Global agricultural production to expand, but at a slower pace - OECD-FAO Agricultural Outlook 2012-2021

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A critical question for this Outlook is whether, how and where agricultural production will respond to current and projected high commodity prices. Over the past 50 years, trend growth in global agricultural production, as measured by FAO’s net production index, has been 2.3% p.a. Past cycles of high prices have been calmed with high production response, and in the presence of inelastic demand, real prices had trended downward for decades.

However, real commodity prices, as measured by FAO’s Food Price Index, reached a trough around year 2000, and have persistently risen since then to double their values of a decade ago.  With signs of slowing productivity in some regions, high and rising input costs for fertiliser and energy related inputs, and with growing constraints due to water and land degradation, what will be the future supply response?

Global agricultural output grew by 2.6% p.a. over the last decade, led by growth in Brazil, China, India and the Russian Federation. This Outlook anticipates a slowing of output growth to 1.7% p.a., which still outpaces population growth and with growth in output per person estimated at 0.7% p.a. While the short-term supply response to price signals is often higher in developed countries, where variable inputs such as fertiliser are more widely used, output in developing countries is expected to grow by 1.9% over the next ten years, resulting in a continual increase in their share of global production.

The growth in commodity production in the developing and emerging economies has exceeded that in the developed world during recent decades as countries have invested more in their agricultural sectors. This trend is projected to continue in the coming ten years for all of the 20 agricultural products covered in this Outlook. In the case of meats (beef, pigmeat, and poultry meat), dairy products (butter, cheese and milk powders), vegetable oils and sugar, the projected annual growth of production in these developing countries exceeds that in the OECD area by a wide margin, often in excess of 50%. As a result, the OECD share of global production of all these commodities declines over the course of the outlook period. Only in the case of selected dairy products of cheese, milk powders, biofuels, and fish oil does OECD area production continue to dominate the world market output, having lost this status for beef, poultry meat and coarse grains production in the current decade and for the other products in an earlier period.

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Further reading The OECD-FAO Agricultural Outlook assesses market trends and prospects for production, consumption, trade, stocks and prices of agricultural commodities, including biofuels. » Read the complete report online