World agriculture markets over the next decade are susceptible to slowing demand and production growth, said an annual outlook report by the Organisation for Economic Cooperation and Development and the Food and Agriculture Organization of the UN.
This is a summary of the report.
Commodities production reached record levels in 2017 for most cereals, meats, dairy products and fish, and cereal stocks climbed to new highs. At the same time, demand growth started to weaken.
WEAKING DEMAND GROWTH
Much of the impetus to demand over the past decade came from rising per-capita incomes in China, which stimulated demand for meat, fish and animal feed. This demand is decelerating, and new sources of demand are not sufficient to maintain global growth.
As a result, agricultural commodity prices were expected to remain low. Current stocks also make a rebound unlikely within the next few years.
Plus, weakening demand growth leaves population growth as the main driver of consumption growth, and the rate of population growth is forecast to decline.
Moreover, global per-capita consumption of many commodities was expected to flatten. For staples like cereals, roots and tubers, consumption levels are close to saturation.
Additionally, demand growth for meat products is slowing from regional variations in preferences and disposable income constraints, although demand for animal products like dairy is set to expand faster.
For cereals and oilseeds, the foremost source of demand growth will be feed, particularly from China, closely followed by food. Feed demand growth, nevertheless, was projected to slow globally, despite livestock production intensification.
Demand for cereals, vegetable oil and sugar cane for biofuel production was expected to flatten over the decade. This was in contrast with the last decade where biofuels expansion led to more than 120 million tonnes of additional cereals demand, predominately corn.
The exceptions to the broad pattern of slowing per-capita demand growth come from sugar and vegetable oils, where per-capita intake was expected to increase in the developing world, amid greater urbanization and demand for processed and convenience foods.
PRODUCTION GROWTH ABOUT 20%
Global agricultural and fish production was projected to grow by around 20% over the coming decade but with considerable variation. Strong growth was expected in Sub-Saharan Africa, South and East Asia, the Middle East and North Africa.
Production growth in the developed world was expected to be much lower, especially in Western Europe.
With slower consumption and production growth, agriculture and fish trade was projected to grow at about half the rate of the previous decade. Net exports will tend to increase from land-abundant countries and regions, while countries with high population densities or high population growth will see rising imports.
For nearly all agricultural products, exports were projected to remain concentrated among stable groups of key supplying countries. A notable change was the emerging presence of the Russian Federation and Ukraine on world cereal markets.
CATTLE, BEEF RECAP
Cash cattle trading was reported this week at $123 to $124 per cwt on a live basis, down $3 from last week. Dressed-basis trade was reported at $200 per cwt, down $5.
The USDA choice cutout Wednesday was down $1.62 per cwt at $230.22, while select was down $0.71 at $217.50. The choice/select spread narrowed to $12.72 from $13.63 with 120 loads of fabricated product sold into the spot market.
There were no tenders Tuesday for deliveries against the Apr futures contract.
The CME Feeder Cattle index for the seven days ended Monday, was $144.63 per cwt, down $0.03. This compares with Wednesday’s May contract settlement of $141.37, down $0.22.