Executive Summary and key findings from the 2016-2025 edition
- Efficiency gains in production enable production growth at lower real prices
- Increases in food demand limited by slowing population growth and a gradual saturation of consumption in emerging economies
- Global undernourishment to decline further, but higher consumption of sugar and fats
- Productivity growth driven mainly by yield improvements
- Global exports to remain highly concentrated and resource poor regions increase food imports
- Projections represent fundamental market trends, the underlying assumptions are subject to uncertainties
The Agricultural Outlook 2016-2025 is a collaborative effort of the Organisation for Economic Co-operation and Development (OECD) and the Food and Agriculture Organization of the United Nations (FAO). It brings together the commodity, policy and country expertise of both organisations and input from collaborating member countries to provide an assessment of medium-term prospects of national, regional and global agricultural commodity markets. The Outlook provides supply, demand, trade and price estimates of major agricultural commodities for 41 countries and 12 geographical regions. The special theme chapter of this year’s edition focusses on the prospects and challenges of the agricultural sector in Sub-Saharan Africa.
Prices for the main crops, livestock and fish products all fell in 2015, signalling that an era of high prices is effectively over for all sub-sectors. Meat prices fell from record highs in 2014, dairy product prices continued declines that started in 2013 and 2014, while crop prices fell further from their peaks in 2012. The main factors behind lower prices have been several years of robust supply growth, weakening demand growth due to the overall economic slowdown, lower oil prices and further accumulation of already abundant stocks.
Over the ten-year Outlook period the demand growth for food is expected to slow progressively. Global population growth, the main driver of demand increases, is declining, while income growth in emerging economies is projected to be weaker. At the same time, consumers, especially in populous emerging economies, show a declining propensity to spend income gains on consuming more basic foodstuffs. Demand for meat, fish and dairy products will grow relatively strongly, inducing additional demand for feed, in particular from coarse grains and protein meals. Demand for agricultural commodities for biofuel production is projected to stagnate due to the lower energy prices and more conservative biofuel policies in several countries.
Increasing consumption in developing countries is projected to reduce the global proportion of people who are undernourished from 11% to 8% over the next ten years, with the total numbers of undernourished declining from 788 million to less than 650 million. However, undernourishment in Sub‑Saharan Africa remains high, and in ten years the region will account for more than one third of the global total of undernourished, compared with just over a quarter today. Many countries will be confronted with a complex burden of undernourishment (too few calories), obesity, and micronutrient deficiency (with unbalanced diets a common problem). In both developed and developing countries, consumption of sugar, oils and fats is projected to increase faster than consumption of staples and protein, largely as a result of people consuming more processed food products.
The increased demand for food is projected to be satisfied through productivity gains, with modest changes in crop area and livestock herds. Yield improvements are projected to account for 80% of the increase in crop output. There is some scope to increase agricultural area sustainably, mainly in parts of Latin America and Sub-Saharan Africa. The majority of new crop area in Africa will be dedicated to cereals, while the expansion in Latin America is focussed on soybeans. Yield growth is expected to be slower in the main producing countries, as it becomes progressively more difficult to shift the technological frontier forward. But there are large yield gaps in many developing countries, especially in Sub-Saharan Africa, and bridging these gaps could add significantly to global supplies.
With overall market growth projected to slow, agricultural trade is expected to expand at about half the rate of the previous decade. Nevertheless, for most commodities a constant share of production continues to be traded on world markets. The fact that relatively few countries are abundant in natural resources means that trade will become more important for global food security. However, trade in basic food products is constrained by the pursuit of food self-sufficiency policies in a number of countries, and a structural shift towards more trade in value added products.
For most agricultural commodities, global exports are concentrated among just a few key supplier countries. For all products covered by the Outlook, the five main exporters will account for at least 70% of total exports, with just two or three countries dominating supplies of some commodities. On the import side there is less concentration, although the People’s Republic of China (hereafter “China”) is a critical market for some commodities – in particular soybeans, but also dairy products and coarse grains other than maize. Food import dependency of resource poor regions, especially North Africa and the Middle East, is projected to intensify.
With supply and demand growth broadly matched, real agricultural prices are projected to remain relatively flat. However, there will be some relative price changes that reflect adjustments in the composition of demand, as well as differences in supply conditions, such as the comparative ease of increasing production in Latin America relative to Asia. Overall, livestock prices are projected to rise relative to crop prices, and the prices of coarse grains and oilseeds are projected to rise relative to the prices of food staples. Those structural trends are likely to be more apparent in the current context of lower prices across all commodity groups.
The Outlook is subject to a wide range of uncertainties, including variations in oil prices, yields and economic growth. If historical variations in these factors continue, then there is a strong chance of at least one severe price swing within the next ten years. Such wide inter-annual price movements can mask long-term trends. Climate change may add to this uncertainty, especially if the occurrence of extreme weather events intensifies.
In addition, there are several policy uncertainties. One relates to China's recently announced changes to its grains policy, including the setting of domestic prices and the management of stocks. The current Outlook assumes that those changes will enable China to meet its domestic objective of maintaining a high self-sufficiency ratio in maize without severely disrupting international markets. However, the timing and scale of stock release is a major uncertainty underlying the projections. A further risk relates to the Russian import ban, which is assumed to expire at the end of 2017.