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Higher farm commodity prices likely for next 10 yrs: OECD, FAO

business Updated: Jun 15, 2010 21:20 IST

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The price of agricultural commodities worldwide is likely to remain higher over the next 10 years considering a rise in energy prices amid recovery in the global economy, a latest report said.

"That nominal price of all (farm) commodities covered in the report will be on a higher plateau over the projection period 2010-2019," the Organisation for Economic Co-operation and Development (OECD) and the UN body Food and Agriculture Organisation (FAO) said in the annual joint report.

High energy prices have returned and "a further rise in oil prices could be expected to increase input and production costs, having an impact on crop supplies, prices and trade flows, and reinforce feedstock demand for biofuels," it said.

According to the OECD-FAO Agricultural Outlook, the average price of wheat and coarse grains are likely to rise between 15-40 per cent, vegetable oil prices by 40 per cent, dairy prices by 16-45 per cent over the next decade.

OECD's Secretary-General Angel Gurria said: "The agriculture sector has shown resilience to recent price shocks and the economic downturn... But going forward, governments should implement measures to ensure that farmers have at their disposal better tools to manage future risks, such as production contracts, insurance schemes and futures markets."

As the role of developing countries in the international markets is growing quickly, "policy discussions must be global in scope, and we need to improve the framework for such exchange of views," FAO Director-General Jacques Diouf said.

The report also sees the global agricultural output to grow more slowly over the next decade from last ten years. Nevertheless, the farm output is likely to meet the market demand of estimated population levels in 2050.

"Developing countries will provide the main source of growth for world agricultural production, consumption and trade," it said, adding that output is expected to rise by more than 40 per cent in Brazil and by 20 per cent in China, India, the Russian Federation and Ukraine.

"Although the world produces enough to feed its population, recent price spikes and the economic crisis have contributed to a rise in hunger and food insecurity," it noted.

About one billion people are now estimated to be undernourished.