The agriculture sector has shown more resilience to the global economic crisis than other industries, largely due to food being a basic necessity. As the downturn lowers food prices, pressure is eased on the recession-hit consumers.
This has been stated in the “Agriculture Outlook 2009-2018” report, prepared jointly by the Organisation for Economic Co-operation and Development (OECD) and the UN Food and Agriculture Organisation (FAO).
Fall in agricultural prices and production and consumption of farm goods were likely to be moderate if the economic recovery began in two to three years, it said. “But the risks could increase if the economic downturn deepens,” it warned.
An expected economic recovery, renewed growth in demand for food from developing countries and the emerging bio-fuel markets were the key drivers underpinning agriculture commodity prices and markets over the medium term, it said.
Food prices have come down from the record peaks of early 2008 but they remain high in many poor countries. “Over the current decade, prices of all farm commodities, except beef and pig meat, are unlikely to fall back to their average levels before the 2007-08 peaks, even when adjusted for inflation,” the report said.
Average crop prices are projected to be 10-20 per cent higher in real terms (adjusted for inflation) for the next 10 years, compared with the average for 1997-2006. Prices for vegetable oils are expected to be more than 30 per cent higher, it points out.
The report cautions that events of extreme price volatility similar to the one in 2008 cannot be ruled out in the coming years, especially as commodity prices have become increasingly linked to oil and energy costs.
Though agricultural production, consumption and trade were expected to increase in developing countries, food insecurity and hunger continued to be a growing problem among the world’s poor, it said.
The report argues that the longer term problem is access to food rather than food availability. The solution, it says, lies in poverty reduction and economic growth. Agricultural development was the key for sustainable development and poverty reduction since 75 per cent of the poor in the developing countries lived in rural areas, it said.
The report says that, apart from higher international aid, governments can support agricultural development through targeted policies such as infrastructure investment, establishment of effective research and development systems, and incentives for sustainable use of soil and water.
The report also emphasises the need for greater opening of agricultural markets and broadening of economic development beyond farming in poor rural regions.
