OECD/UN: Agricultural boom in developing nations seen supplying stagnant Europe

Brazil to lead agriculture boom as Europe imports

ROME — The rising economies of Brazil, China, and India will see strong growth in their agricultural sectors in the next decade as output remains stagnant among big importers in Western Europe, international experts forecast Tuesday.

Russia and Ukraine will also make big gains while high prices, which had caused riots over the cost of staples like rice and bread in some developing countries in 2008, will likely ease somewhat, according to a report by the U.N. Food and Agriculture Organization and Organization for Economic Co-operation and Development.

The Agricultural Outlook report said it correctly anticipated last year that international market prices for most agricultural products would have retreated “considerably” in 2009 due to a “strong production response and lower demand due to the recent high prices and with the onset of the global recession.”

Soaring fuel prices and demand for biofuels had helped drive up food prices dramatically in 2007-2008.

“Today we’re in calmer waters,” Angel Gurria, the OECD’s secretary-general told a news conference to present the annual outlook.

He cited the more abundant stocks of food and the lifting of most temporary trade restrictions imposed by some governments to deal with the price hike crisis.

“On the whole, this year’s outlook is cautiously more positive that recent reports,” Gurria said.

He warned, however, against what he called the “great temptation for protectionism,” given the high unemployment, high deficits and low economic growth plaguing many nations the last few years.

Allowing for inflation, food prices are expected to be much lower over this decade than in those two peak-price years, the report said. The largest fall in prices compared to the 2007-2008 levels were seen in wheat, rice, oilseeds, protein meals, butter, cheese and skim milk powder.

Still, the report highlighted how the costs of these products will remain above longer-term averages.

“The price increases, in real terms, range for crops from around 16 percent to 40 percent above their average for the last decade,” the report said, with dairy products seeing one of the sharpest rises.

Brazil is predicted to experience by far the fastest growth in agriculture, an expansion of more than 40 percent through 2019 compared to the 2007-2009 base period. China and India were expected to see growth of 26 percent and 21 percent. Projections for Russia and Ukraine were 26 percent and 29 percent, assuming government agricultural support comes off as planned.

During the same period, agricultural growth in the European Union’s 27 countries will be less than 4 percent and production in Western Europe will remain “stagnant,” the report said.

“Growth in consumption on a per capita basis in this region will need to be met by imports,” the report’s authors wrote.

Over the decade ending in 2019, global production of crops will increase by more than 13 percent, it said.

One reason agricultural commodity markets, except for sugar, have “calmed considerably” in the past two years was weaker demand amid the economic crisis, the report said.

Still, “stronger demand, with an anticipated return to higher growth following economic recovery and from increasing populations, should outpace production growth, on average” over this decade to keep commodity prices “on a higher plateau” compared to the average in the last decade before the 2007-2008 hikes.

In other projections, the report said bumper crops will help keep cereal prices under pressure, while other factors cited were recession and “reduced policy supports for biofuels in some countries.”

It also said that “large production gains” in rice were anticipated for Myanmar, Cambodia and Laos, likely causing these nations “to emerge as important players in the export market” and resulting in less dependence on traditional suppliers Thailand and Vietnam.

Tuesday’s report was published jointly by the FAO, based in Rome, and the OECD, based in Paris.

Associated Press reporter Egidio Di Benedetto contributed to this report.