Soaring Food Prices and the EastAgri Region

Soaring Food Prices Soaring Food Prices and the EastAgri Regionand the EastAgri Region

EastAgri 2008 Annual Meeting, 11 September 2008

Stefan TangermannDirector for Trade and Agriculture

OECD Trade & Agriculture Directorate 22OECD Trade & Agriculture Directorate

Cereal prices in real terms, schematicCereal prices in real terms, schematic


} 20-30% Bad weather Low stocks Panic

High oil price Weak dollar Biofuels

}Transitory

(1/3 of which: Biofuels)

Long-term}

? ?



Historical Projected

March 2008

Wheat prices in real termsWheat prices in real terms



June 2008

Maize prices in real termsMaize prices in real terms



May 2008

Rice price in real termsRice price in real terms



April 2008

Oilseed price in real termsOilseed price in real terms

OECD Trade & Agriculture Directorate 10

World commodity prices trend higherWorld commodity prices trend higher

Percent growth between : average 2008-2017 and average 1998-2007


Wheat

Maize

Rice(right handaxis)

Is the bubble bursting?Is the bubble bursting?Weekly spot prices

Source: FAO


What happens to world prices, if …What happens to world prices, if …Change in world prices expected for 2017, relative to baseline

Scenario 1: Biofuel production constant at 2007 level

Scenario 2: Scenario 1 + Oil price constant at 2007 levels (72$)

Scenario 3: Scenario 2 + Lower income growth in EE5 countries (half annual growth rate)

Scenario 4: Scenario 3 + Progressive appreciation of the USD exchange rates to reach 10% higher rates in 2017

Scenario 5: Scenario 4 + Yields for wheat, oilseeds and coarse grains 5% higher than over the production period


Are China and India pushing up prices?Are China and India pushing up prices?Supply balance cereals (incl. rice)

China India



Oilseeds: Brazil mirrors ChinaOilseeds: Brazil mirrors ChinaSupply balance oilseeds

China Brazil



OECD countries loose export share OECD countries loose export share


Will the CIS be the world's break basket?Will the CIS be the world's break basket?



Russia will feed its livestockRussia will feed its livestock



CIS oilmeal surplus will growCIS oilmeal surplus will grow

Oilmeal net trade



… … as will surplus of vegetable oilas will surplus of vegetable oil

Vegetable oil net trade



Butter: CIS intra-trade and overall net importsButter: CIS intra-trade and overall net imports



Cheese: CIS intra-trade and overall net importsCheese: CIS intra-trade and overall net imports



CIS to remain major meat import regionCIS to remain major meat import region



ConclusionsConclusions

• World prices will calm down

… but remain higher than in the past

… oil price, biofuel support policies are major drivers

• Global production and consumption shifts increasingly towards non-OECD countries

• CIS has potential to be major grains exporter


Thank YouThank You

Trade and Agriculture Directorate

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Soaring Food Prices and the EastAgri Region

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