LONDON, May 29: Agricultural commodity prices should ease from their recent record peaks but over the next 10 years they are expected to average well above the mean of the past decade, according to the latest Agricultural Outlook from OECD and the UN Food and Agriculture Organisation.

The current high prices will hit the poor and hungry people hardest, particularly those who are net food buyers, especially in urban areas in low income countries.

In comparing averages of the coming decade with those of the past, real prices, i.e. nominal prices corrected for inflation, are projected to increase in a range from less than 10 per cent for rice and sugar, under 20 per cent for wheat, around 30 per cent for butter, coarse grains and oilseeds to over 50 per cent for vegetable oils, according to the report.

Prices may also become more volatile because stock levels are expected to remain low and as some of the demand for agricultural commodities becomes less responsive to price changes. The recent increase in investment funds on commodity future markets might also become an additional factor in price variability. Climate change, too, may affect crop production and supply in unforeseen ways.

The report says that drought in some of the world’s main grain-producing regions in the context of low stocks was a large – but transitory – factor in the sharp price rise of the past two years. More permanent factors such as high oil prices, changing diets, urbanisation, economic growth and expanding populations, are also at play and are behind the expectation of higher average prices in the coming 10 years than over the past decade.

Growing demand for biofuel is another factor contributing to higher prices. World fuel ethanol production tripled between 2000 and 2007 and is expected to double again between now and 2017 to reach 127 billion litres a year. Bio-diesel production is seen to expand from 11 billion litres a year in 2007 to around 24 billion litres by 2017. The growth in biofuel production adds to demand for grains, oilseeds and sugar, so contributing to higher crop prices.

Among other findings of the report are the following:

• Both consumption and production is growing faster in developing countries for all agricultural commodities except wheat. By 2017, these countries are expected to dominate trade in most farm products.

• High prices will be beneficial for many commercial farmers both in developed and developing countries. However, many farmers in developing countries are not linked to markets and are unlikely to benefit from the higher prices that are forecast.

• Consumption of vegetable oils — both from oil seed crops and from palm — will grow faster than for other crops over the next 10 years. The rise is being driven both by demand for food and for biofuel.

• Brazil’s share of world meat exports is expected to grow to 30 per cent by 2017.