Farm Ireland

Thursday 18 April 2019

Meat prices will fall to historic lows over the next decade

Stock photo
Stock photo

Tim Wallace

Meat prices will fall to historic lows over the next decade and other foods should also become cheaper as population growth slows and farms become more efficient.

Costs have spiked in recent years as surging demand from a larger and increasingly wealthy global population have put pressure on supplies.

But those demographic strains should ease in the next 10 years at the same time as production is ramped up as the agriculture industry becomes more productive, the Organisation for Economic Co-operation and Development (OECD) believes.

Global meat prices are set to fall by 18pc in real terms by 2027, taking costs below levels seen at any point since the OECD’s records began in 1990.

The biggest fall is expected in beef, amounting to an average annual price cut of 2.7pc, followed by lamb and mutton at 2pc and poultry at 1.5pc.

This is driven by more effective production. The OECD expects beef output to rise 16pc and sheep meat 21pc, without using any extra land to achieve this increase.

Consumers of cereals can look forward to a price drop of around 13pc – led by an anticipated annual drop of 1.65pc for rice – while oil seed prices are expected to drop by 6.2pc

Buyers of dairy products – who may need relief the most after the recent "butter bubble" sent prices spiralling – can also look forward to a drop of almost 10pc.

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Butter prices are forecast to drop by an average of almost 2pc per year. That would represent a significant turnaround for shoppers.

Skimmed milk powder is the only major category for which the OECD anticipates a rise in prices over the next 10 years, averaging 1pc per year.

“The weakening of demand growth is expected to persist over the coming decade. Population will be the main driver of consumption growth for most commodities, even though the rate of population growth is forecast to decline,” said the OECD in its annual Agricultural Outlook.

“Moreover, per capita consumption of many commodities is expected to be flat at a global level. This is notable for staple foods such as cereals and roots and tubers, where consumption levels are close to saturation levels in many countries.

“By contrast, demand growth for meat products is slowing due to regional variation in preferences and disposable income constraints, while demand for animal products such as dairy is set to expand faster in the coming decade.”

There could still be specific shocks which send prices up or down at certain moments despite the general expected downward trend, the OECD said.

Extreme weather can affect harvests, for instance, while plant or animal diseases can hit production.

Changes in government policies are also important – for instance, pushing more cereals into ethanol or biodiesel will increase prices for consumers of those foods.

A trade war could also push up the price of goods traded between any pair of countries involved by applying tariffs at the border.