16/07/2002 - Global agricultural commodity markets have taken a long time to recover from a precipitous drop in prices during the second half of the 1990s, caused by slack demand and trade in the wake of a general downturn in world economic growth, as well as continued high levels of government spending on farm support. However, according to the OECD's Agricultural Outlook 2002-2007, world agricultural prices should gradually rise from their current weak levels as the economic recovery strengthens at the end of this year and into 2003. It forecasts a more marked increase in prices for certain meats and dairy products than for cereals and oil seeds.

The Outlook provides a comprehensive set of projections for all sections of agriculture over the next five years. It also takes a special look at Russian agriculture and at the issue of food security in developing countries.

The report says world agricultural markets will improve between now and 2007. Much of this will be due to stronger demand and growing imports in rapidly developing countries outside the OECD. The growth in trade of livestock products and feedstuffs will continue to be faster than that of food grains. Yield and productivity rather than increased land use will contribute most to crop expansion.

The report points at continuing high levels of government subsidies and farm support in many countries. Governments, it says, should recognise that the long-term prosperity and competitiveness of their farm sectors is not served by insulating producers from world markets. It adds that any slowdown of market-orientated policy reform and trade liberalisation could put a sustained recovery in agriculture at risk - even more so if it discourages developing countries from reform.

Because of high subsidies, the scope for adjusting the supply of agricultural commodities to market conditions is limited, says the report. Restoring balance to international markets in the medium term has thus become dependent on a recovery in demand.

Among the Outlook's forecasts are the following:

• Global wheat, coarse grain and rice production is expected to increase by 11%, 13% and 8% respectively by 2007, compared with the average for 1996-2000. Although OECD-country cereal output should increase by more than 9% to 2007, almost 70% of the global increment will come from non-OECD countries.
• Low stock levels and rising demand, especially from developing countries, should fuel a gradual improvement in maize, and to a lesser extent, wheat prices. But none of the cereals is expected to return to the high price levels seen in the mid-1990s.
• Poultry prices on international markets should be supported by a sharp decline in EU exports.
• East Asia is expected to become a more important dairy market in the medium term. Development of fast food catering and increasing adoption of "western" diets is expected to boost consumption by more than 50% over the next five years.

The projections do not yet account for the effects of the new US Farm Bill and the mid-term review of the EU's Common Agricultural Policy. However, OECD will analyse the market implications of these policy developments in the near future.

The OECD Agricultural Outlook is available for journalists on the protected website. Journalists may also obtain a copy of thereport by contacting Nicole Le Vourch, OECD's Media Relations Division. For further information, please contact Stephen Di Biasio in the Media Relations Division (tel. [33] 1 45 24 81 03).

For free highlights, a selection of tables and how to obtain the full version for non journalists,see Agricultural Outlook 2002-2007

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"OECD Agricultural Outlook 2002-2007"
210 pages, OECD, Paris 2002
Available in electronic format (pdf)
Euros 40; US$36
ISBN 92-64-18721-9 (51 02 07 1)