July 28, 2011

 

USDA expecting global agricultural prices to remain high

 

 

The USDA is expecting global agricultural commodity prices to remain high over the next decade, with strong demand growth from emerging markets, boosting global prices and profitability.

 

Mike Dwyer, the director of the Global Policy Analysis Division Office with the USDA Foreign Agricultural Service, told delegates at this year's Australian Grains Industry Conference in Melbourne, Australia, that agriculture is entering a "golden era", and a combination of strong growth in global food, feed, biofuel and fibre demand, and a weaker US dollar will keep agricultural commodity prices high over the next 10 years.

 

Developing countries have held up better than the developed world as the global economy emerged from the worst recession in decades, according to Dwyer, who predicted logarithmic growth of consumer incomes through to 2020, especially in large emerging markets where much of the growth in global import demand for agricultural products is concentrated.

 

In a break from the past where global recessions usually hammer commodity prices, Dwyer said this time prices were down slightly from 2008 but still high by historical standards.

 

Price volatility on the market had been exacerbated by "errors in government policy", where shrinking supplies and food security concerns have led some countries to restrict exports, leading to distorted markets and increasing world prices, according to Dwyer.

 

However, he added that demand for commodities such as grain was now growing significantly faster than the historical rate of yield growth, and future price increases would only be tempered by more land coming into production or through the rapid introduction of greater use of biotechnology.

 

Acreage for global grain production fell 1% over the last 20 years, but grain yields increased 28%.

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