A comprehensive report on trends in world agriculture by two leading inter-governmental organizations arrives at a time when prices for almost all agricultural outputs are at records highs. However, the report predicts that productivity gains will outstrip increased demand, bringing prices gradually down.

The "Agriculture Outlook 2008-2017", produced jointly by the OECD and FAO, provides a sweeping analysis of world agriculture at the present, and predicts trends for the next ten years. It comes during a period of higher than usual uncertainty in the sector; prepared, as authors describe, "in an environment characterized by increased instability in financial markets, higher food price inflation, signs of weakening global economic growth and food-security concerns."

Higher food prices are blamed on the three-pronged forces of adverse weather in key grain producing regions, increased consumption of livestock in countries like China, and the growth in biofuels production. While prices will probably recover from the disruptions due to weather, prices are likely to stay high as the other two factors continue to drive demand.

Global trade patterns are shifting, notes the report, with developing countries accounting for a growing share of the production and consumption of all agricultural products apart from wheat. Developing countries are also accounting for an increasing share of imports and exports in the agricultural sector.

The report predicts that prices will remain volatile over the next decade, as stocks may not be replenished, demand becomes less sensitive to prices, and climate change causes havoc on weather conditions.

The report also includes projections for the supply, demand, trade and prices of biofuels. Although the higher prices for agricultural commodities has made biofuels less viable, extensive public support in the form of tax concessions, blending obligations and import tariffs will continue to drive up production.

According to the report: "Global ethanol production is projected to increase rapidly and to reach some 125 billion litres in 2017, twice the quantity produced in 2007 ... Following increased mandates international trade in ethanol is exptected to grow rapidly to 6 billion litres in 2010 and almost 10 billion litres by 2017, despite continuing trade protection. Most of this trade will originate in Brazil, and will be destined for markets in the EU and the U.S."

Biodiesel production is set to grow and an even faster rate, due largely to blending mandates. Most of the trade in biodiesel is expected to flow from Malaysia and Indonesia to the EU.

For more information on the "OECD FAO Agricultural Outlook 2008-2017", click here.