Remarks byC, delivered at the Launch of the OECD-FAO Agricultural Outlook 2012-2021 in Rome, Italy, 11 July 2012,
(As prepared for delivery)
Ladies and Gentlemen,
It is a pleasure to be here again at the FAO with Director-General José Graziano to present the result of our joint annual publication - the OECD-FAO Agricultural Outlook - for the period 2012-2021. This report is the outcome of a very fruitful cooperation between our Organisations.
The Outlook covers a lot of ground! It reports projections for key agricultural commodities, biofuels and fisheries over the next 10 years, and it also looks at the longer-term policy challenges of meeting the rising demand for food, feed and fuel.
I will focus on some key trends in agricultural markets and then focus on the policy challenges that will need to be addressed in the coming years.
Agricultural market trends and developments
This Outlook shows that price volatility – which has been a major source of concern in recent years – will continue to feature prominently in policymakers’ agenda over the next 10 years.
The good news is that, with a rebound in crop production, stocks have improved somewhat, and markets appear less turbulent. Price levels have fallen from recent peaks, and food price inflation has eased.
But commodity prices are expected to remain high. The Outlook projects that in the next 10 years commodity prices will remain on average 10-30 per cent above the levels of the previous decade. This is essentially because of higher energy prices, which are a major driving force of commodity prices.
Developing countries are expected to be the main drivers of growth in global production through 2021, based on their greater potential to increase land devoted to agriculture and to improve productivity. The growth in production of developing countries is projected to average around 2 per cent per year, compared to slightly over 1 per cent in the developed countries. By 2021, developing countries will account for the bulk of exports of rice, oilseeds, vegetable oils, sugar, beef, poultry and fish products.
As in previous Outlooks, the emerging-market economies are expected to capture an increasing share of the expanding world trade in agriculture. Countries like Brazil, Indonesia, Thailand, the Russian Federation and the Ukraine have made significant investments to boost agricultural production capacity and their exports will increase the most.
In this context, demand for food will also increase sharply due to urbanisation and migration, higher per capita incomes, changing diets and a growing population. Agricultural production will need to increase by 60% over the next 40 years to meet the rising demand for food. This translates into an additional 1 billion tonnes of cereals and 200 million tonnes of meat a year by 2050 compared with 2005/07 levels. These are staggering numbers! And in addition bio-fuel production is expected to double and will require additional agricultural feedstocks.
However, the scope for expanding farmland area around the world is limited. By 2050, total arable land is projected to increase by only about 5 per cent, or 69 million hectares. To make matters worse, let’s not forget that some 25 per cent of all agricultural land is already highly degraded. Water scarcity in agriculture is a problem for many countries. Many fish stocks are over-exploited. And climate change and extreme weather events will increase uncertainty and pose their own challenges for farmers around the world.
It is imperative to achieve sustainable agricultural productivity growth
So, in this context of tightening resource constraints, how can we contain food prices and reduce global food insecurity?
Our answer is clear: a much needed boost to production will need to come from increased productivity. But increased productivity will need to go hand in hand with greater sustainability.
Let me outline how this can be done.
First, we must encourage better agronomic practices and promote the green growth potential of agriculture. This is what the OECD Green Growth Strategy is about: expanding economic opportunities without overly straining natural resources. Green growth is not only desirable and achievable, it is also essential if the food and nutrition requirements of future generations are to be met.
A thriving agriculture underpinned by improved productivity will expand the rural economy and positively influence wages and food security, especially in developing countries.
Providing incentives for farmers to adopt sound agronomic practices - such as minimum or zero till cultivation, drip irrigation, optimum fertiliser use, higher nutrient efficiencies in livestock production and better use of organic fertilisers - would all contribute to more sustainable agriculture. New biotech developments and plant breeding techniques will also likely introduce crops that are more resistant to droughts and heat and that are better able to survive saline soils or excessive rainfall.
Second, to ensure increased efficiency on a global scale we must put in place a commercial, technical and regulatory environment that encourages agronomic improvements at the farm level. Also, well-functioning markets must provide clear price signals that reflect the scarcity of natural resources. And property rights must be defined and enforced to encourage optimal use of resources, for example through government water quotas.
Third, we must encourage agricultural innovation. This is no easy task and involves improving institutional design and the regulatory environment for innovation, tailoring R&D and innovation to the needs of small family farms, and adequately enforcing effective intellectual property rights, such as patents. We should also address the need for better policy coherence for agricultural innovation, for more demand-driven research systems, for more agricultural education and training programmes, and for greater private-sector engagement.
Fourth, we must tackle wastage. The message is simple enough: we could reduce considerably the need for increased production and productivity gains by simply reducing food loss and waste both post-harvest and all along the food chain.
Last but not least, we should not forget that high food prices affect poor consumers in developing countries the most. But in many of those countries the upward pressure on prices could be reduced by a shift to better agronomic practices, which could improve productivity and reduce the huge yield gap – the difference between what is economically achievable and the actual yield – for staple commodities, which is as high as 50 per cent in many developing countries.
Moreover, increased investment is needed in infrastructure in the developing world, especially to improve storage, transportation and irrigation, and for upgrading electrification, information and communication systems. Such investments can provide access to markets for smallholders and, most importantly, strengthen incentives to increase sustainable production.
Closing the gender gap in developing countries would also raise agricultural output. Studies show that if women had the same access as men to productive resources, such as fertilizers and machines, they would substantially increase yields on their farms and total agricultural output in developing countries. Therefore, we must eliminate discrimination against women in access to resources, education, extension and advisory services, financial services and labour markets.
Ladies and Gentlemen,
All these are essential policy challenges identified in this 2012-2021 Agricultural Outlook. We have highlighted many of these issues in our recent report to the G20, Sustainable Agriculture Productivity Growth and Bridging the Gap for Small Family Farms. It provides concrete policy recommendations to governments on how to close the agriculture productivity gap in a sustainable way.
Both the current market situation as well as the outlook pose important challenges for policymakers. But it also presents opportunities for farmers worldwide. So let’s address the challenges we have before us and work on increasing agricultural production and productivity in a sustainable way. Let’s design, promote and implement better agricultural policies for better lives.
More information about the report at www.agri-outlook.org