Study says ag sector shows recession resilience

The agriculture sector isn’t quite recession proof, but it’s proving to be more resilient amid the global economic crisis compared to other industries because food is a basic need.

But if the downturn worsens that could change, according to a new report released today from France’s Organization for Economic Cooperation and Development (OECD) and the United Nations Food and Agriculture Organization (FAO).

Trade finance constraints are impacting agri-food firms and if the tight credit markets continue, the viability of these companies could be at risk. Access to credit was viewed as a key issue in the report, especially from smaller agri-food firms in both OECD and non-OECD countries that were surveyed.

The report cautions of the possibility of episodes of extreme price volatility, especially because commodity prices are linked to oil and energy costs.

Food prices have come down from their peak in 2008 (see Why ethanol production will drive world food prices even higher in 2008). As the downturn causes food prices to fall, pressure is alleviated on consumers who have less money to spend. Still, the study says, food insecurity and hunger are increasing global problems.

Average crop prices are expected to rise 10 percent to 20 percent during the next 10 years, according to the report, OECD-FAO Agricultural Outlook 2009-2018. Prices for vegetable oil, in particular, are expected to rise more than 30 percent.

These increases are likely to be caused by an expected economic recovery, food demand stemming from developing countries and the emerging biofuel markets (see Global biofuels market faces challenges and U.S. biofuel industry growing 40-50% a year, says analyst).

Because of the demand on the food supply, there are a number of cleantech companies seeking to increase crop yields. St. Louis, Mo.-based Monsanto (NYSE:MON) which makes a strain of corn that's genetically engineered to protect against pests, tried to overturn Germany's ban on genetically modified crops (see Monsanto strikes back at Germany, UCS).

Ames, Iowa-based Becker Underwood recently licensed the global marketing rights to a new seed-protection technology, where dipping seeds in jasmonic acid kickstarts a plant's natural defenses against pests. The technology is drawing attention because it doesn't involve genetic modification (see New UK tech protects crops without genetic modification).

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