Organisation for Economic Cooperation and Development
UncertaintiesUncertainties in in thethe MacroMacro--EconomicEconomic Environment Environment ––ImplicationsImplications forfor MediumMedium--Term Term PerspectivesPerspectives forfor
Agricultural Agricultural MarketsMarkets
Martin von Lampe
Trade & Agriculture Directorate 1
Martin von Lampe
Trade and Agriculture Directorate, OECD
Conference on Prices and Market Risks: Farmers Faced with VolatilityCentre de conférences Pierre Mendès France – Paris – France, November 23-24, 2009
• Agricultural Outlook - a set of conditional projections published in an OECD-FAO annual report
OECDOECD--FAO Outlook 2009FAO Outlook 2009--20182018
Trade & Agriculture Directorate 2
• The datasets are available at www.agri-outlook.org
Key macroeconomic assumptionsKey macroeconomic assumptions
• 2009 global economic
recession
• 2010 global economic
recovery
• 2% annual inflation in
Trade & Agriculture Directorate 3
• 2% annual inflation in
OECD; higher in BRICs
• stronger US dollar
• stable policy regime
• crude oil prices increasing
from end-2008 low
60
80
100
120
140
160
Real prices at or above historical levelsReal prices at or above historical levels
% change relative to 1997-2006 average
Trade & Agriculture Directorate 4
-20
0
20
40
60
Wheat Coarse grains
Rice Oilseed Veget. Oil
Raw sugar
Beef (pacific)
Pigmeat (pacific)
Butter SMP Crude oil
Average 2007-08 Average 2009-18
20
30
40
50
60
%
World Production Non-OECD Production
Steady growth of global productionSteady growth of global production
Production Growth from 2006-08 average to 2018
Trade & Agriculture Directorate 5
0
10
20
Whe
at
Coa
rse
grai
ns Ric
e
Oils
eeds
Veg
et. O
ils
Sug
ar
Bee
f
Pig
mea
t
Pou
ltry
But
ter
Che
ese
WM
P
2018
2006-08
2018
US
AE
U
20%
Demand shares - WORLD (2018 )
Biodiesel increasingly important Biodiesel increasingly important
demand driver for vegetable oildemand driver for vegetable oil
Trade & Agriculture Directorate 6
0 5 10 15 20 25 30 35
2006-08
2018
2006-08
Million tonnes
non-biofuel use
biofuel useInd
on
esi
a + 90 Mt 80%
…while feed and fuel push coarse grain demand up…while feed and fuel push coarse grain demand up
+ 50 Mt
2006-08
2018
2006-08
2018
Food useFeed useBiofuelsOther
No
n-
OE
CD
No
n-
OE
CD
OE
CD
8%
56%
24%
11%
Demand Shares (2018) - OECD
Trade & Agriculture Directorate 7
0 100 200 300 400 500 600 700
Million tonnes
0 200 400 600 800 1000 1200 1400
2006-08
2018
Wo
rld
19%
56%
12%
13%
Demand Shares (2018) – World
• Economic projections have changed a lot
• Timing/speed of recovery critical
• Energy prices important but highly uncertain
Underlying macroeconomic assumptions uncertain Underlying macroeconomic assumptions uncertain
Trade & Agriculture Directorate 8
• Energy prices important but highly uncertain
• Role of exchange rates
• Credit markets in turmoil
1. The impact of alternative GDP projections
2. The impact of alternative crude oil prices
How sensitive are agricultural marketsHow sensitive are agricultural markets
to changes in the macro environment?to changes in the macro environment?
Trade & Agriculture Directorate 9
2. The impact of alternative crude oil prices
3. The impact of alternative exchange rates
GrowthGrowth projections projections revisedrevised regularlyregularly
Revisions of GDP growth March 2009 vs. Dec. 2008
3%
4%
5%
6%
7%
8%
An
nu
al
cha
ng
e i
n r
ea
l G
DP
OECD: Base
OECD: Lower GDP
slow recovery
Trade & Agriculture Directorate 10
-4%
-3%
-2%
-1%
0%
1%
2%
2000 2003 2006 2009 2012 2015 2018
An
nu
al
cha
ng
e i
n r
ea
l G
DP
slow recovery
Non-OECD: Base
Non-OECD: Lower
GDP slow recovery
Lower income growth impacts Lower income growth impacts
livestock prices morelivestock prices more
Trade & Agriculture Directorate 11
… which is partly linked to income elasticities,… which is partly linked to income elasticities,
but also to slower production adjustmentsbut also to slower production adjustments
Trade & Agriculture Directorate 12
… so feed consumption has strong impact on crop use… so feed consumption has strong impact on crop use
Trade & Agriculture Directorate 13
1. The impact of alternative GDP projections
2. The impact of alternative crude oil prices
How sensitive are agricultural marketsHow sensitive are agricultural markets
to changes in the macro environment?to changes in the macro environment?
Trade & Agriculture Directorate 14
2. The impact of alternative crude oil prices
3. The impact of alternative exchange rates
70
80
90
100
110
120
130
140
150
US
$ p
er
ba
rre
l
WTI Brent
OilOil pricesprices highlyhighly unpredictableunpredictable
Trade & Agriculture Directorate 15
10
20
30
40
50
60
70
US
$ p
er
ba
rre
l
70
80
90
100
110
120
130
140
150
US
$ p
er
ba
rre
l
WTI Brent
OilOil pricesprices highlyhighly unpredictableunpredictable
Trade & Agriculture Directorate 16
10
20
30
40
50
60
70
US
$ p
er
ba
rre
l
Oil price assumption Oil price assumption relativelyrelatively lowlow
60
80
100
120U
SD
per
bar
rel
Trade & Agriculture Directorate 17
0
20
40
60
1981 1985 1989 1993 1997 2001 2005 2009 2013 2017
US
D p
er b
arre
l
Outlook 2008Outlook 2009
20
30
40
50
2009-10 2018
%
Impact of higher oil prices on commodity pricesImpact of higher oil prices on commodity prices
Trade & Agriculture Directorate 18
0
10
20
8%
10%
12%
14%
Ch
an
ge
in a
ve
rag
e w
orl
d p
rice
s,
-20
17
Medium-term impact of oil price at ~USD100 instead of USD70
Impact of higher oil prices on commodity pricesImpact of higher oil prices on commodity prices
-- What is the relevance of biofuels?What is the relevance of biofuels?
Trade & Agriculture Directorate 19
0%
2%
4%
6%
Wheat Maize Veget. oils
Ch
an
ge
in a
ve
rag
e w
orl
d p
rice
s,
20
13
-
Agric. Production Costs Biofuel Price Impact Biofuel Demand Effect
Note: Results not exactly comparable to those in previous slide as based on 2008 baseline
1. The impact of alternative GDP projections
2. The impact of alternative crude oil prices
How sensitive are agricultural marketsHow sensitive are agricultural markets
to changes in the macro environment?to changes in the macro environment?
Trade & Agriculture Directorate 20
2. The impact of alternative crude oil prices
3. The impact of alternative exchange rates
What if the Euro was 10% weaker?What if the Euro was 10% weaker?
What if the Dollar was 10% stronger?What if the Dollar was 10% stronger?
Trade & Agriculture Directorate 21
What if the Euro was 10% weaker?What if the Euro was 10% weaker?
What if the Dollar was 10% stronger?What if the Dollar was 10% stronger?
Trade & Agriculture Directorate 22
• Agriculture relatively resilient to changes in economic prospects compared to other sectors
• Food as necessity
• Larger sensitivity for livestock markets than for crop markets
• Crude oil prices are increasingly important for
ConclusionsConclusions
Trade & Agriculture Directorate 23
• Crude oil prices are increasingly important for agricultural markets
• Agricultural production costs
• Demand as energy carrier
• Exchange rates remain crucial
Thank You
Trade and Agriculture Directorate
Trade & Agriculture Directorate 24
www.oecd.org/agriculturewww.oecd.org/agriculture
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