Asian growth the key

Kate PollardThe West Australian

Increasing productivity growth is the key to meeting future challenges of long-term food demand, according to ABARES chief commodity analyst Jammie Penm.

Speaking at the Northam ABARES regional outlook conference last week, Mr Penm said by 2050 the world's population was expected to hit 9.3 billion people.

The impact and implication for Australian agriculture was explored by researchers, who forecast that income would rise by 123 per cent and world food consumption would increase by 75 per cent, mostly from Asian consumers.

But he said supply had been constrained by weakening productivity growth and no significant expansion in land, as well as land degradation, water availability and climate change.

"World productivity growth was around 3 per cent a year, now it has slowed down to 2 per cent a year and will continue to slow to one per cent growth a year towards 2050," Mr Penm said.

"By 2050, global food prices on average will be around 11.5 per cent higher compared to 2007, the base year of data."

It's a contrast, as prices have demonstrated a downward trend over the past four decades.

With most of the growth in demand for food coming from Asia, Australia's closest neighbours have the potential to increase agricultural production, but are unlikely to meet the increase in demand.

Researchers also looked at the impact on increasing productivity growth from one to 1.1 per cent and found higher production could absolve upward price pressures.

If land availability was increased by 10 per cent, the impact on price was also likely to be smaller than if productivity was increased.

Mr Penm said if land productivity fell due to climate change from 1.3 per cent growth to 0.8 per cent, world food prices would increase by 22 per cent. "It's only through these simulations that we can have a better understanding of the unknowns and implications for world prices," he said.

Rural performance is also being affected by uncertainty in the world economic outlook, the volatility of the Australian dollar, which is depreciating, and the US drought, which is continuing but improving.

Factored together, Mr Penm said it was a plus for the rural sector and in terms of exports, the outlook remained relatively positive.

The outlook for commodities in the Wheatbelt is mixed, according to ABARES researcher Peter Collins.

Prices for cereal crops have been forecast to fall in response to higher world production with barley production predicted to rise in Black Sea countries, a record 279 million tonnes of oilseed production and higher corn harvest.

In Australia, Mr Collins said winter crop production was forecast to increase by 10 per cent to 40 million tonnes.

WA's winter crop production was forecast to increase by 25 per cent due to yield increases, with wheat and barley forecast to rise by 29 and 12 per cent, respectively.

Canola was expected to be up by 16 per cent to 1.4 million tonnes.

But since the forecasts were made, growers have experienced one of the driest Junes on record and the impact on winter crop production has not yet been assessed.

Mr Collins told growers that productivity growth by croppers had fallen from 3 to less than 0.5 per cent and was also slowing in mix crop-livestock enterprises.

The sheep industry market outlook forecasts prices to rise for lamb, mutton and wool with lower supplies, production and exports.

Live export numbers were expected to rise slightly but still remained low.

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