Ample supply and a knock to consumption in the event of a global recession threaten to produce a “market shock” as food prices tumble, the U.N.’s food agency and the OECD said in a report published.

“The macroeconomic shocks induced by the COVID-19 pandemic are expected to put downward pressure on agricultural commodity prices,” they said, adding there was potential for “a historically significant market shock” this year.

An economic downturn due to the coronavirus pandemic could hit demand for agricultural commodities and trigger short-term price falls on an historic scale, they said.

The impact on vegetable oil and animal-based products would be greater than for staple crops such as rice and wheat, they added.

The projections were part of an annual 10-year agricultural outlook produced by the U.N.’s Food and Agriculture Organization (FAO) and the Organisation for Economic Cooperation and Development (OECD).

It marked their first analysis of the possible consequences of the new coronavirus.

The virus, which causes the COVID-19 disease, has already contributed to price slides in agricultural commodities, including a 10-year low for U.S. corn, as restaurants have closed and fuel consumption has fallen.

Some commodity prices have recovered in recent weeks, helped by an easing of lockdowns, although traders say the demand outlook remains uncertain as the virus continues to spread.

The FAO and OECD projected that agricultural prices would gradually revert to their baseline scenario which calls for a slight decline in real terms over 2020-2029.

Higher agricultural productivity, led by yield gains, would keep pace with population-driven food demand and curb global prices, they said.

Prices of meat, particularly pork, were projected to fall more sharply in the coming decade as the market recovers from a swine fever epidemic that has decimated pig herds in China and some other Asian countries, the FAO and OECD said.

Source: Reuters