Global competition among exporters of wheat, rice, oilseeds, sugar and livestock is expected to intensify over the next ten years among both developed and developing countries, according to the Organisation for Economic Co-operation and Development's latest Agricultural Outlook - produced for first time in collaboration with the UN Food and Agriculture Organization (FAO).

Stiffer competition, combined with higher productivity, will result in a further drop in real prices for most basic food commodities. Farmers will thus have to make continued efforts to improve efficiency. Policy reforms could help improve agricultural markets, the Outlook adds.

With increasing export supplies by low cost non-OECD countries and a continued high degree of protection in many of the rich OECD markets, rising demand growth in developing countries will result in an increase in their share of the global trade in farm products.

The report estimates that total world cereal output will increase by over one percent annually with most of the growth occurring in the non-OECD area. Although increasing imports by China and other Asian countries could drive nominal prices higher in the near term, international wheat prices are expected to fall in real terms by around 11% over the next 10 years. However, in rebound from recently low levels, real world rice prices are expected to increase over the projection period, reversing the downward trend of the past 30 years.

With the growing importance of China and India in global markets, small shocks to either demand or supply in these large countries could lead to substantial external adjustments. Similarly, conditions in the key emerging suppliers, particularly in South America, will be increasingly critical to the evolution of world markets. With rapidly increasing production and trade of livestock products, animal disease outbreaks also provide for an important source of uncertainty.

Increasing concentration and globalization in the food industry, and their implication for the growing role of product standards, are likely to increase their influence on the evolution of global production and trade patterns.

Some shift in OECD farm support

Coinciding with the release of the Outlook, the OECD is also publishing its latest Agricultural Policies: Monitoring and Evaluation report, which includes a first assessment of the implementation of the Common Agricultural Policy in the 10 new member states that joined the European Union in 2004. It finds that:

• Enlargement has increased the diversity of EU farm structures.
• Although enlargement brought in large amounts of land and labour, the value of agricultural production increased by less than 10 percent.
• Farm income in new member states is likely to increase significantly over the medium term.
• Levels of support in new member states were estimated to be well below levels of the existing 15 EU countries in 2004, but given the relatively small addition their agricultural sectors make to the EU, average support to farmers across the newly enlarged EU relative to farm receipts was reduced by one percentage point only.

In the 30 member countries of the OECD the average level of support to farmers remained unchanged last year at 30 percent of overall farm receipts, most of which continues to be given through trade distorting measures such as the propping up of market prices. The report nevertheless welcomes the move to payments that are less linked to specific commodities in many countries.

OECD-FAO Agricultural Outlook: 2005-2014

For the first time, the Agricultural Outlook has been prepared jointly by the Organisation for Economic Co-operation and Development (OECD) and the Food and Agriculture Organization of the United Nations (FAO), and thus draws on the commodity, policy and country expertise of both organisations. This annual publication analyses world commodity market trends and long-run prospects for the main agricultural products. It shows how these markets are influenced by economic developments and government policies.  Each edition highlights some of the risks and uncertainties that may influence the agricultural outlook. In this edition, the projections have been extended to cover a larger number of developing countries, including for the first time India and South Africa, in addition to Argentina, Brazil, China and Russia, and many more regions.

This eleventh edition of the Agricultural Outlook provides an assessment of agricultural market prospects based on medium-term projections that extend to 2014 for production, consumption, trade and prices of included commodities. The projections presented in the report are based on specific assumptions regarding macroeconomic conditions, agricultural and trade policies and average weather conditions, and thus are one representative scenario for agricultural markets over the next decade.

World agricultural production is projected to continue to grow to 2014 but at a slower pace than in the last decade. Broad-based economic growth in both OECD and non-member economies, and moderate population growth will lead to higher per capita incomes and consumption gains world-wide, but particularly in developing countries. Rising demand will provide the foundation for an increase in agricultural trade over the projection period. However, competition in global commodity markets is expected to intensify as production expands in many countries.

REPORT HIGHLIGHTS in PDF format: http://www.oecd.org/dataoecd/32/51/35018726.pdf

The complete edition of OECD-FAO Agricultural Outlook: 2005-2014 is available from:

• SourceOECD for subscribing institutions and many libraries

• OECD Online Bookshop for non-subscribers -- Did you know you can browse the book online via our online bookshop?

• OLISnet, under "Publication Locator", for government officials with accounts  (subscribe)

Agricultural Policies in OECD Countries: Monitoring and Evaluation 2005

Support to farmers in OECD countries accounted for 30% of farm receipts in 2004. While support has fallen since the mid-1980s, the current level was first reached almost a decade ago. It continues to vary widely across countries and commodities. Governments are gradually changing the way in which support is provided, away from the most production and trade distorting measures — like import tariffs and export subsidies — and towards payments based on areas farmed and historical entitlements. While this trend is set to continue, trade distorting measures still dominate, contributing to lower world prices. Greater efforts are needed to better target policies towards clearly defined farm income and environmental objectives.

This book is a unique source of up-to-date estimates of support to agriculture. Separate chapters describe and evaluate agricultural policy developments in each OECD member, including important developments such as the single payment scheme in EU countries and the introduction of the Canadian Agricultural Income Stabilisation programme. A special chapter examines the implications of the enlarged EU on agricultural production, trade, income, Common Agricultural Policy implementation, and support levels. This edition also includes a special section on agricultural support in four non-OECD EU countries: Estonia, Latvia, Lithuania and Slovenia.

REPORT HIGHLIGHTS in PDF format: http://www.oecd.org/dataoecd/33/27/35016763.pdf