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MUMBAI, July 17

WORLD agricultural markets are forecast to improve in the coming years as prices are expected to gradually rise from their current weak levels and economic recovery strengthens at the end of this year and into 2003.

``As world economic recovery gets underway in the latter half of 2002 and strengthens into 2003, it should underpin rebounding global demand and trade, notwithstanding the subdued conditions expected in agricultural markets in the current year in the wake of slack demand and trade reflecting the general downturn in world economic growth'', the Organisation for Economic Cooperation and Development (OECD) said in its Agricultural Outlook 2002-2007 released on Tuesday in Paris.

Providing a medium-term assessment of future trends and prospects in the major agricultural commodity markets of OECD countries, the report said economic recovery will fuel gradually rising world agricultural prices up to 2007, though more for some meats and dairy products than for cereals, oilseeds and their by-products.

``A return to higher, sustainable global economic growth will lay the foundation for strengthening demand and expanding trade in farm products,'' the report noted. Trade in both bulk and processed products should increase to 2007 with the steepest rise in net dairy product exports by OECD countries, followed by cereals and meats.

Demand for agricultural products in general is expected to be more brisk in non-OECD countries boosted by faster economic and population growth, rising personal incomes, increasing urbanisation and changing diets.

World and OECD production of agricultural products is projected to expand steadily during 2002-2007 with the fastest growth in non-OECD region; however, their total demand will expand even faster and will be met by higher imports from OECD countries to fill shortfalls, report forecast.

The agriculture outlook report recognizes that farm support in the OECD area has remained high and continues to have a major impact on agricultural markets. Fundamental reform has been slow and insufficient, and sometimes, such as with new US farm legislation, it has resulted in additional budget allocation for farm support.

A slowdown in market oriented policy reform and trade liberalisation could put a sustained recovery in agriculture at risk, even more so if it discourages developing countries from reform, the report has warned.

Admitting that the policy context is becoming more complex, the report recognised that a key challenge facing governments in the period ahead will be to better match domestic priorities to international obligations. ``Countries must find effective ways of tackling their legitimate internal policy issues without harming their trading partners,'' it said.

Among the major forecasts are:

Global wheat, coarse grains and rice production is expected to increase by 11 per cent, 13 per cent and 8 per cent respectively by 2007, compared with the average for 1996-2000;

Low stock levels and rising demand, especially from developing countries, should fuel a gradual improvement in maize (corn), and to a lesser extent, wheat prices. But none of the cereals is expected to return to the high price levels seen in the mid-1990s;

Poultry prices on international markets should be supported by a sharp decline in EU exports;

East Asia is expected to become a more important dairy market in the medium term. Development of fast food catering and increasing adoption of ``western'' diets is expected to boost consumption more than 50 per cent over the next five years.

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