Remarks by Angel Gurría,
OECD, Paris, 1 July 2015
Excellencies, Ladies and Gentlemen,
I am delighted to welcome Mr Graziano and his team from the UN Food and Agriculture Organization for the launch of this year’s OECD-FAO Agricultural Outlook. This is the 21st Outlook produced by the OECD, and the eleventh produced jointly with FAO. Thank you, Jose, for your continued partnership.
This year’s report contains a special focus on Brazil, the world’s second largest supplier of agricultural products and the foremost exporter in meeting additional global demand. (Allow me to acknowledge the presence here today of our colleagues from the Embassy of Brazil. Welcome!)
Overall, this year’s Outlook provides further evidence that markets are returning to more “normal” conditions after a period of unusually high and volatile prices.
Lower prices have been driven by a combination of supply and demand factors. Production has responded rapidly to higher food prices. Whereas cereal production grew by 7% in the eight years before the food price spike, it has grown by 18% in the eight years since – adding over 380 million tonnes to annual supplies. At the same time, demand remains subdued by the underperformance of the world economy and the fact that consumption of many products – in particular food staples – is close to saturation point in many parts of the world. Lower oil prices have also helped bring down costs, and they have almost eliminated the market incentive to grow crops for biofuel production.
All of these findings highlight how flexible the agricultural sector is. But we should not be complacent. Given uncertainties over the world economy, oil prices, and weather, aggravated by climate change, we cannot rule out the risk of another shock within the next decade. We must build a system that is robust enough to withstand such shocks.
The smooth functioning of international markets is crucial. Transparent and open markets are essential in allowing food to be produced where it is both economically efficient and environmentally sustainable, and transported efficiently to where it is consumed.
The OECD and FAO continue to collaborate on the Agricultural Market Information System – AMIS for short – which helps provide timely and transparent information on international markets.
In recent years, concern has centred on the policies that contributed to higher food prices, such as export bans and support for first generation biofuels. As prices have fallen, we are paying more attention again to the prices received by producers, and to the role of support policies.
For the OECD area as a whole, gradual progress has been made in curbing the use of producer support policies which distort markets. But that progress has stalled. Moreover, several larger emerging economies are now making use of such instruments. We know that policies based on market interventions are an ineffective way of protecting farmers’ incomes – they are inequitable approaches, and distort international markets.
As in previous decades, agriculture is one of the most difficult areas on which to make progress on multilateral trade reform. Several countries are now targeting self-sufficiency in food and agricultural products. While every country should strive for sustainable improvements in productivity, pursuing self-sufficiency through trade barriers has been shown again and again to be harmful to the countries themselves.
The current Outlook suggests that globally agriculture will respond to the challenge of producing more food for a growing and more affluent population. More can nevertheless be done to raise agricultural productivity, and to do so sustainably. In this respect, there are important lessons to be learned from Brazil.
Brazil’s agricultural sector has grown dramatically for over three decades. Total agricultural output in Brazil has more than doubled since 1990, and livestock production has almost trebled. It has achieved this through improved productivity, with the national research agency, Embrapa, playing a key role.
In recent years, growth has gone hand-in-hand with policies to ensure that the benefits reach the poorest people, and also with policies to improve the sustainability of farm practices.
Based on current trends, we expect Brazil to be the biggest supplier in meeting the world’s additional demand for food over the next ten years, even though a large share of production will go to meeting additional domestic demand. Asia will benefit from Brazil’s exports. For example, China will account for 80% of additional global oilseed export demand, half of which will be supplied by Brazil. Africa – which will be the focus of next year’s Outlook – could stand to benefit from Brazilian know-how and expertise.
As always, there is scope for further improvement. Our Outlook highlights the roles that further investments in infrastructure and a reduced regulatory burden could play in strengthening Brazil’s production even further.
We will continue to work with Brazil – and with all our partners – to help design and implement Better Agricultural Policies for Better Lives.