FAO and OECD warn that food commodities are still at risk of “market shock” due to coronavirus

The UN’s food agency and the OECD report that a “market shock” of tumbling agricultural prices could be part of a global recession triggered by a coronavirus epidemic.
calendar icon 17 July 2020
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According to reporting in Reuters, the organisations said that with food production mostly maintained during the COVID-19 crisis, agricultural markets face the risk of swelling stockpiles that could weigh on prices.

“The macroeconomic shocks induced by the COVID-19 pandemic are expected to put downward pressure on agricultural commodity prices,” they said, adding there was potential for “a historically significant market shock” this year.

The impact on vegetable oil and animal-based products would be greater than for staple crops like rice and wheat, they said.

The projections were part of an annual 10-year agricultural outlook published by the UN’s Food and Agriculture Organisation (FAO) and the Organisation for Economic Cooperation and Development (OECD).

It marked their first analysis of the possible consequences of the new coronavirus on agricultural markets.

The coronavirus pandemic has already contributed to price slides in agricultural commodities, as restaurant demand dried up and fuel consumption rates fell during lockdowns.

Some commodity prices have recovered in recent weeks, helped by an easing of lockdowns, but the FAO and OECD said the short-term outlook remained uncertain.

“The markets have done a good job of getting over the initial shock,” OECD Secretary General Angel Gurria told an online news conference.

“However, there is no room for complacency, especially as the virus spreads in developing countries.”
While the COVID-19 context has clouded the short-term outook, the FAO and OECD projected that agricultural prices would gradually revert to their baseline scenario of a slight decline in real terms over 2020-2029.

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