Ag Policy Blog

Global Outlook: Higher Production, Lower Prices Over Next Decade

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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This chart from the 10-year agricultural outlook released Monday by the FAO and OECD shows most crop and livestock commodities will see prices decline an average of 1% to 2% annually. Source: FAO/EOCD Global Outlook 2019-2028

Agricultural production globally is expected to increase 15% over the coming decade, due mainly to yield improvement and higher production intensity on current cropland, pushed heavily by new technologies.

At the same time, farmers around the world are expected to see lower prices for most commodities and livestock in a 2019-2018 agricultural outlook released Monday by the United Nations Food and Agriculture Organization (FAO) as well as the Organization for Economic Co-operation and Development (OECD).

While production will rise, the report states trade markets will face new uncertainties. On the supply side, diseases such as African swine fever will create new problems, as well as growing resistance to antimicrobial treatments. The report also cites challenges such as regulatory responses to gene editing and the increasing likelihood of more extreme climate events.

Affecting demand, the FAO and OECD cite evolving diets and public perception to health and sustainability issues both affecting agricultural demand, as well as "policy responses to alarming trends in obesity." Trade agreements and growing trade tensions will also affect demand and markets.

The FAO and OECD forecast lower average annual commodity price changes of 1% to 2% per year over the next decade for most cereal crops, oilseeds, sugar, meats, dairy products and biodiesel and cotton.

"Lower prices are a boon to millions of consumers worldwide, but also put pressure on the incomes of those producers who are not lowering their costs sufficiently through improved productivity," the report states. "A low-price environment could thus lead to increasing demands for support to farmers, which could in turn affect the projections."

Nutrition will remain a challenge as the report cites, "A combination of excessive calorie consumption, unbalanced diets and declining activity levels imply a growing burden of overweight and obesity in various countries across the world." In some lower-income and middle-income countries, poor diets also coexist with undernourishment and micro-nutrient deficiencies, the report states.

The outlook sees global biofuel growth tapering off with additional growth coming from Indonesia with vegetable oil for biodiesel while China and Brazil increase ethanol production, using primarily cassava and sugarcane. Global ethanol use is expected to grow about 18% over the next decade, or 21 billion liters (about 5.5 billion gallons). China is expected to take up about 1.4 billion gallons of ethanol growth over the next decade because of a 10% ethanol blending goal. Brazil will add about 2 billion gallons of ethanol production with most of that coming from sugar cane.

Despite diseases such as ASF, livestock production will continue to increase as well with "robust demand" expected for livestock feed. Growth in livestock production will be driven by larger herds and greater feed use that also becomes more efficient as well. Aquaculture is also expected to grow significantly.

The FAO and EOCD expect that China will increase its hog production by 4.62 million metric tons over the next decade despite African swine fever. China will account for 42% of pork expansion globally through 2028 largely by increasing production intensity and modernizing its industry.

Dairy also is expected to be the fastest-growing livestock sector over the next decade with greater demand for fresh dairy products in Asia driving much of the demand. Countries such as India will work to increase its milk per-animal over that time.

The report shows other details, such as Turkey had the highest rate of food inflation among countries from 2018-19, rising 31%, compared to a .7% increase in the U.S. Consumers in the U.S. pay the lowest percentage of their expenditures for food at 7.8%.

The full FAO/OECD report can be found at…

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