OECD report offers hope for cereal trade

ALTHOUGH world cereal prices are currently depressed, with large tonnages of grain in stores throughout the world, an influential report published this week will give some optimism for the trade.

The report published jointly by the Organisation to Economic Co-operation and Development and the UN Food and Agriculture Organisation predicts average wheat and coarse grain prices rising between 15-40 per cent in real terms over the coming decade.

The same report puts the real price increases for vegetable oils to be more than 40 per cent higher while dairy products are projected to be on average between 16-45 per cent higher.

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Rises in livestock prices over the next ten years are expected to be less marked on the whole, although world demand for meat is climbing faster than for other farm commodities as increasing wealth among some sections of the population in emerging economies alters dietary habits.

The report's authors see sustained economic growth in emerging markets as an important factor underpinning growing their predicted higher demand and rising prices.

Continued expansion of biofuel output, often to meet government targets, will also create additional demand for wheat, coarse grains, vegetable oils and sugar. Increasingly, higher production costs add upward pressure on prices, particularly where energy is used intensively. Although there are major concerns over the world being able to feed itself, the report sees global agriculture output growing more slowly over the next decade than in the past ten years. The slower rate of increase, they believe, is still sufficient to meet the 70 per cent increase in world food production required to meet the market demand created by estimated population levels in 2050.

The report adds that although the world produces enough to feed its population, recent price spikes and the economic crisis have contributed to a rise in hunger and food insecurity. About one billion people throughout the world are now estimated to be undernourished.

The OECD's secretary-general, Angel Gurra, said: "Governments should implement measures to ensure that farmers have at their disposal better tools to manage future risks, such as production contracts, insurance schemes and futures markets."