17 June 2011: The Agricultural Outlook 2011-2020, produced jointly by the Organisation for Economic Co-operation and Development (OECD) and the UN Food and Agriculture Organization (FAO), predicts that prices for agricultural commodities will fall in the short run but increase over the next decade to average 20-30% higher in real terms than over the 2001-2010 period.

According to the report, agricultural production is expected to increase in the short term leading commodity prices to fall from the highs of early 2011, but in the long run, prices are expected to increase due to slower annual growth in agricultural production, in particular for oil seeds and coarse grains.

Higher prices for commodities will exert pressure on consumer prices and lead to higher aggregate consumer price inflation, which may reduce purchasing power of the poor and increase risks for economic stability and food security in some developing countries.

The report also investigates the key driving forces affecting food price volatility, which can have significant negative effects on the agricultural sectors, food security and the wider economy in developed and developing countries, noting that climate change and unpredictable weather is the most frequent and significant factor causing volatility. Other factors include stock levels, energy prices, exchange rates, growing demand, resource pressures, trade restrictions and speculation.

The report identifies the following policy challenges: mitigating volatility through enhanced market transparency and removal of policy distortions, such as import and export restrictions or biofuel subsidies; and managing volatility through safety nets for low income consumers, emergency food reserves and market-based risk management. [Publication: OECD-FAO Agricultural Outlook 2011-2020] [OECD Press Release]