Agri Business

World agricultural commodity prices likely to remain high

G. Chandrashekhar | Updated on March 12, 2018 Published on July 15, 2012

Contributing to biofuel: Oil palms waiting to be processed

Although global agricultural commodity prices have come off recent peaks, food price inflation remains a concern in developing countries; and over the next ten years, agricultural prices are expected to remain on a higher plateau even as energy price levels and volatility are seen to condition the outlook, according to the latest OECD-FAO Agricultural Outlook 2012-2021.

The expanding biofuels sector is set to absorb a larger share of crop production. The global production of bio-ethanol and biodiesel is projected to almost double by 2021, and will be heavily concentrated in Brazil, the US and the European Union.

In other words, there will be greater diversion of cane, corn and wheat as feedstock for bio-ethanol and oil crops (palm, soya, rape etc.) as feedstock for biodiesel.

The biofuel sector is largely driven by a system of mandate (compulsory use for consumers) and incentives (for producers). The report projects consumption of a growing share of the global production of sugarcane (34 per cent), vegetable oils (16 per cent) and grains (14 per cent) for biofuels by 2021.

Mandate-driven ethanol trade flows between the US and Brazil are expected to increase. The US is anticipated to import sugarcane-based ethanol mainly from Brazil (world’s largest cane producer) to help meet domestic demand created by its mandate for advanced biofuels, while Brazil would import low priced corn (maize) based ethanol principally from the US to satisfy the demand for its large fleet of flex-fuel vehicles.


As for cereals, stocks are expected to get tighter over time. The stock-to-use ratios will remain below historical averages, posing the risk of future price volatility. Interestingly, the Black Sea region will play a larger role in the world wheat trade. The Russian Federation, Ukraine and Kazakhstan are expected to become much more important sources of wheat export by 2021; but high production variability in this region may have implications for global trade and world price volatility, the report has cautioned.

Larger exports of rice are projected from the least developed countries in Asia while rice imports are to increase in Africa.


Oilseeds production and exports continue to be dominated by the traditional players, but emerging exporters such as Ukraine and Paraguay are expected to increasingly contribute to global export growth. China, the dominant importer, will account for more than half of total world imports. Brazil’s oilseeds production growth is expected to slow from 4.9 per cent to less than 2.0 per cent over the next ten years. As for sugar, food and fuel (ethanol) demand will sustain over the medium-term and help maintain prices at a high level. Production cycles will continue to characterise sugar markets in Asia, leading to occasional large trade fluctuations and price volatility. A key driver of the sugar market will be how Brazil’s cane crop is allocated between sugar and ethanol.

Meat consumption in developing countries is set to expand. Large Asian economies, crude oil exporting countries and Latin America where income gains are expected to be significant will drive demand for meats. Poultry meat will lead the anticipated growth as the cheapest and most accessible source of meat protein, overtaking pig meat as the largest meat sector by the end of the decade. Aquaculture is set to surpass capture fisheries in food consumption. Fish production is one of the fastest growing sources of animal protein. World fisheries and aquaculture production are expected grow by 15 per cent over the next ten years. A 33 per cent growth in aquaculture production will take it past capture fisheries as the primary source of fish for human consumption by 2018.

Dairy products

While developing countries will become most important producers of milk, a modest increase in consumption of dairy products – with the exception of cheese and fresh dairy products - is expected in developed countries. By 2021, the consumption of all dairy products is expected to increase by about 30 per cent in developing countries.

Interestingly again, developing countries under the lead of India and China are projected to overtake developed countries in milk production by 2013.

Responses are invited from readers. They may be sent to >

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on July 15, 2012
This article is closed for comments.
Please Email the Editor