OECD: Commodity prices expected to continue decline
July 13, 2018
The world is now living in an era of plentiful agriculture and food production with lower prices that are expected to continue to fall, but there are still risks related to climate change and policy, the Paris-based Organization for Economic Cooperation and Development said July 10 as it released reports on the agricultural outlook and the monitoring of agricultural policy.
The situation is very different from the 2008 to 2009 period when production was low and prices spiked, sparking action by many nations to try to improve the situation, Carmel Cahill, the OCED deputy director for trade and agriculture said during a teleconference that was beamed to OECD's Washington Center.
But Cahill said many governments' policies do not live up to their claims. Fully two-thirds of support is still provided in ways that are market-distorting, environmentally damaging and stifling innovation, she added.
Cahill also noted that emerging economies now dominate both markets and policy.
The report said that there is little appetite in the developed countries to reduce government supports in a period of low prices and that emerging countries — defined as developing countries that are getting richer — are increasing support.
Will Martin, a senior research fellow at the International Food Policy Research Institute, who commented on the report, noted that agricultural trade used to be between developed countries, but today it is mostly between developed and developing countries or among developing countries — and that most of the policy conflicts are between developed and developing countries.
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Farm Foundation President Constance Cullman said she wondered what the report's findings would look like if China were taken out of the "emerging market bucket."
The report did not factor in the recent tariffs that President Donald Trump has imposed on steel and aluminum and the resulting retaliatory tariffs that other countries have imposed on U.S. farm products. The OECD analysts said that if the tariffs continue they will have to factor them into next year's reports.
Martin said that the trade conflicts could cause supplies to go up in the short term, but over the long term will cause countries and companies to change the countries from which they buy commodities, interrupting supply chains and reducing efficiency in world agriculture and food production.
Agriculture Department Chief Economist Rob Johansson said he largely agreed with the OECD findings that commodity prices and farm incomes are falling. He noted that both USDA and OCED make 10-year projections and said that if the tariffs continue both institutions will have to take their impact into consideration in their forecasts.
To see the OECD-FAO Agricultural Outlook 2018-2027 go to https://www.oecd-ilibrary.org/agriculture-and-food/oecd-fao-agricultural-outlook-2018-2027_agr_outlook-2018-en.