Abstract:
In the last years the prices of many agricultural commodities
registered significant rises. These price developments mainly result from the
combination of supply side factors at EU and world levels and demand-side
drivers. Some of the factors are of a structural nature and they have set
conditions for tighter, demand driven markets and thus firmer price levels.
Most commodity markets have recently shown similar developments but the
impact on agricultural prices is amplified by the seasonality that
characterizes agricultural production and which limits its capacity for short
term adjustment as compared to other industrial sectors.
In this paper we intend to analyze the structural factors and effects
caused by them such as: the steady rise in global commodity demand driven
by record economic growth rates, urbanization and changes in dietary
patterns (notably for meat) in many parts of the world; the emergence of new
market outlets; the successive reforms of the CAP have certainly contributed
to making agriculture more competitive but they have also produced shifts in
production responses between sectors; the growth in cereal yields in the EU
has considerably lowed down since 1995 and this could increasingly
constrain the capacity of the agricultural sector to meet a rising domestic
and global demand. Whilst caution is necessary in asserting that we have
entered a new period of strong market prices after two decades of price
decreases, it is becoming increasingly clear that structural factors like the
growth in global food demand and the development of new market outlets can
be reasonably expected to maintain prices at sustained levels over the
medium-term. The high agricultural prices can be expected to be reflected in
consumer prices to a much lower extent given the low and declining share of
agricultural raw materials in food production costs and the competitive
structure of the food supply-chain.
