Agri Commodities

Exploring the Influence of Trade on Agri-Commodity Markets

Exploring the Influence of Trade on Agri-Commodity Markets

Trade is essential in supplying agri-commodities to consumers all over the world. It contributes to providing greater choice in consumer goods and plays a vital role in reducing food insecurity across the globe.

Over the past decade, international agricultural and food markets have witnessed several changes, which have brought domestic and international markets closer together.

Since 2000, trade-in agro-food products has grown rapidly – faster than in the previous decade, at close to 8% in real terms per year between 2001 and 2014, compared to 2% between 1990 and 2000 – as world markets responded to a more rules-based trading environment, falling tariffs, and reductions in trade-distorting producer support.

Driven by rapid development in several emerging regions including Asia and South America, the global agricultural output has also increased. However, the agri-food trade isn’t just ‘growing’; it’s becoming ‘global.’

The Agri-Commodities that consumers find in their local stores is increasingly made from a wider range of products, produced in a wider range of locations across the globe.

Among the developments in agro-food markets, there has been a considerable rise in trade among emerging and developing nations, which are becoming increasingly important as suppliers and customers for agro-commodities. The increased commerce has also resulted in a closer integration of the world’s food chain.

A growing share of agro-food trade is taking place in global value chains (GVCs) – agricultural and food processing value chains that are spread over several countries – linking agro-food sectors and other sectors of the economy from across the world.

(SOURCE- OECD.ORG)

The State of Agricultural Commodity Markets, 2020 (SOCO 2020) argues that global trade and well-functioning markets lie at the heart of the development process as they can spur inclusive economic growth and sustainable development, and strengthen resilience to shocks.

“We need to rely on markets as an integral part of the global food system. This is all the more important in the face of major disruptions, whether they come from COVID-19, locust outbreaks, or climate change,” wrote FAO Director-General QU Dongyu in his introduction to the report. (SOURCE – reliefweb.int)

AGRICULTURAL TRADE CAN CONTRIBUTE TO CLIMATE CHANGE ADAPTATION AND MITIGATION EFFORTS

  • Agricultural trade patterns have been developed in parallel with economic expansion in developing nations since the beginning of the twenty-first century.
  • Agricultural trade may experience more transformations in the future years, reflecting the varied and disproportionate impact of climate change on agricultural industries throughout the world.
  • As climate change alters the comparative advantage and competitiveness of agriculture across regions and countries, some nations could lose while others could gain.
  • International trade could play a particularly important role in adaptation efforts, contributing towards food security in many countries. In the short term, by moving food from surplus to deficit areas, trade can provide an important mechanism to address production shortfalls due to extreme weather events.
  • In the long term, international trade could contribute towards efficiently adjusting agricultural production across countries.

KEY POINTS:

  • The role of emerging economies in global agricultural markets has increased since 2000.
  • The growing income per capita and reduced poverty boosted food consumption and imports, while increases in agricultural productivity led to growing exports.
  • Developing countries are increasingly participating in international markets. South agricultural trade has also expanded significantly. For Least Developed Countries, agricultural imports have grown faster than exports.
  • Agricultural trade can help in adapting to climate change and in ensuring food security. It can support adaptation efforts by stabilizing markets and reallocating food from surplus to deficit regions.

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