OECD-FAO experts: In the next 10 years, prices for most agricultural products expected to decline

“After several years of relatively calm market conditions, global agricultural markets are facing increasing risks, including political uncertainty caused by trade conflicts,” said Natalia Merkusheva, Economist at FAO’s Trade and Markets Division, presenting the OECD-FAO Agricultural Outlook 2019-2028 at the Central Scientific Agricultural Library (CSAL) in Moscow.

What are the medium-term trends in agricultural markets? According to the consensus forecast of OECD and FAO experts, the production of basic goods will grow by 15 percent by 2028. The surge will be based on productivity growth rather than on the increase in agricultural land (with the exception of a few regions).

Demand is expected to go up significantly in Asia, the Middle East and North Africa, where there will be a demographic upturn.

As for the structure of consumption, dairy products will become catalysts for the growth of consumption per capita. In South Asia, dairy products will become a major source of protein in diets. Sugar and vegetable oils will also be in demand all over the world, due to urbanization and the transition to the use of semi-finished products and fast food.

Trade in agricultural products will follow established patterns, as traditional agricultural products face high trade barriers. Trade will be driven both by the benefits of boosting agricultural export revenues for exporting countries and by the pursuit of food security in importing countries.

At the same time, in the next 10 years, real prices for most goods will decline, OECD-FAO experts predict, as the rate of growth in production will outpace the rate of growth in demand.

World agricultural markets are now faced with a number of new factors that create uncertainty and “exacerbate the traditionally high risks confronting agriculture”, Natalia Merkusheva underlined.

Such risks include, among others, African Swine Fever (ASF), the spread of antimicrobial resistance (AMR), as well as “regulatory responses to new plant breeding practices and responses to increasingly extreme climate change.” Unsettled trade conflicts among the leading players in global markets create an equally disturbing background.

Alexander Korbut, Vice-President of the Russian Grain Union, shared his forecast vision of the future of agricultural markets with the audience. In 2025-2028, according to his calculations, the average annual grain production in Russia will reach approximately 140 million tons, of which wheat will account for 80-82 million.

In comparison with other leading grain producers, according to the expert, Russia and Ukraine will retain their competitiveness. In the future, Russian grain exports may reach 55-57 million tons per annum. At the same time, the main buyers will be African countries. Even if Iraq and Saudi Arabia “open” their domestic markets, Korbut believes that the overall increase in Russian grain exports to these countries will not exceed 2-3 million tons.

Other distinguishing features of of agri-food markets, according to Korbut, will be, first of all, as we witness today, trade conflicts. Secondly, there will be transfer of production to other countries, which is already being done, for instance, by China, which is growing soybeans for its domestic consumption in the Russian Far East.

The prospects of the agricultural sector are also directly related to the dynamics of changes in dietary habits. Measurements of consumption of basic products by different age groups in Russia have revealed a contradictory picture, said Alexander Baturin, MD, Professor, Head of the  “Optimal nutrition” research programme of the Federal Research Center of Nutrition and Biotechnology.

For example, if we take fish, then in the age group from 18 to 29 years, daily consumption averages 21 grams, in the group from 30 to 44 years – 24 grams, in the group from 45 to 59 years – 23 grams, and for people over 60 years – 7 grams. All age categories fall short of the recommended amount of 30-50 grams per day.

Yet, there is another obstacle: following the rules of healthy diets. The risks of the “new wave” include the surge in the consumption of fast food, in particular, of semi-finished products, due to the steady process of urbanization, and the accelerating pace of life for city dwellers.

The problem is also that manufacturers are “interested in selling their products,” the expert noted. Therefore, producers take into account, all other things being equal, that consumers, without fully realizing it, prefer food with more sugar and fat. This is a real danger, said Dr. Baturin, because “the increase in fat consumption is a risk factor leading to obesity, diabetes, cardiovascular disease and cancer.”

At the same time, paradoxically, in Russia, according to surveys, low-income individuals observe a more balanced diet. In the rest of the world, the exact opposite is true.

The components of a healthy diet, according to Dr. Baturin, are: “affordability of food (sufficient income), range and variety of food products (shelf offering), knowledge and ability to abide by a healthy diet (awareness through education).”

The presentation of the OECD-FAO report, the subsequent presentations and the ensuing discussion were broadcast live on CSAL website.