Global food prices predicted to stagnate

Which will be a marked change from the last 15 years.

Marcus Roberts | Jul 20 2016 | comment

The Organisation for Economic Cooperation and Development and the United Nations’ Food & Agricultural Organisation have prepared a joint report on the forecasted global food market for the next 10 years. According to this report, food prices are expected to stagnate at a level slightly higher than they were before the global food price spike of 2007-2008. This is good news, because global food prices have more than doubled since 2001 due to population growth and rising incomes which saw a greater demand by more consumers for meat than in the past. (Meat being more costly than grains and oilseeds. See here for our recent blogpost on China’s meat consumption.) In 2011, the global food prices spiked at three times the 2000 level.

However, since then the prices have fallen away somewhat. The last three years have seen the longest slump in food prices since 2000. A decade of slow or no growth would be more welcome than the past 15 years of steep growth and volatility. The reason for the report’s predictions is that global population growth (the main contributor to increasing food prices) is declining to 1 per cent per annum by 2025. Furthermore, income growth in emerging economies is predicted to be weakened and consumers are showing “a declining propensity to spend income gains on consuming more basic foodstuffs”. The population growth will be matched by increasing food supplies: by 2025 global cereal production is predicted to rise by 12 per cent due to yield improvements while usage is expected to expand by 14 per cent. In fact yield improvements are expected to account for 80 per cent of crop output increases. Livestock herd numbers and crop areas are expected to only grow “modestly”. While meat, fish and diary demand will grow “relatively strongly” (good for the New Zealand!), crop demand for biofuels is not expected to change much. Overall, although expected rising fuel prices will increase the nominal price of foods over the next decade, once inflation is excluded food prices will stagnate for the next decade. Is this another sign that the global overpopulation doomsday scenarios are not going to eventuate?

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