OECD-FAO Agricultural Outlook 2002

205 Pages·2002·6.149 MB·English

by  OECD

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OECD Agricultural Outlook 2002-2007
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The OECD Agricultural Outlook 2002-2007, now in its eighth edition, shows that sluggish economic
OECD
growth, weak demand and continued high levels of spending on farm support are slowing the

recovery in world prices, despite a general tightening of supplies in recent years. An economic

rebound and strengthening demand beginning in the second half of 2002 should lead to increased
Agricultural

trade and higher prices over the projection period to 2007.

This book is essential reading for all those involved with agricultural markets. It provides the reader Outlook

with valuable information on market trends and medium-term prospects for the main agricultural

products, shows how these are influenced by government policies, and highlights some of the risks

and uncertainties that may influence the agricultural outlook: 2002-2007

• What is the role of government policies and how do they influence farmers’ decisions?

• How long will the slowdown last and how fast will recovery proceed?

• Which farm prices will benefit most from the expected recovery?

• What is the outlook for agricultural trade?

• Which countries and products stand to gain the most?

• How does OECD trade liberalisation affect food security in developing countries?

• How are world markets affected by developments in Russian agriculture?

• What lessons can be drawn from recent animal disease outbreaks?

• What are the key issues that OECD policy makers will face over the next five years?

The report provides detailed commodity projections to 2007 for production, consumption, trade,

stocks and prices of temperate-zone products in OECD countries, and presents selected information

on other countries, including China, Argentina and the Russian Federation.

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ALSO AVAILABLE ON CD-ROM E
To access the complete database, which contains series going back as far as 1970 and selected C
D
results for the scenarios discussed in this publication, consult the OECD Agricultural Commodities

A
Outlook Database, available on CD-ROM.
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ISBN 92-64-18721-9
2002 2002
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OECD Agricultural
Outlook
2002-2007
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
Pursuant to Article 1 of the Convention signed in Paris on 14thDecember 1960, and which came into
force on 30thSeptember 1961, the Organisation for Economic Co-operation and Development (OECD)
shall promote policies designed:
– To achieve the highest sustainable economic growth and employment and a rising standard of
living in Member countries, while maintaining financial stability, and thus to contribute to the
development of the world economy.
– To contribute to sound economic expansion in Member as well as non-member countries in the
process of economic development.
– To contribute to the expansion of world trade on a multilateral, non-discriminatory basis in
accordance with international obligations.
The original Member countries of the OECD are Austria, Belgium, Canada, Denmark, France,
Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain,
Sweden, Switzerland, Turkey, the United Kingdom and the United States. The following countries
became Members subsequently through accession at the dates indicated hereafter: Japan (28thApril
1964), Finland (28thJanuary 1969), Australia (7thJune 1971), New Zealand (29thMay 1973), Mexico
(18thMay 1994), the Czech Republic (21stDecember 1995), Hungary (7thMay 1996), Poland
(22ndNovember 1996), Korea (12thDecember 1996) and the Slovak Republic (14thDecember 2000). The
Commission of the European Communities takes part in the work of the OECD (Article13 of the OECD
Convention).
Publié en français sous le titre:
PERSPECTIVES AGRICOLES DE L’OCDE
2002-2007
© OECD 2002
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75775 Paris Cedex 16, France.
FOREWORD
The OECD Agricultural Outlook provides a medium term assessment of
future trends and prospects in the major agricultural commodity markets of
OECD countries. The report is published annually, as part of a continuing
effort to promote informed discussion of emerging policy issues. This eighth
edition of the OECD Agricultural Outlook, 2002-2007 is set against the
background of a sharp drop in global economic activity at the beginning of
the Outlook period, as well as prospective changes in EU and US farm policy
in2002 and the planned finalisation of multilateral trade negotiations under
the Doha Development Agenda in 2003. The Outlook for agricultural
commodity markets, both globally and in many Member countries is highly
conditional on the pace of economic recovery, on policy interventions in
general by OECD governments and on the outcomes of current domestic
policy reviews and multilateral trade negotiations, in particular. These
outcomes have not been anticipated in this report.
The projections to2007, presented in the Outlook, constitute a plausible
medium-term future for the markets of key commodities. They are the result
of close co-operation between the OECD Secretariat and experts in Member
countries and some Non-Member Economies (NMEs) and hence reflect their
combined knowledge and expertise. The projections are based on a number
of assumptions relating to current or announced agricultural and trade
policies in OECD countries, the underlying macro-economic environment,
and developments in major NMEs. The OECD’s Aglink model is used to
guarantee internal consistency in the projections. The model is also used to
generate scenarios around the Outlook baseline so that sources of
uncertainty in relation to key assumptions and selected policy issues can be
analysed. In addition to the projections and scenarios, this edition of the
Outlook also includes an analysis of the sensitivity of the projections to
exchange rate assumptions and two special focus sections in which some
issues of particular importance are analysed. The first of these sections
discusses projections and main issues in the medium term outlook for
Russian agriculture evaluating Russia’s potential to develop into a major force
in global commodity markets over the medium term. The second evaluates
the implications of the world market price developments as presented in this
Outlook for a number of indicators of food security in NMEs. The fully
documented Outlook database, including historical data, projections and
selected scenario results, is available on CD-Rom.
This publication is prepared by the Directorate for Food, Agriculture
and Fisheries of the OECD with the active participation of all Member
countries. Two other annual publications prepared by the Directorate
support and extend the policy assessments provided in this
report– Agricultural Policies in OECD Countries: Monitoring and Evaluation 2002
(June2002), and Agricultural Policies in Transition Economies: Trends in Policies and
Support, 2002 (September2002).
© OECD 2002 3
The OECD Agricultural Outlook is published under the responsibility of
the Secretary-General of the OECD. The views expressed and conclusions
reached in this report do not necessarily correspond to those of the
governments of OECD Member countries.
Acknowledgement
This edition of the OECD Agricultural Outlook was prepared by the
following team of economic analysts from the OECD Secretariat: Loek
Boonekamp (team leader), Pete Liapis, Garry Smith (co-ordinator), Grégoire
Tallard, Wyatt Thompson, Pavel Vavra and Martin von Lampe. Research and
statistical assistance were provided by Armelle Elasri, Ane Kathrine
Christensen, Gaëlle Gouarin and Claude Nenert. Secretarial services were
provided by Christine Cameron and Michèle Patterson. Technical assistance
in the preparation of the Outlook database CD ROM was provided by Frano
Ilicic and final revisions to the report were translated by Armelle Elasri,
Gaëlle Gouarin and Claude Nenert. Many other colleagues in the OECD
Secretariat furnished useful comments on earlier drafts of the report.
4 © OECD 2002
TABLE OF CONTENTS
Acronyms and Abbreviations................................................................. 6
The Outlook in Brief ............................................................................. 7
Overview ............................................................................................... 9
Economic and Policy Assumptions ....................................................... 23
Cereals................................................................................................... 43
Oilseeds................................................................................................. 61
Meat....................................................................................................... 79
Dairy Products....................................................................................... 93
Russian Agriculture: Current Situation and Future Trends .................. 109
Food Security of Non-Member Economies (NMEs):
Some Implications of the Outlook .................................................... 123
Methodology.......................................................................................... 135
References ............................................................................................ 193
Annexes
Annex I. Statistical Tables................................................................. 137
Annex II. Glossary of Terms................................................................ 203
LIST OF BOXES
Box 1. Sensitivity analysis: effects of exchange rate changes .................. 30
Box 2. The effect of the economic downturn on agricultural markets .... 33
Box 3. The Farm Security and Rural Investment (FSRI) Act2002-07 ...... 41
Box 4. Market impacts of changes
in the European Union’s set-aside policy ....................................... 56
Box 5. Some possible effects of changes
to the US marketing loan rate ........................................................ 66
Box 6. Developments in selected OECD biofuel policies
and consequences for crop markets............................................... 70
Box 7. Market and trade impacts of the BSE crises ................................. 83
Box 8. An analysis of dairy support schemes
in Japan and the United States ...................................................... 106
© OECD 2002 5
ACRONYMS AND ABBREVIATIONS
Acronyms
ABARE Australian Bureau of Agricultural and Resource Economics
ALIC Agriculture and Livestock Industry Corporation
AMAD Agricultural Market Access Database
AMF Anhydrous milk fat
BSE Bovine spongiform encephalopathy
CAP Common Agricultural Policy
CEEC Central and Eastern European Countries
CFIP Canadian Farm Income Program
CIS Commonwealth of Independent States
CPI Consumer price index
CRP Conservation Reserve Program
DEIP Dairy Export Incentive Program (US)
EU or EU15 European Union of 15 Member States
EEP Export Enhancement Program (US)
ERS Economic Research Service of the US Department for Agriculture
Euro The single currency of the twelve EU countries participating in the European Economic and Monetary Union
EUROSTAT Statistical Office of the European Communities
FAIR ACT Federal Agriculture Improvement and Reform Act (US)
FAO Food and Agriculture Organisation
FAS Foreign Agricultural Service of the US Department of Agriculture
FMD Foot and mouth disease
FMMO Federal Milk Marketing Orders
FSRI ACT The Farm Security and Rural Investment Act
FTAA Free Trade Area of the Americas
GATT General Agreement on Tariffs and Trade
GDP Gross domestic product
HIV Human Immunodeficiency Virus
IEA International Energy Agency
IGC International Grains Council
IMF International Monetary Fund
JRIS Rice Farming Income Stabilisation Programme
LDC Least Developed Countries
MAF Ministry of Agriculture and Forestry (New Zealand)
MAFF Ministry of Agriculture, Forestry and Fisheries (Japan)
MBM Meat and bone meal
MERCOSUR Common Market of the South
MFN Most Favoured Nation
MLC Meat and Livestock Commission (United Kingdom)
NAFTA North American Free Trade Agreement
NFIDC Net Food Importing Developing Countries
NIS New Independent States
NISA Net Income Stabilisation Account
NME Non-Member Economies
NZDB New Zealand Dairy Board
OECD Organisation for Economic Co-operation and Development
OIE Office International des Épizooties
OIS Other Independent States
OTMS Over Thirty Month Scheme
PAPP Production Adjustment Promotion Programme
PFC Production Flexibility Contract
PSE Producer Support Estimate
SMP Skim milk powder
SPS measures Sanitary and Phyto-Sanitary Measures
SRM Specified Risk Material
TRQ Tariff rate quota
TSE Total Support Estimate
UAA Utilised Agricultural Area
UK United Kingdom
URAA Uruguay Round Agreement on Agriculture
US or USA United States
USDA United States Department of Agriculture
vCJD Variant Creutzfeldt-Jacob Disease
WFM World Food Model
WMP Whole milk powder
WTO World Trade Organisation
For an explanation of technical terms, see the Glossary
Abbreviations and symbols
ARS Peso (Argentina) GBP Pounds (United Kingdom) mha Million hectares
AUD Dollars (Australian) Ha Hectare mn Million
Bn Billion hltr hectolitre mt Million tonnes
CAD Dollars (Canadian) IDR Rupiah (Indonesia) NZD Dollars (New Zealand)
CNY Yuan (Chinese) INR Rupee (India) PLN Zloty (Poland)
cwe Carcass weight equivalent JFY Japanese fiscal year (beg. 1April) pw Product weight
cwt hundredweight JPY Japanese yen rtc Ready-to-cook
c.i.f. Cost insurance freight KRW Won (Korea) rwt Retail weight
cts/Ib US cents per pound Kg Kilogram t Tonnes
dw Dressed weight kt Thousand tonnes t/ha Tonnes per hectare
EUR European currency unit L Litre RUR Russian ruble
HUF Forint (Hungary) lw Live weight THB Baht (Thailand)
f.o.b. Freight on board MXN Peso (Mexican) USD Dollars (United States)
6 © OECD 2002
THE OUTLOOK IN BRIEF
(cid:127) Subdued conditions are expected in agricultural markets at the start of the Outlook period as slack
demand and trade reflects the general downturn in world economic growth. However, as world
economic recovery gets underway in the latter half of2002 and strengthens into2003, it should
underpin rebounding global demand and trade. This, in turn, should fuel gradually rising world
agricultural prices up to2007 –though more for some meats and dairy products than for cereals,
oilseeds and their by-products. Real, inflation-adjusted prices remain little changed during the
projection period, but their longer-term trend continues downward.
(cid:127) A return to higher, sustainable global economic growth lays the foundation for strengthening
demand and expanding trade in farm products. Trade in both bulk and processed products should
increase to2007 with the steepest rise in net dairy product exports by OECD countries, followed by
cereals and meats. Demand for agricultural products in general is expected to be more brisk in
Non-Member Economies (NMEs), boosted by faster economic and population growth, rising
personal incomes, increasing urbanisation and changing diets.
(cid:127) World and OECD production of agricultural products is projected to expand steadily over the
Outlook period with the fastest growth in the NME region. Livestock products and feedstuffs
continue to expand their share of trade at the expense of food grains while yield and productivity
increases continue to contribute most to crop expansion. While the NMEs account for the bulk of
growth in world agricultural production, their total demand expands even faster, met by higher
imports from OECD countries to fill shortfalls.
(cid:127) Farm support in the OECD area remains high and continues to have a major impact on agricultural
markets. Fundamental reform has been slow and insufficient and sometimes, such as with the new
US farm legislation, it has resulted in additional budget allocations for farm support. Multilateral
negotiations are still at an early stage under the Doha Development Agenda in the WTO. Changes
in national farm legislation are expected over the Outlook period. Governments in reviewing
policies should recognise that the long term prosperity and competitiveness of their farm sectors is
best served by a market-orientated approach rather than by insulating producers from markets
through high levels of subsidies and protection.
(cid:127) The policy context is becoming more complex. A key challenge facing governments in the period
ahead will be to better match domestic priorities to international obligations. Countries must find
effective ways of tackling their legitimate internal policy issues without harming their trading
partners. Further, fundamental agricultural reforms will also be needed to encourage broader
participation of developing countries in a new WTO agreement and to share its benefits across all
countries. Further integrating the farm sector more effectively into the multilateral trading system
would help to sustain a recovery in global agricultural markets.
© OECD 2002 7
OVERVIEW
Outlook at a glance – economic rebound will eventually boost markets
Improved market conditions OECD agricultural markets are subdued at the start of the Outlook period
in prospect… as commodity demand and trade slows amid significantly weaker world
economic growth. Global economic activity fell sharply over the last year as a
synchronised downturn spread from the United States and Japan to other
OECD countries, then to the rest of the world. However, economic recovery is
expected to be underway in the latter half2002 and to strengthen in2003. In
later years of the Outlook, a sustained upturn in economic activity, especially
…but the long term in developing countries, lays foundations for strengthening demand, trade
downward trend in real and prices for agricultural products. However, higher farm incomes and
commodity prices continues continuing productivity growth are expected to boost global output of cereals
and oilseeds sufficiently to restrain world price increases for these
commodities over the Outlook period. Atlantic and Pacific meat markets are
initially held back by animal disease outbreaks, particularly beef, but overall
prospects for the meat sector improve during the medium term. For many
agricultural products covered in the Outlook, projected world prices for2007
are above the average for1996-2000. However, real prices, adjusted for
inflation, remain relatively flat to2007, but with a longer term declining trend.
The macroeconomic context is weak but should improve
Weaker global economic The projections for OECD countries show how both global and domestic
conditions… forces are shaping the agricultural sector. The world economy has been
weaker and more variable since the late1990s but went into a synchronised
downturn in2001 for the first time since the1970s. The trough deepened
following the terrorist attacks in the United States on 11September 2001, as
weaker commodity demand pushed down market prices. Dairy products were
hardest hit, falling sharply from their August2001 peaks in a display of
volatility typical of these thin markets. Meat prices also declined with
…and regional disease recession and the impacts of Foot and Mouth Disease (FMD) outbreaks in the
outbreaks… European Union and Argentina and BSE in Europe and Japan. Some crops
proved more resilient to the weakening economic conditions as lower global
production outweighed weaker demand, drawing down stocks and firming
prices at the beginning of the Outlook period. The impact on agricultural
markets of the downturn in economic growth in OECD countries is examined
in Box2 of the Economic and Policy Assumptions chapter.
…signal a slow recovery Two distinct phases of the global macro economic forecast impact on the
at first… agricultural baseline. Economic slowdown dominates the near term, the main
uncertainties being its depth and duration, followed by the timing and
strength of the expected recovery. Beyond the recovery phase, agricultural
© OECD 2002 9