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Higher global meat prices likely over next decade: report

Beef Central, 12/07/2012

Projected world meat prices in real terms to 2012. Source: OECD and FAO. Click on image below article to view in larger format. Global food commodity prices are forecast to remain on a higher plateau over the next decade, a report by the Organisation for Econoimc Cooperation and Development and UN Food and Agriculture Organisation predicts.

The organisations'  joint forecast for food commodity prices through to 2021, developed in consultation with agro-industry experts around the world, predicts that firm demand and slowing production growth will underpin higher food commodity prices over the next 10 years.

Meat protein prices are projected to rise in real terms by about 11pc, 17pc, and 4pc above 2009-11 levels values for bovine, pigmeat, and sheepmeat respectively.

The report says prices for all meats in real terms are at their highest levels of the past 15 to 20 years, and little moderation is expected as long as feed and energy prices remain high.

The higher prices will are expected to induce increased supply, however this will be limited by higher input costs in addition to competition for land and water, the report predicts.

“The combined effect of these factors will slow global production growth for meat to 1.8 percent per annum  in the outlook period compared to 2.2 pc per annum in the previous decade,” it said.

“Bovine meat production is projected to increase 1.8pc on average each year, while that for pigmeat and sheepmeat may grow 1.4pc and 1.8pc respectively.

“Poultry remains the fastest growing meat sector, with growth projected at 2.2pc p.a.”

Developing countries are expected to increase their share of global production in all meat categories, and by the end of the period will account for 58pc, 64pc, 63pc and 78pc of bovine, pig, poultry and sheepmeat production respectively.

The report predicts continued concentration of production into fewer and larger farm units based on increasing returns from scale, which will increase the reliance of meat production on feed grain inputs.

The report notes that world meat consumption continues to grow at one of the highest rates among major agricultural commodities.

Growth in developing countries is set to capture 82pc of the additional global consumption over the next 10 years.

Per capita consumption will increase by 3.2 kg p.a., with poultry accounting for 70pc of the increase.

By 2021, consumers in developed countries will eat an extra 3.6 kg of meat per capita relative to the base period.

The report says food prices in general will maintain higher levels over the next decade, driven by population growth, higher per capita incomes, urban migration, changing diets in developing countries, and competition for feedstocks from biofuel.

At the same time production costs will rise. With farmland area expected to expand only slightly in the coming decade, additional production will need to come from increased productivity, including by reducing productivity gaps in developing countries, the report said.

The outlook anticipates that agricultural output growth will slow to an average of 1.7 percent annually over the next 10 years, down from a trend rate of over 2 percent per year in recent decades.

Higher input costs, increasing resource constraints, growing environmental pressures and the impacts of climate change will all serve to dampen supply response.

Much of the projected growth will come from developing countries, which will increasingly dominate in the production of most agricultural commodities, and also take on a more important role in commodity trade.

"Increased productivity, green-growth and more open markets will be essential if the food and nutrition requirements of future generations are to be met," said OECD Secretary-General Angel Gurría.

"Governments should renounce trade-distorting practices and create an enabling environment for a thriving and sustainable agriculture underpinned by improved productivity. We have highlighted many of these issues in our work on food security for the G20 and this Outlook provides further important analysis and recommendations to governments."

“For consumers, especially for the millions of people living in extreme poverty, high food prices have caused considerable hardship. We need to redouble our efforts to bring down the number of hungry people. We must focus on increasing sustainable productivity growth, especially in developing countries, and especially for small producers," said FAO Director-General José Graziano da Silva.

"High real prices for agricultural commodities provide higher incentives for farmers and rural development, especially where markets are open and price mechanisms function well, and where farmers also have the capacity to respond."

Sustainability concerns

The Outlook notes that 25 percent of all agricultural land is highly degraded. Critical water scarcity in agriculture is a fact for many countries. Several fish stocks are over-exploited or at risk. There is a growing consensus that extreme weather events are becoming more frequent and climatic patterns are changing in many parts of the world.

Beyond its call for complementary policies to address productivity and sustainability, the report recognizes that the private sector will play the lead role in agriculture going forward.
Governments should encourage better agronomic practices, create the right commercial, technical and regulatory environment and strengthen agricultural innovation systems (eg research, education, extension, infrastructure), with attention to the specific needs of smallholders.

Creating the right enabling environment also means ensuring that the business climate is conducive to domestic and foreign investments, so governments should limit trade restrictions as well as those domestic support schemes that distort incentives for production and investment in agriculture.

There is a need to develop national investment schemes and increased development assistance to agriculture for research and development, innovation adoption and infrastructure development, the report said.

Developing countries should promote agricultural infrastructure investment in rural areas to improve storage, transportation and irrigation systems, as well as electrification, information and communication systems. Investment in human capital is equally important and depends on more public spending on health care, education and training.

These policies should also address the reduction of food loss and food waste, pegged by a recent FAO study at roughly one-third of food produced for human consumption, in order to limit the need to increase production and conserve resources.

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