United Nations Conference on Trade and Development

11th MULTI-YEAR EXPERT MEETING ON COMMODITIES AND DEVELOPMENT

15-16 April 2019, Geneva

The outlook for global food and agricultural markets

By

Katia Covarrubias

Economist, Medium-term Outlook and Market Analysis

Trade and Markets Division (EST)

FAO

The views expressed are those of the author and do not necessarily reflect the views of UNCTAD.

The outlook for global food and agricultural markets

UNCTAD 2019 Multi-Year Expert Meeting on Commodities and Development

Katia Covarrubias, Economist Medium-term Outlook and Market Analysis

Trade and Markets Division (EST) FAO

OECD-FAO Agricultural Outlook

•  10yearhorizon•  Globalcoverage•  Majortemperateclimate

commodities•  Modelbasedprojections

validatedthroughglobalexpertconsensus

•  Scenarioanalyses

Global context and key assumptions

•  Populationwillreachnearly8.4billionby2027(+1%p.a.)

Ø  Globally,populationgrowthslowing–fewerpeoplebeingaddedeachyearØ  Growthconcentratedinemergingmarkets:SSA,India,MENA

•  Incomegrowthprojectedatca.3.5%p.a.

Ø  Importantregionaldifferencesintotalandpercapitaterms

•  Crudeoilreferencepriceat$67by2027(nominal)

•  Realcurrencydepreciationexpectedinmajorexportersofagriculturalcommodities

Projections of commodity prices

•  Supplyanddemandfundamentalskeeprealinternationalreferencepricetrendsslightlydeclining

•  Mostcommoditygrouppricesfollowsimilartrendsduetosubstitutabilityandcomplementarities

50

70

90

110

130

150

170

190

210

230

250

1999 2002 2005 2008 2011 2014 2017 2020 2023 2026

2002-04=100

ProjectedFAOFoodPriceIndex

Nominal Real

Consumption trends of select commodity groups

5

•  Globalconsumptiongrowthpatternsshapedbychangingsetofdrivers

•  BiofuellandscapeshiftingtowardsemergingmarketsØ U.S.andE.U.vs.Brazil,China,

Indonesia•  Feeddemand–developmentsinAsia

0%

5%

10%

15%

20%

25%

Cereals Roots&Tubers

Sugar Vegoils Meat Dairy Fish

Grow

th2016-18to

2027

Totalconsumption

Food Feed Fuel Other

Consumption trends of select commodity groups

6

•  Populationgrowthwillshapeoutlookforstaplesconsumptionàsaturation

•  Preferencesmarkwideninggapinconsumptionofanimalbasedproteins

Ø  Staplesmainsourceofproteininlowerincomeeconomies

Ø Meat,fishanddairyinemergingmarketsandhighincomecountries

•  Fatandsugarconsumption

Ø  Growingwithincomesandurbanization

Ø  Healthconcerns:higherinc.countries

0%

5%

10%

15%

20%

25%

Cereals Roots&Tubers

Sugar Vegoils Meat Dairy Fish

Grow

th2016-18to

2027

Foodconsumption

Fooddemandgrowth Pop.growth

Total agricultural production by region

0%

5%

10%

15%

20%

25%

0

200

400

600

800

1000

1200

1400

1600

1800

Sub-SaharanAfrica

SouthandEastAsia

MiddleEastandNorthAfrica

EasternEuropeandCentralAsia

Oceania Americas WesternEurope

Billion

con

stantd

ollars

2016-18 2027 Growthinagriculturalandfisheriesproduction2016-18to2027(rightaxis)

•  Globalvalueofagriculturalproductiontogrowca.15%by2027

Ø  Crop14.5%Ø  Livestock14.7%Ø  Fish12.4%

•  Regionalvariationinproductiongrowthoutlook

•  Mostoutputgrowthwillcomefromimprovementsinproductionintensity

Crop production

•  YieldimprovementswilldrivemostcropproductiongrowthØ  72%yieldand28%area

harvested

•  Maize,oilseeds:Ø  Netareaharvested

growthinS.America,Africa,India

•  Cotton,sugarcane:Ø  AreaexpansioninIndia,

Brazil

•  Wheat,riceØ  Minimalareaexpansion

0

50

100

150

200

250

-0.20%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

Wheat Maize Rice Other coarsegrains

Soybean Other oilseeds Cotton Sugarcane Palm oil

Mn ha

Annual growth in yield Annual growth in area Global crop area in 2028 (Million ha, right axis)Globalcropareain2027(Millionha,rightaxis)

Crop production: Wheat outlook

•  YieldexpansionsdominategivenproducercontextØ  E.U.–areaconstraints,sustainedhighyieldsØ  India–investmentinirrigation

Ø  BlackSea–adoptionofimprovedseeds,fertilizers

•  Limitationstofurthergrowth

Ø Maizewillremainmorecompetitiveaslivestockfeed

Ø  E.U.– biofuelpoliciesmovingawayfromfirstgenerationfeedstocks

Ø  Stocksrisingasproductiongrowthexceedsdemandà40%stockstouseby2027

051015202530354045

050

100150200250300350400450500

2008 2013 2018 2023 2027

Maize

%Mt

051015202530354045

050100150200250300350400450500

2008 2013 2018 2023 2027

Wheat

%Mt

Stocks Stocktouse(rightaxis)

Agricultural net exports by regions

•  Tradegrowthprojectedtoslowtoabouthalfthepreviousdecade’srate

•  Blacksearegionconsolidatesroleinglobalwheatmarkets

•  Maintradepatternspersist:

•  NetexportsrisingfromtheAmericas

•  NetimportstomeetgrowingfooddemandinAfrica

•  Ongoingmarketconcentration

-150

-100

-50

0

50

100

2004 2007 2010 2013 2016 2019 2022 2025

Billion

con

stan

tdollars

Asia E.EuropeLatinAm.&Caribbean N.Africa&MiddleEastN.America OceaniaSubSaharanAfrica W.Europe

Key messages and policy challenges

Consumption Production•  Consumptiongrowthinmilk,sugarandoils•  ExpandingpublichealthconcernsPoliciestocombatmalnutrition

•  Outputgainsmostlyfromyieldincreases•  ImportantsustainabilitychallengesInvestinsustainableproductivitygrowth

Trade Prices

•  Tradegrowthtoslow•  Increasingimportdependencies•  ExporttradetoremainconcentratedNeedforopenandreliablemarkets

•  Realpricesformostcommoditiesexpectedtofall

•  UpsidepriceriskshigherthandownsideMarketinformationandriskmanagement

12

ThankYou

AfterreleaseinJuly,downloadthelatestpublicationfrom:http://www.fao.org/publications/oecd-fao-agricultural-outlook/2019-2028/en/

Accessthefulldatabaseat:http://www.agri-outlook.org/data/

Contactusforfurtherinformationat:est-projections@fao.org