ROME, June 15 (Reuters) - Agricultural prices in 2010-19 will be mostly higher than in the decade preceding a spike in 2007-08, bolstered by an economic recovery and rising energy prices, the FAO and OECD said in a report on Tuesday.
Prices of major farm products should fall well short of peaks seen since 2007 as supply generally becomes less tight, but will be underpinned by growing demand and energy-related costs, the United Nations' Food and Agriculture Organisation and the Organisation for Economic Cooperation and Development said.
Crop and livestock products, with the exception of pork, were all expected to show higher real prices in the coming decade versus 1997-2006, with wheat and coarse grains seen 15-40 percent higher and vegetable oils up more than 40 percent.
Dairy products were forecast to show real growth of 16-45 percent in average prices, with the outlook having improved markedly since a recovery in the market in late 2009.
"Stronger demand, with an anticipated return to higher growth following economic recovery and from increasing populations, should outpace production growth, on average, over the projection period to maintain all commodity prices on a higher plateau," FAO and OECD said in their joint Agricultural Outlook 2010-2019 report.
In their previous 10-year outlook published a year ago in the depths of the global economic downturn, the organisations had forecast crop prices would rise 10-20 percent in real terms versus 1997-2006, dairy prices would be slightly higher and meat prices would not exceed the base period.
Rising crude oil, seen at over $96 a barrel in 2019, would support agricultural prices by raising input costs and boosting markets for biofuels that use crops, the new report said.
But while outstripping prices in the decade before the 2007-08 surge, most agricultural prices were not forecast to rise significantly by 2019 compared with current levels as increased production would boost supplies, a trend FAO has stressed in its short-term crop forecasts.
BRAZIL DRIVES FARM OUTPUT
Although trailing demand growth, increases in agricultural output would still be sufficient to maintain sizeable stock levels and to keep overall production on track to meet an estimated 70 percent rise in global food output needed by 2050 to supply a swelling global population, the report said. Production gains would be driven by emerging countries. Brazil would be the fastest-growing farm producer in 2010-19 with an increase of over 40 percent, while Ukraine (29 percent) and Russia (26 percent) would also see high growth.
But a shift in production towards countries with more erratic crop yields could contribute to price volatility, along with the increasing influence of energy prices on agriculture, the report said. Emerging countries would also claim a greater share of consumption and trade in agricultural commodities, although they would remain dwarfed by the world's richest economies in exports in dairy products and non-rice grains.
Biofuels should also drive demand and prices for major crops in coming years, with government targets and a recovery in energy prices encouraging more growth of the alternative fuels, FAO and OECD said, forecasting ethanol output would reach 159 billion litres in 2019, up 110 percent from a 2007-09 average.
By 2019, almost 35 percent of sugarcane and 13 percent of coarse grains production worldwide will go towards ethanol, up from about 20 and 9 percent in 2007-09, while the share of vegetable oil output going to biodiesel would rise to 16 percent from 9 percent, the report said.
But the outlook for biofuel markets was uncertain given fluctuating crude oil prices, evolving public policy and the prospect of second-generation biofuels, it added. (Reporting by Gus Trompiz; editing by Sue Thomas)