By Jorge Soguero and Holger Matthey, EST Medium-term Projections Team, FAO.
The OECD-FAO Agricultural Outlook is a collaborative effort of OECD and FAO. It has been published annually for the last 12 years and has become a leading global agricultural commodity outlook. It brings together the commodity, policy and country expertise of both organizations and input from collaborating member countries to provide assessment of medium-term prospects of national, regional and global agricultural commodity markets. To further elaborate on special aspects of the projections, the publication also features a special topics chapter. The 2016 edition focuses on the prospects and challenges of the agricultural sector in Sub-Saharan Africa.
The medium-term modeling framework is continuously updated and enlarged to respond to requests for analyses of emerging policy or market issues from national governments, regional organizations and decentralized FAO offices.
An ever-growing global demand
Global agricultural commodity demand will continue to expand over the Outlook period 2016-2025, albeit at a slower rate compared to the last decade. The overwhelming share of the additional demand will originate in developing countries where population and income will increase. It is expected that 95% of the population growth in the next ten years will occur in developing countries and a significant share of their expected income gains will be spent on food products.
As per capita incomes in developing countries rise, diet composition changes towards higher shares of animal protein. This nutrition transition, combined with the ongoing population growth, necessitates further global expansion of the livestock sector. High feed efficiency, low price, and a global cultural acceptance, have made poultry the meat of choice both for producers and consumers, notably in developing countries. Pork production will also expand considerably driven by China and, to a lesser extent, the United States.
By 2025, additional 21 million tonnes (Mt) of poultry meat and 14 Mt of pork will be needed worldwide to satiate the increasing demand for animal proteins, which entails an expansion of around 72% in the global livestock sector.
The Latin American case
The resulting need for additional animal feed is underpinning the growing production of feed grains, especially maize and soybeans. Globally, the bulk of the additional production is expected to be generated through yield improvements. In Latin America, particularly in Brazil, land and natural resource constraints are less binding than in other parts of the world, allowing for a strong production growth based on improved yields and area expansion. By 2025, total crop area in Latin America (excluding Caribbean islands) is projected to increase by 22.5 Mha million hectares (24%), relative to the base period 2013-15.
Soybean cultivation will dominate the area expansion. Brazil is allocating an additional 11 Mha to soybean production by 2025, and is expected to become the world’s largest producer. Under these projections, around 43% (68 Mt) of global soybean exports will be supplied by Brazil by 2025, whereas the share of Latin America will expand to 60%.
In addition to the expanding export demand, domestic consumption of meat and dairy products, already high compared to other developing regions, will increase further. Regional demand for fish is also expected to increase by 20% over the next decade. However, per-capita consumption will remain low compared to Africa and Asia. As in the rest of the world, the majority of the production growth will come from aquaculture, with an increase of around 40% by 2025, notably from Brazil. Nonetheless, captures will remain the main source of fish production, with Peru and Chile covering most of the regional demand. The production of fish in Latin America will remain modest in global terms with a share of 16 Mt of the 195 Mt produced worldwide in 2025.
Latin America has made great progress in eradicating hunger, as caloric intake per capita has increased significantly. In general terms, the higher consumption of meat, dairy and fish products led to more diversified diets and higher per capita protein intake. A considerable share of the caloric intake increase comes from sugar and vegetable oils. Sugar consumption is of particular concern as Latin America has the highest rate of consumption per person relative to any other region of the world.
Supporting global exports
In summary, global agricultural markets may increasingly depend on Latin American supplies over the next decade. The agricultural sectors in many countries of the region will strengthen their positions, attracting higher investments, especially into infrastructure which tends to be the bottleneck for Latin American exports. However, relying on a handful of exporters for the supply of numerous commodities implies potentially significant market impacts should trade be interrupted, either as a result of production shocks or policy changes. Those risks are particularly acute in the case where just one or two countries hold a significant share of exports, and other countries may struggle to replace a shortfall, at least in the short-term.
The Spanish version of the OECD-FAO Agricultural Outlook 2016-2025 will be available in October.
For the online version visit the website www.agri-outlook.org
For enquiries or further information contact Holger Matthey (EST-Projections@fao.org).
Agronoticias would like to thank Jorge Soguero, Holger Matthey and Pedro Marcelo Arias for their generous collaboration in this article.
Photo 1: Agricultural Outlook 2016-2015 cover
Photo 2: Sunset Photo, by Derek Gavey via Flickr (CC BY 2.0)
Photo 3:Commercial poultry farm, by Matthew H via Flickr (CC BY-NC-ND 2.0)
Photo 4: Soy in Cubatao, Brazil, by Márcio Garoni via Flickr (CC BY-NC 2.0)
Photo 5: Containers in the Panama Canal, by Patrick Denker via Flickr (CC BY-NC 2.0)