World Agricultural Outlook, Risks, and Challenges …...2015-17 2027 Americas South and East Asia Sub-Saharan Africa Western Europe Yield (t/ha) Eastern Europe and Central Asia MENA

World Agricultural Outlook, Risks, and Challenges for the

Coming 10 years

Annelies DEUSS

Trade and Agriculture Directorate, OECD

PRIMAFF Open Seminar11 December 2018, Tokyo, Japan

Outline of the presentation

Part 1: OECD-FAO Agricultural Outlook

• Prices

• Consumption

• Production

• Trade

• Risks and uncertainties

Part 2: The economic effects of public stockholding policies for rice in Asia

How examine the impacts of these uncertainties?

The Economic Effects of

Public Stockholding

Policies for Rice in Asia

OECD-FAO Agricultural Outlook

#AgOutlook3

• Joint OECD-FAO report published

annually in June/July

• 10 year horizon

• Model based projection validated

through global expert consensus

• Major commodities

• Global coverage

• Special theme chapter 2018:

Middle East and North Africa



#AgOutlook4

The food price crisis, ten years later…

50

100

150

200

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Index 2002-04 = 100FAO Food Price Index (real)

Prices spiked due to a “perfect

storm” of market shocks reinforced

by policy responses

Real prices to be

contained by strong supply

growth, ample stocks and

weakening demand

growth

Prices Consumption Production Trade Risks & Uncertainties


#AgOutlook5

Declining real prices are expectedfor almost all commodities

-3

-2

-1

0

1

2

Wh

eat

Mai

ze

Oth

er c

oar

se g

rain

s

Ric

e

So

ybea

n

Oth

er o

ilse

eds

Veg

etab

le o

ils

Pro

tein

mea

ls

Wh

ite

sug

ar

Raw

su

gar

Po

ult

ry

Po

rk

Bee

f

Sh

eep

Bu

tter

Ch

eese

Sk

im m

ilk

po

wd

er

Wh

ole

mil

k p

ow

der

Fis

h

Eth

ano

l

Bio

die

sel

Co

tto

n

Cereals Oilseeds Sugar Meat Dairy Biofuels

%Annual real price change over the coming decade



#AgOutlook6

Growth in demand for agricultural commodities slows down – except for dairy

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27

Cereals Meat Fish Fresh dairy Sugar Vegetable oil

% Due to per capita demand growth (food & other uses) Due to population growth

Average annual growth rate in demand (%)



#AgOutlook7

Most additional food demand will come from Sub-SaharanAfrica, India and China

-20

0

20

40

60

80

100

120

140

160

2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27 2008-17 2018-27

Cereals Meat Fish Fresh dairy Sugar Vegetable oil

Rest of World MENA China India Sub-Saharan Africa OECD

Growth in demand (Million tonnes per decade)



#AgOutlook8

Biofuel growth slows down, reducingthe demand growth for feedstocks

0

20

40

60

80

100

120

140

2000 2003 2006 2009 2012 2015 2018 2021 2024 2027

bln LWorld ethanol production

World biodiesel production

0

5

10

15

20

25

2000200320062009 2012 2015 2018 2021 2024 2027

%

Maize used for biofuelsSugarcane used for biofuelsVegetable oil used for biofuels



#AgOutlook9

Crop and meat production will increase without major changes in total land use

0.0

2.0

4.0

6.0

8.0

10.0

12.0

0 20 40 60 80 100Area harvested (Million ha)

2015-17 2027

Americas

South and

East Asia

Sub-Saharan Africa

Western

Europe

Yield (t/ha)

Eastern Europe

and Central Asia

MENA

Maize

0

10

20

30

40

50

0.0 0.2 0.4 0.6 0.8 1.0 1.2Pasture (billion ha)

2015-17 2027

Americas

South and

East Asia

Sub-Saharan

Africa

Western

Europe

Ruminant meat production (Million tonnes)

Eastern Europe

and Central Asia

Oceania MENA

Ruminant meat



#AgOutlook10

As demand growth slows down,so do agricultural trade volumes

Annual growth rate of trade volumes (%)

0

2

4

6

8

10

Wheat Maize Rice Soybean Poultry Pork Beef Skim milkpowder

%

2008-17 2018-27



#AgOutlook11

Trade: Specialisation between regionsis increasing over time

-100

-50

0

50

100

150

1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026

Agricultural trade balances by region, in constant value, 1990-2027 (bln USD)

Americas

Oceania

Eastern

Europe and

Central Asia

Western

Europe

Sub-Saharan

Africa

MENA

South and

East Asia



#AgOutlook12

Exporter concentration remains high

Export shares of top 5 exporters in 2027, by commodity

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Soybean

Pork

Maize

Skim Milk Powder

Poultry

Whole Milk Powder

Sheep

Vegetable Oils

Protein Meals

Rice

Butter

Sugar

Cheese

Wheat

Beef

Cotton



#AgOutlook13

Importer concentration less pronounced – except for some products

Import shares of top 5 importers in 2027, by commodity

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Soybean

Cotton

Sheep

Pork

Vegetable Oil

Protein Meal

Butter

Skim Milk Powder

Beef

Cheese

Maize

Whole Milk Powder

Poultry

Sugar

Rice

Wheat



#AgOutlook14

50

100

150

200

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Index 2002-04 = 100FAO Food Price Index (real)

Real prices to be

contained by strong supply

growth, ample stocks and

weakening demand

growth


How do risks and

uncertainties affect

the baseline

projections?


#AgOutlook15

Agricultural markets are always uncertain

Structural Policy

Demand • Income growth • Biofuel policies

• Food and health policies

Supply • Oil prices

• Pests and diseases

• Climate risk

• Potential of precision agriculture

• Regulation of new plant

breeding techniques

Trade • Emergence of new market

players

• Trade disputes

• Bilateral and regional trade

agreements (CTTP, NAFTA,

Brexit)

Increasing policy

uncertainties are adding

to market risks



#AgOutlook16

Risk Uncertainty

• Can predict possibility of future

outcome (variance known)

• Can be parametrized

Medium-term Agricultural Outlook

Analysed using partial stochastics

• Cannot predict possibility of future

outcome (variance unknown)

• Cannot be parametrized

Stochastic analysis: estimation of

possible future variations based on

historical variations for key

agricultural and macroeconomic

drivers

Partial: does not

capture all sources of

variability that can

affect agricultural

markets



#AgOutlook17

0

50

100

150

200

250

300

350

2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

USD/tReal maize price: Baseline and 90% interval

Grey range includes 90% of

simulated prices from the

stochastic analysis

Despite downward trend, risk of temporary price increases remains



#AgOutlook18

Risk Uncertainty

• Can predict possibility of future

outcome (variance known)

• Can be parametrized


Analysed using partial stochastics

• Cannot predict possibility of future

outcome (variance unknown)

• Cannot be parametrized


Analysed using scenarios

Examples of scenarios:

- Impact of export tax by large exporter

- Impact of change in public stockholding

policies

Stochastic analysis: estimation of

possible future variations based on

historical variations for key

agricultural and macroeconomic

drivers

Partial: does not

capture all sources of

variability that can

affect agricultural

markets


Outline of the presentation


• Prices

• Consumption

• Production

• Trade

• Risks and uncertainties

Part 2: The economic effects of public stockholding policies for rice in Asia

How examine the impacts of these uncertainties?


Public Stockholding


20

• Since the 2007-08 food price crisis, public stockholding policies have

regained popularity.

• Public stockholding programmes are considered as policy tools that

can be deployed to:

• shield consumers from food price spikes

• provide more stable domestic prices for both producers and consumers

• However, these programmes may also have additional and

unintentional impacts on domestic and international markets,

depending on how they function and the scale of intervention.

Why examine public stockholding policies?

This report: what are their market impacts over the medium term?

Focus on: public stockholding programmes for rice in Asia

21

• 8 Asian countries: Bangladesh, China,

India, Indonesia, Japan, Korea,

Philippines, and Thailand

• 2 parts:

Part 1: In-depth review of the functioning

of public stockholding programmes

Part 2: Examine the medium-term

markets impacts

This report


Public Stockholding


22

Approach: comparable across countries

Organize review around 5 questions:

1. Which agencies are in charge of public stocks?

2. What are the main purposes for keeping public stocks of rice?

3. How does the country acquire rice for its public stocks and at which prices?

4. How does the country release rice from its public stocks and at which prices?

5. Are there any trade restrictions in place?

Generalize the process of acquisition and release of rice from public

stocks

Part 1: Review functioning of public stockholding programmes

23

Generalization of the process of acquisition and release of rice from public stocks


DOMESTIC

MARKET

Market price

DOMESTIC

MARKET

Procurement

price

INTERNATIONAL

MARKET

Import price

DOMESTIC

MARKET

Market price

DOMESTIC

MARKET

Subsidized

price

INTERNATIONAL

MARKET

Export price

24

Generalization of the process of acquisition and release of rice from public stocks


Note: situation until 2014 for Thailand and up to and including 2016 for the other countries

25

Part 2: Medium-term market impacts of alternative public stockholding strategies

• Motivation: periods of high (low) prices or price volatility can motivate countries to

behave in the same way (e.g. 2007-08)

• Establish bounds to global market impacts that derive from changes in public stock

policies across the region

“What would happen to domestic and international markets over the medium term

(2018-2030) if all eight countries set their public stock levels of rice to either a low or

high level at the same time?”

Baseline scenario: “business as usual” – assume no changes in policies and macro-

economic environment during 2018-2030

Low-level scenario: set public stock norm to 2 weeks of national consumption by 2020

High-level scenario: set public stock norm to 3 months of national consumption by 2020

• Transition period towards low-level/high-level scenarios: 3 years (2018-2020)

• Compare three scenarios:

26

Impact analysis

Market impacts on:

• Procurement

• Private stocks

• Prices

• Availability

• Public expenditure

Impact of a global production shock

27

Key findings

Short-term

Medium-term

Shock

Relative impacts vary by country, but there are several common trends:

Effects of changing public stockholding policies are more pronounced

during the transition period when countries adjust their public stocks to

the new levels than during the remainder of the projection period.

Changing stockholding policies can have structural impacts over the

medium term on overall procurement, domestic and international prices,

availability, private stock levels, and public expenditure.

In the event of a global production shock, the immediate impacts on

prices and availability are less severe if countries hold larger public stocks

than if they hold smaller ones, but keeping low levels of public stocks

enables faster recovery towards the no-shock situation

28

Key findings

Short-term

Medium-term

Shock












29

Impact on procurement

Aggregate procurement by all countries except China

0

10000

20000

30000

40000

50000

60000

70000

kt

Baseline

High-level scenario

Low-level scenario

Note: Shaded area indicates projection period 2018-2030

Source: OECD simulations

Short-term Medium-term

Effects most

pronouncedStructural impacts

30

Impact on domestic producer prices

Percentage change compared to baseline scenario, 2017-2030


-7

-6

-5

-4

-3

-2

-1

0

1

2

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

%

Bangladesh China India Indonesia

Japan Korea Philippines Thailand

-5

0

5

10

15

20

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

%

Bangladesh China India Indonesia

Japan Korea Philippines Thailand

Low-level scenario

compared to baseline

High-level scenario

compared to baselineShort-term

Effects most

pronounced

Medium-term

Structural impacts

31

Key findings

Short-term

Medium-term

Shock












32

Impact of a global production shock

Impact of a 3% global production shock in 2024 on the world price of rice under the

low- and high-level scenario


100

200

300

400

500

600

700

USD/t

Low-level High-level

Low-level with shock High-level with shock

-1

0

1

2

3

4

5

6

7

2024 2025 2026 2027 2028

%Low-level High-level

Global prices under low- and high-level

scenario, without and with shock, 2000-2030 Percentage change under low- and high-

level scenario with shock compared to a

situation without shock, 2024-2028

• Immediate impacts less severe if larger public stocks

• Faster recovery if smaller public stocksShock

Global

production

shock in 2024

33

Policy recommendations

When considering a consistent change (increase or decrease) in the levels of

public stocks, governments should take into account that:

• the impacts are not limited to the short term; there can also be

persisting structural impacts over the medium term,

• this not only affects domestic markets, but can also have spillover

effects in international markets,

When considering a consistent increase in the levels of public stocks,

governments should take into account that this

• raises fiscal costs

• discourages private sector engagement in stockholding activities

34

Further information on the Agricultural Outlook

www.agri-outlook.org

Both publications are available on OECD iLibrary

https://www.oecd-ilibrary.org/

For questions or inquiries

[email protected]

More information


Public Stockholding


Documents

World Agricultural Outlook, Risks, and Challenges …...2015-17 2027 Americas South and East Asia Sub-Saharan Africa Western Europe Yield (t/ha) Eastern Europe and Central Asia MENA