Presentation Title

							     Soaring Food Prices
   and the EastAgri Region
             Stefan Tangermann
      Director for Trade and Agriculture




EastAgri 2008 Annual Meeting, 11 September 2008
Cereal prices in real terms, schematic




1973                                                2008   2017

             OECD Trade & Agriculture Directorate                 2
Cereal prices in real terms, schematic




1973                                                2008   2017

             OECD Trade & Agriculture Directorate                 3
Cereal prices in real terms, schematic




1973                                                2008   2017

             OECD Trade & Agriculture Directorate                 4
 Cereal prices in real terms, schematic




                                            ?                                 ?
 Bad weather
 Low stocks
 Panic
                   }   Transitory
                                                                       } 20-30%
                                                                 (1/3 of which: Biofuels)
 High oil price
 Weak dollar
 Biofuels
                   }   Long-term


 1973                                                             2008                2017

                          OECD Trade & Agriculture Directorate                               5
                                      Wheat prices in real terms

                                700
                                             Historical                             Projected
US $ per tonne in 2007 prices




                                600

                                500                                                  March 2008
                                400

                                300

                                200

                                100

                                 0



                                             OECD Trade & Agriculture Directorate                 6
                                      Maize prices in real terms

                                500
                                             Historical                             Projected
                                450
US $ per tonne in 2007 prices




                                400
                                350
                                300                                                  June 2008
                                250
                                200
                                150
                                100
                                 50
                                 0



                                             OECD Trade & Agriculture Directorate                7
                                       Rice price in real terms

                                1600
                                            Historical                             Projected
                                1400
US $ per tonne in 2007 prices




                                1200

                                1000

                                 800                                               May 2008

                                 600

                                 400

                                 200

                                   0



                                            OECD Trade & Agriculture Directorate               8
                                       Oilseed price in real terms

                                1200
                                              Historical                             Projected
                                1000
US $ per tonne in 2007 prices




                                 800

                                                                                      April 2008
                                 600

                                 400

                                 200

                                   0



                                              OECD Trade & Agriculture Directorate                 9
      World commodity prices trend higher
      Percent growth between :            average 2008-2017 and average 1998-2007
100
                       nominal               real
 80


 60


 40


 20


  0


-20
      Wheat   Coarse     Rice    Butter    Cheese         SMP        Oilseed Veget. Oil     Beef    Pigmeat      Raw
              grains                                                                      (pacific) (pacific)   sugar


                                     OECD Trade & Agriculture Directorate                                               10
                 Is the bubble bursting?
                     Weekly spot prices
           550                                                900

           500                                                800   Wheat
           450
                                                              700
           400
                                                              600   Maize
           350
US$ je t




           300                                                500
                                                                    Rice
           250                                                400   (right hand
                                                                    axis)
           200
                                                              300
           150
                                                              200
           100

            50                                                100

            0                                                 0



                                                                    Source: FAO

                       OECD Trade & Agriculture Directorate                 11
               What happens to world prices, if …
Change in world prices expected for 2017, relative to baseline
                     Wheat                                     Maize                       Vegetable oil
 0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
-40%
-45%
       Scenario 1: Biofuel production constant at 2007 level
       Scenario 2: Scenario 1 + Oil price constant at 2007 levels (72$)
       Scenario 3: Scenario 2 + Lower income growth in EE5 countries (half annual growth rate)
       Scenario 4: Scenario 3 + Progressive appreciation of the USD exchange rates to reach 10% higher rates in 2017
       Scenario 5: Scenario 4 + Yields for wheat, oilseeds and coarse grains 5% higher than over the production period
                                                OECD Trade & Agriculture Directorate                                12
                    Are China and India pushing up prices?
                                   Supply balance cereals (incl. rice)

                                    China                                                                 India
              450                                                              250
                                  Historical   Projected                                          Historical      Projected
              400
                                                                               200
              350

              300
                                                                               150
              250
Millionen t




                                                                 Millionen t
                                                                                     Production        Use
              200    Production     Use                                        100

                                                                                     Net export
              150    Net export
                                                                                50
              100

               50
                                                                                 0
                0

              -50                                                              -50




                                                 OECD Trade & Agriculture Directorate                                         13
                                 Oilseeds: Brazil mirrors China
                                         Supply balance oilseeds

                                 China                                                                 Brazil
              100                                                                90

                    Production   Historical   Projected                                Production   Historical   Projected
               80                                                                80
                    Use                                                                Use
                    Net export                                                   70
               60
                                                                                       Net export
                                                                                 60
               40
Millionen t




                                                                   Millionen t
                                                                                 50
               20
                                                                                 40
                0
                                                                                 30

              -20
                                                                                 20

              -40                                                                10


              -60                                                                 0




                                                OECD Trade & Agriculture Directorate                                         14
OECD countries loose export share




              OECD Trade & Agriculture Directorate   15
Will the CIS be the world's break basket?


          Historical                                          Projected




                       OECD Trade & Agriculture Directorate               16
Russia will feed its livestock


Historical                                          Projected




             OECD Trade & Agriculture Directorate               17
CIS oilmeal surplus will grow
        Oilmeal net trade

 Historical                                          Projected




              OECD Trade & Agriculture Directorate               18
… as will surplus of vegetable oil
          Vegetable oil net trade

   Historical                                          Projected




                OECD Trade & Agriculture Directorate               19
Butter: CIS intra-trade and overall net imports



             Historical                                    Projected




                    OECD Trade & Agriculture Directorate               20
Cheese: CIS intra-trade and overall net imports



            Historical                                          Projected




                         OECD Trade & Agriculture Directorate               21
CIS to remain major meat import region



        Historical                                          Projected




                     OECD Trade & Agriculture Directorate               22
                  Conclusions

• World prices will calm down

  … but remain higher than in the past

  … oil price, biofuel support policies are major
    drivers

• Global production and consumption shifts
  increasingly towards non-OECD countries

• CIS has potential to be major grains exporter


                   OECD Trade & Agriculture Directorate   23
           Thank You

Trade and Agriculture Directorate




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           OECD Trade & Agriculture Directorate   24