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OECD Secretary-General

Launch of the 2016 OECD-FAO Agricultural Outlook

 

Remarks by Angel Gurría

Secretary-General, OECD

Monday, 4 July 2016

FAO Headquarters, Rome, Italy

(As prepared for delivery)

 

 

Excellencies, Ladies and Gentlemen,

 

I am delighted to be here in Rome for the launch of this year’s Agricultural Outlook. This is the 12th Outlook produced jointly with the UN Food and Agriculture Organisation. Thank you, José, for your continued partnership.

 

The overriding challenge facing the global agriculture and food system is formidable: to feed a growing world population in a sustainable and climate-friendly way. It’s only appropriate that this year’s Outlook gives a special focus on Sub-Saharan Africa – a region of over one billion people where the challenge of food security is at its most acute, and one that is feeling the brunt of climate change.

 

An era of high world food prices is over…but the next surprise could be around the corner

 

Across all commodity groups, the past year has provided further evidence that an era of high and volatile prices is effectively over.

 

The price declines have been particularly acute for meat and dairy products. For example, from January 2014 to May 2016 the price which a French farmer received for a litre of milk declined from around 40 cents to 28 cents, which means a reduction of 30%. The new price environment has caused concern to shift from the prices that consumers pay to the prices that farmers receive.

 

Our Outlook suggests that this lower price environment will be with us for the next few years at least.

 

One immediate cause is the self-correction of markets, with production having responded robustly to a period of higher prices. This has led to further accumulation of already abundant stocks for many commodities. World cereal stocks are now almost 50% higher than they were a decade ago.

 

A further factor has been lower oil prices, which have averaged below USD 50 a barrel for the past six months. This has lowered costs, and also limited the incentive to divert crops to biofuel production. With few exceptions, the production of biofuels from crops is would not be economically viable without government support policies.

 

On the demand side, even after eight years since the outbreak of the crisis, growth in advanced economies remains weak, while key emerging economies – where the greatest demand potential exists – continue to slow down or are facing recession.

 

Although the current Outlook’s central projection is for flat prices in real terms, we need to be vigilant against a convergence of factors that could cause food prices to spike again. Our uncertainty analysis reveals a 90% probability of a major price swing – with risks of prices moving upwards or downwards – within the next ten years.

 

The inter-agency platform, Agricultural Market Information System (AMIS), is our collective effort to be vigilant. A future food crisis is likely to be precipitated not by markets alone, but by rash policy responses that make a bad situation worse. Policymakers have learned from the 2007-08 food price crisis that policies to stabilise their domestic markets can destabilise world markets and even backfire domestically.

 

The long-term supply capacity of agriculture is not in doubt

 

Over the longer term, the agriculture sector needs to feed a growing and more affluent population. Its capacity to do so is not in doubt.

 

What is in doubt is whether the sector will simultaneously help to eradicate the blight of hunger and food insecurity, while conserving the planet’s natural resources.

 

Momentum for action is there. Last year saw major agreements on the Sustainable Development Goals and on climate change (COP21). The agriculture and food sector should play a key role in achieving the SDGs, and be an active part of the solution to climate change. But while agreements are important, it’s implementation that changes lives.

 

Our Outlook projects that the growth in food availability would reduce the global prevalence of undernourishment from 11% to 8% over the next ten years. In Sub-Saharan Africa, we foresee progress with a reduction in the prevalence of undernourishment from 23% to 19%, but the total numbers of undernourished are likely to remain stubbornly high. Deeper reforms and investments are key to eliminating poverty and hunger across the region.

 

The “Nairobi Package” agreed at the 10th WTO Ministerial Conference also provides an important impetus to improve the functioning of agricultural markets, including a hugely significant commitment to abolish export subsidies for agricultural products. More broadly it signalled the potential of multilateral trade negotiations to deliver freer agricultural trade. But government policies do not yet measure up to its ambition.

 

Our latest Producer Support Estimate (PSE) data show that the 50 countries for which OECD measures support to agriculture, provided an annual average of USD 585 billion of support to producers in the years 2013-15, plus an additional USD 87 billion on wider support to the sector. More than two-thirds of support to farmers was provided in the form of higher prices or through market distorting subsidies. Those policies are ripe for reform!

 

Ladies and gentlemen, today’s economic, social and environmental demands all add up to an urgent call to collective action. As this Outlook shows, we are working with an increasing number of national and regional collaborators. The OECD will continue to work with its partners across the globe to help governments design, develop and deliver better agriculture and food policies for better lives.

 

Thank you.


 

 

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