Paris, June 17 - Food demand should keep the farm sector strong in the next decade despite a significant hit from the global economic downturn, the OECD and the UN's FAO food agency said in a report on Wednesday.
"Despite the significant impact of the global financial crisis and economic downturn on all sectors of the economy, agriculture is expected to be relatively better off, as a result of the recent period of relatively high incomes and a relatively income-inelastic demand for food," it said.
Average crop prices were projected to be 10-20 percent higher in real terms in 2009-2018 relative to 1997-2006, while real prices for vegetable oils were expected to rise more than 30 percent, the OECD-FAO Agricultural Outlook shows.
After a pullback from peaks in 2007/08, farm prices were broadly expected to be capped by the downturn in the next two to three years before accelerating with the economy, the report said, stressing however that a rapidly evolving economic picture meant its farm price projections were subject to caution.
Record highs for crop prices fuelled food inflation last year, sparking riots in some parts of the developing world.
Meat and dairy prices were seen rising less than crops in 2009-2018 as they face a bigger short-term hit from the crisis due to their sensitivity to income levels, the report said.
In real terms, meat is not seen surpassing the 1997-2006 average, while dairy commodities are expected to be slightly higher, supported by rising energy and vegetable oil prices.
Crop and vegetable oil prices in the coming years will be supported by demand from developing countries, reflecting population growth and rising incomes, and the growing use of plant-based biofuels, the report said.
"A projected rapid expansion of biofuel production to meet mandated use will continue to have inflating price impacts for such feedstocks as wheat, maize, oilseeds and sugar," it said, citing estimates biodiesel could claim 20 percent of global vegetable oil consumption by 2018.
However, the development of biofuels will reinforce the sensitivity of farm commodities to volatile crude oil prices, the report also said.