, technical and regulatory environment and strengthen agricultural innovation systems, with attention to the specific needs of smallholders.

Creating the right enabling environment also means ensuring that the business climate is conducive to domestic and foreign investments, so governments should limit trade restrictions as well as those domestic support schemes that distort incentives for production and investment in agriculture. There is a need to develop national investment schemes and increased development assistance to agriculture for R&D, innovation adoption and infrastructure development, said the report.

Developing countries should promote agricultural infrastructure investment in rural areas to improve storage, transportation and irrigation systems, as well as electrification, information and communication systems. Investment in human capital is equally important and depends on more public spending on health care, education and training.