Price volatility as concerning as high commodity prices - Commission

11-Jul-2012 - Last updated on 12-Jul-2012 at 11:50 GMT

Price volatility is as concerning as constant high commodity pricing, according to a European Commission response to a new report on global agricultural development in the next decade.

The new Agricultural Outlook 2012-2021 report was issued jointly by the Organisation for Economic Cooperation and Development (OECD) and the Food and Agriculture Organisation of the United Nations (FAO).

“While international agricultural commodity markets appear to have entered calmer conditions after record peaks last year, food commodity prices are anticipated to remain on a higher plateau over the next decade,” the report states.

High prices would be underpinned by firm demand coupled with a slowing growth in global production, said the OECD.

Real concern

However, in a statement the Commission added: “Price volatility continues to be a real concern for the farming sector as a whole and is still receiving considerable attention in the international policy arena, in particular regarding the situation of developing countries.”

Price volatility, rather than constantly high prices, was as much of a concern, a spokesman for the Commission said, although it acknowledged prices would remain generally high.

“Price volatility continues to be a real concern for the farming sector as a whole and is still receiving considerable attention in the international policy arena, in particular regarding the situation of developing countries.”

Increased productivity

However, the Commission supported the other findings of the report, that “rising food demand will be met by increased productivity, with developing countries becoming the main source of growth”.

The joint OECD/FAO report claims agricultural output will slow to an average of 1.7% a year over the next 10 years, down from more than 2% in recent decades. “Higher input costs, increasing resource constraints, growing environmental pressures and the impact of climate change will all serve to dampen supply response,” it states.

“Increased productivity, green growth and more open markets will be essential if the food and nutrition requirements of future generations are to be met,” said OECD secretary general Angel Gurria. “Governments should renounce trade distorting practices and create an enabling environment for a thriving and sustained agriculture underpinned by improved productivity.”

The report also calls for government to encourage better agronomic practices and encourage research and innovation, sentiments the Commission echoed.