Release of the OECD-FAO Agriculture Outlook


Remarks by Angel Gurría, OECD Secretary-General

Rome, 15 June 2010

Ladies and Gentlemen,

It is a pleasure to once again participate with the FAO in the release of the medium-term OECD-FAO Agriculture Outlook, probably the most comprehensive and widely quoted agricultural outlook available today. Let me just make a few points in addition to what my good friend Jacques Diouf has just said. 

There is probably nothing more important than a reliable and affordable source of food; and nothing more difficult than making agricultural market projections. Everything that’s hard to predict affects these markets – oil prices, exchange rates, the weather, government policy. But we try each year and maybe we are getting better at understanding agricultural markets, or have just been lucky, because our track record has been quite good lately. 

The agriculture sector has been through a number of shocks with production shortfalls, commodity price spikes, record high oil prices, a major financial crisis and a global economic recession coming one after the other. Together these factors have led to increased global hunger, fears for food security and some rather unhelpful policy responses.

Today we are in calmer waters. The macroeconomic prospects underlying this outlook are more favourable, supply response has been strong, stocks are more healthy and most of the ad hoc restrictions on agricultural exports have been lifted. On the whole, this year’s outlook is cautiously more positive than recent reports.

Let me briefly overview the key highlights:

  • A somewhat slower growth in production is projected compared with the past decade but still on track to keep pace with population growth

  • A strong recovery in demand is foreseen as the global economic recovery strengthens, especially in developing countries

  • Real commodity prices, on average, are expected to be well above the previous decade on average although down from the 2007-08 peaks

  • Livestock price projections are weaker than for crops and for dairy but demand growth is expected to be strong

  • The biofuels sector is also expected to see strong growth, supported by relatively high oil prices and policy mandates in the US and EU

Taken together, these prospects should help attract the kinds of investment in agriculture and related infrastructure needed over the medium term to enhance innovation and maintain productivity growth.           
While OECD countries dominate production and trade in many key agricultural commodities, most of the growth in production, consumption and trade will come from developing countries. This is welcome news for the economies of developing countries which are highly dependent on agriculture.  

The events of the last few years are fresh in people’s minds and so they should be with so many more people going hungry in the world. Governments are also worried that extreme volatility, if it is repeated, will be detrimental to farmers who may not invest and to poor consumers for whom high and uncertain prices can be devastating. What then should governments be doing?

The indications are that we are entering into a relatively high price period for at least some commodities. The most effective way to get farmers to respond to growing demand is to make sure that they get those high price signals from the market.

It is impossible to know whether future agricultural prices will be more or less volatile than the past and indeed it would be foolish to pronounce on that topic. But governments can avoid policy actions that could provoke a recurrence of the price spike of 2008 – rethinking some biofuels policies and strengthening disciplines on export restrictions would help in this direction.

Governments should also be seeking to strengthen their degree of readiness should extreme volatility once again emerge. This means finding ways to target assistance to those consumers who are most vulnerable to price spikes, and to help farmers faced with a severe dip in their household incomes. There are many ways this can be done without getting in the way of the sector’s capacity to respond to the demand and without creating costly schemes that have not worked in the past and that will not work in the future [such as price controls and international commodity management schemes].

Let me leave you with this final thought. This medium term outlook suggests that most agricultural prices will be higher in real terms in the coming decade than they were during the past decade. That is good news for the world’s farmers. Governments can help by making sure that the institutions, policies and technologies are available to allow them to invest in increased productivity and so grasp the opportunities created by rising demand. At the same time, as Jacques Diouf has rightly emphasised, governments can do more to improve the ability of poor consumers to feed themselves. This is a long term undertaking that will require coordinated international efforts.

Thank you.


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