The Food and Agriculture Organisation (FAO) is cautiously optimistic about the prospects of food commodities in the wake of economic upheaval in the past two years, but average prices for wheat and grains, vegetable oils and dairy are likely to be higher over the next decade, according to FoodNavigator.com.
The report, quoting the FAO and OECD’s annual Agricultural Outlook, says that although farm commodity prices have fallen from the dizzy heights they reached in 2008, they probably won’t sink back to pre-crisis levels any time soon.
It predicts that wheat and grain will be on average 15-40% higher over the past decade in real terms (after adjusting for inflation); and vegetable oils will be around 40% higher. Dairy prices look to remain between 16 and 40% higher.
Price rises in livestock are expected to be “less marked on the whole” despite world demand for livestock products growing, mainly from developing countries that are shifting towards more animal protein-rich diets, the report says.
While food price rises have an obviously catastrophic effect on food security in developing countries, for the food industry the big question is whether price volatility will continue to squeeze profit margins in the coming years.
“The evidence is inconclusive as to whether [volatility] has changed over the long run for major food crops,” the FAO says.
Factors that have had a hand in price shifts include economic growth in emerging markets, biofuel expansion – often to meet governments’ targets, and higher production costs, especially in processes where a lot of energy is required.
FAO director general Jacques Diouf was quoted saying: “Governments should implement measures to ensure that farmers have better tools to manage future risks, such as production contracts, insurance schemes and futures markets”.