Overview Paper

Has the Treadmill Changed Direction? WTO Negotiations in the Light of a Potential New Global Agricultural Market Environment

By Seth Meyer, Josef Schmidhuber, 
July 2014
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For decades technological progress had shifted supply in agricultural commodity markets outward against an inelastic demand, resulting in a trend of declining real crop prices and a falling share of undernourished people globally. However, high energy prices and the use of agricultural products for biofuel production have established new dynamics in traditionally slow-growing food markets. Agricultural output has increased since 1970, but future sustainable gains will be more difficult to achieve. The size of the energy market and a highly elastic long-term demand will lead to energy markets absorbing any “excess” production, keeping markets tight and prices elevated. The shift from a demand-constrained to a supply-constrained market environment has changed the emphasis in the food security debate.

A shift to a supply-constrained market, one where energy markets provide a large and elastic source of demand for agricultural output, has important implications for the policy process. Trade negotiations, which emphasise market access for exporters in the context of low prices, may need to be buttressed by discussions on how to address the concerns of import-dependent developing countries and those affected by export constraints, should high and volatile prices persist. The implications of a shift in the dynamics of supply and demand in agricultural markets extend to other policy arenas, including research and development policy and resource management policy.

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