Analysis of long-term challenges for agricultural markets

Abstract

The Long-term Agricultural Outlook model (LAO) is a long-run partial equilibrium trade model developed by the OECD as a complementary modelling tool to AGLINK-COSIMO, a more detailed partial equilibrium model used to develop ten-year projections for agricultural markets, as reported in the annual OECD-FAO Agriculture Outlook publication. LAO describes the drivers of structural changes in global supply and demand, provides a baseline of real agricultural prices, and can be used to situate short and medium term price projections in a longer-term context. The model is also suitable for performing scenario analysis of long-term issues concerning agriculture, such as the links between food security and climate change. The model structure is similar to that of AGLINK-COSIMO, which enhances comparability, but much simpler, with highly aggregated commodity and regional groupings. The simplified structure makes it possible to make use of data on productivity growth in a way not possible in more complex models, and to investigate the role of long term drivers of productivity growth, in particular research spending. It also facilitates a focus on key macro-economic drivers of agricultural market developments. This report details the motivation, structure, and development of the model, alongside initial outputs. The baseline results indicate a lowering of real agricultural prices in the long run, as growth in global supply outpaces growth in global demand.