WASHINGTON, March 10, 2010 – Despite
the recent slowdown in the world economy and supply response to earlier
dramatic price increases, which depresses commodity prices in the short run,
the Food and Agricultural Policy Research Institute projects that an
economic turnaround and bioenergy mandates will grow demand for food, feed,
and fuel, stimulating trade and price recovery over the rest of the decade.
FAPRI analysts briefed Congress this week on their 2010
agricultural economic baseline projections, known as the FAPRI Outlook.
According to the Outlook, the slowdown in the world
economy in 2009 proved to be deeper and more widespread than originally
anticipated, with a negative annual rate of real GDP growth of -1.9 percent.
However, significant recovery is projected for 2010, with long-term real GDP
growth of 3.3 percent reached by 2011. The Asian economies withstood the
economic crisis, posting positive growth in 2009 (for example, China at 8.5
percent and India at 6.4 percent), and thus lead the world economic
recovery.
The
U.S. dollar made significant gains in 2009 but it resumes its real
depreciation over the rest of the decade against the currencies of
Australia, the European Union, New Zealand, Argentina, and China.
The economic recovery is accompanied by projected
stronger energy prices. FAPRI expects that continuing recovery of crude oil
prices and bioenergy mandates will grow demand and strengthen the world
price of ethanol through 2019. Global net trade in ethanol is projected to
increase by 3.12 billion gallons and reach 4.15 billion gallons by 2019.
Biodiesel mandates in the Americas and Europe sustain the high price of
biodiesel and vegetable oil, with growth in consumption mostly met by
domestic production, as the traditional South American exporters also face
domestic mandates.
Other highlights from FAPRI's 2010 world agricultural
outlook:
Bumper crop production in key wheat producing and
importing countries, coupled with a slow economy, depresses the world wheat
price over the next two years. An economic turnaround strengthens prices.
The world corn price follows a similar pattern, decreasing in 2009/10 but
strengthening thereafter. In the long run, grain prices are expected to
remain strong because of growing demand for food, feed, and fuel purposes.
A production shortfall in 2009/10, particularly in
India, raises the world price of sugar by almost 60 percent. The price
declines by 26 percent in the following year as countries recover. However,
it continues to remain high, as more sugarcane is used for ethanol in
Brazil, and sugar imports of countries like China and the EU remain strong.
World prices of oilseeds remain relatively stable in
2009/10 as the supply rebound (especially for soybeans) is met with
increased demand resulting from the economic recovery. Vegetable oils lead
the oilseeds complex, as demand from both food and biodiesel uses expands
firmly over the outlook period. Increasing demand for protein meal from the
growing and intensifying livestock sector in Asia supports the price of meal
despite large supplies due to strong oil-driven crush. Argentina, Brazil,
Paraguay, and the United States continue to dominate world soybean
production, while China continues to dominate world soybean imports. Palm
oil remains the cheapest and most widely traded edible oil.
Food safety concerns continue to affect the world meat
market in the short run. However, sustained income and population growth
raises per capita meat consumption and fuels expansion in world trade. Over
the next decade, meat trade is projected to increase by 22.5 percent, and
recovery in demand, coupled with higher grain prices, strengthens all meat
prices. Brazil and the United States gain significant shares in the world
meat market.
Dairy prices declined significantly in 2008/09 as a
result of the economic slowdown. In the long run, growth in population and
income continues to put upward pressure on dairy prices. Australia, New
Zealand, and the European Union remain the big exporters. While exports from
the European Union stagnate, Argentina and Brazil expand their dairy
exports. The Asian countries, Russia, and Algeria are the main importers in
the world dairy markets.
