GLOBAL FARMING
According to the recently
published OECD-FAO
Outlook, demand for
agricultural products will
grow during the next
decade but at a slower
rate than agricultural
production, and prices
will thus decrease
in real terms.
Slow but steady
agricultural growth
G
lobal grain production decreased
in 2018 for the second year,
according to the recently published
outlook of the Organisation for Economic
Co-operation and Development of the
Food and Agriculture Organization of
the United Nations (OECD-FAO Outlook).
However, the maize and rice crops were
higher than in 2017. Global grain stocks also
decreased for the first time in six years.
Soya bean production increased as the
US and Brazil both had good crops. China’s
higher import tariff on US soya bean resulted
in weaker demand for the commodity in
feed rations, and stock levels were higher.
Meat production grew in 2018, with the
bulk of higher production originating in
the EU, Russian Federation and US.
World milk production grew 1,6% in 2018,
led by a 3% increase in production in India and
higher production in three major exporting
countries: the EU, New Zealand and the US.
According to the FAO Food Price Index,
global food prices were on average 3,5%
lower in 2018 than in 2017. Meat prices were
down 2,2%, dairy prices 4,7% and sugar
prices a huge 21,9%. Grain prices were 9%
higher. Since the end of 2018, however, prices
for all agricultural products surveyed by the
FAO have increased. From December 2018 to
June, prices increased 7,1% on average. Dairy
showed the highest increase (17,1%), followed
by meat (8,4%), grain (3,2%) and sugar (1,5).OUTLOOK TO 2028
The OECD-FAO expects that total food
demand will grow steadily over the next
decade at 1,2% per year for grains, 1,7% for
animal products and 1,8% for sugar and
vegetable oils. The global consumption of
staple food has levelled off and future growth
will depend largely on population growth.
Demand for higher-value commodities will
depend on a combination of per-capita use
and population growth. As a result, demand
for higher-value commodities such as meat,
dairy products, sugar and vegetable oils will
grow faster than demand for basic staples.
Since the 1960s, the agriculture sector has
increased crop and livestock yields without a
proportional increase in land use. The global
population has more than doubled since
1960; global food production has tripled,while total land use for agriculture has
increased by only 10%. The outlook expects
that the intensification of agriculture will
continue and global agriculture will produce
more food per person. Growth in agricultural
production over the next decade will take
place in emerging and developing countries.
Agricultural production will grow at a
faster rate than the demand for agricultural
products. According to the outlook, most
commodities will see real prices decreasing
by 1% to 2% per year. Pressure on farmers to
increase productivity will continue. Increased
productivity will depend on biotechnology
and precision farming, and will thus probably
originate in large-scale commercial farms.IMPLICATIONS FOR SOUTH AFRICA
Fast demand growth in sub-Saharan Africa will
create a market for South Africa’s commercial
farmers. Opportunities for exporting food
to neighbouring countries will increase.
However, South Africa’s dysfunctional
government services will be unlikely
to cope with all required phytosanitary
measures. Commodity organisations will
have to take over this responsibility.
We have already seen our farmers
establishing commercial farms in other African
countries; this trend will continue. Farmers
in South Africa may soon face competition
from farmers in neighbouring countries
producing products with lower cost structures.
According to the outlook, farmers will
have to face stagnant real international
prices. However, the OECD-FAO Outlook
and the local Bureau for Food and
Agricultural Policy baseline projections
use general equilibrium models for their
predictions. The straight-line future that
these models predict will not materialise.
The important message for South
African farmers from the outlook is that
food demand, especially in sub-Saharan
Africa, will continue to grow.
▪FWBY DR KOOS COETZEE
Dr Koos Coetzee is an independent
agricultural economist. Email him at
[email protected].
Subject line: Global farming.
OPPORTUNITIES FOR
FOOD EXPORTS
TO NEIGHBOURING
COUNTRIES
WILL INCREASE
26 farmer’sweekly 2 AUGUST 2019