The Future of Agriculture

The newly released OECD-FAO Agricultural Outlook 2022-2031 sets out the challenges and growth prospects facing the agricultural commodity and fish markets around the world over the next ten years. The publication analyses markets at a global, regional and per-commodity level. Below is a summary of some of the highlights from the report:

Global population growth the main driver agricultural demand over the next decade

Population size and household disposable income are two main factors behind demand for agricultural commodities. From 2021 to 2031 the global population is expected to increase by over 740 million people, an average growth of 0.9% per year, which is lower than the 1.1% per year in the previous decade.

Over the coming decade, the majority of population growth will be concentrated in Sub-Saharan Africa and Asia.

Income growth is expected to average 1.1% per year globally from 2021 to 2031. Growth rates are expected to vary considerably across countries and regions. Highest income growth is expected in Asia.

Comparing the impact of population growth and income growth on future demand, the OECD and FAO expects population growth to be the largest driver of growth at a global level for most key commodities (excluding diary).

Slowdown in growth for many key commodities

Global demand for agricultural commodities (including non-food uses) is expected to grow by 1.1% per year. This is slower than the previous decade growth averaged 2% per year. Apart from sugar crops, several key commodities will see lower growth rates over the coming decade.

According to the OECD and FAO, the slowing demand is largely due to expected lower demand growth in China and lower global demand for biofuels.

Low- and middle-income countries the main contributors to increased demand

Strong population growth in Sub-Saharan Africa and Asia means that the majority of the additional food demand over the next decade will come countries in these regions. For example, China is expected to account for 41% of additional global fish demand and 34% of additional meat demand over the next decade. India will account for almost half of the additional demand for dairy, while countries in Sub-Saharan Africa will account for a third of additional cereal demand.

Agricultural production expected to grow in all regions

From 2022 to 2031 total world agricultural production is expected to increase with 17%. Production will increase in all regions, with the strongest growth expected to come in Asian and African countries. According to the OECD and FAO, growth in these regions will be driven by higher productivity, mobilisation of more resources (such as land) and more intense use of existing inputs.

Emissions set to increase, but carbon intensity expected to decline

Direct emissions from the agriculture is expected to grow by 6% from 2022 to 2031, with lifestock the most important contributor to the increase. However, all regions are expected to see higher production growth than emissions growth, causing a decrease in the carbon intensity according the OECD and FAO.

Agricultural trade crucial for food availability and farmer incomes

Trade is a major component of the global agricultural system. In many regions, a substantial share of the food production is exported, while food imports play a key role in securing an affordable and diverse selection for consumers.

Over the coming decade, OECD and FAO projects minor changes to the export and import shares. This means a stable trading system will be of utmost importance in ensuring continued growth of the agricultural sector.

The impact of Russia's war against Ukraine

As highlighted in the report, the impact of Russia's war against Ukraine is already putting international agricultural trade under significant strain. In one scenario for the 2022/23 markering season, calculated by the OECD and FAO, full loss of Ukraine capacity to export would lead to a 19% increase in the global wheat price, rising to 34% higher should Russian exports also be affected (-50% restriction of wheat exports by Russia).

Food prices expected to return to long-term decline

One of the key projections in the report is that the current trend of high food prices is expected to be temporary. After the 2022/2023 marketing year, the OECD and FAO projection is that commodity prices will continue their long-term decline.

Productivity growth needs to triple in order to achieve the Sustainable Development Goal 2

The outlook includes an analysis of the progress needed to achieve the Sustainable Development Goal 2 on zero hunger. In order to reach the goal, while at the same time reducing emissions to reach the Paris agreement targets, agricultural productivity must increase by 28% by 2030, according to the OECD and FAO estimates. This would be more than triple the productivity growth in the last decade.