Trends in trade and production

Trends in agricultural trade

Agricultural exports more than doubled between 1995 and 2008, increasing from more than USD 464 billion to more than USD 1 trillion (Figure 4.1) a growth rate of 5.8% per year.⁶ At the same time, total merchandise trade expanded even faster, growing from a little more than USD 5 trillion to more than USD 13.7 trillion (Figure 4.1), an annual growth rate of 8.2%. Consequently, agricultural share of total trade mostly declined over the period from around 9% to around 7% of total trade (Figure 4.2).

Figure 4.1. Agricultural and total merchandise trade

Figure 4.2. Share of agricultural trade in total merchandise trade

Trends in trade of processed agricultural products

Trade in processed agricultural products also more than doubled from 1995 to 2008 going from more than USD 211 billion to almost USD half a trillion. Trade in these products grew at a faster rate than overall agricultural goods, showing an annual growth rate of 6.5% (Figure 4.3). Hence, their share of total agricultural trade increased from a little more than 45% in 1995 to 48% in 2008 (Figure 4.3). Note the rapid rise in the trade of these products starting in 2000 and the increase share of total agricultural trade which seems to have been halted in 2007-08, the time that coincides with the relatively high commodity prices mostly for products that are not processed.

Figure 4.3. Trade in processed agricultural products and their share of total agricultural trade

What types of countries are mostly engaged in exporting processed products? The World Bank classifies countries into several income categories based on their per capita income. The categories used in this report are as of July 2009. The classification is: 1) high income OECD countries⁷ (26); 2) high income non-OECD countries (39); 3) upper middle income countries (42); 4) lower middle income countries (54); and 5) low income countries (49). The actual numbers used in this report varies by year based on data availability.

It seems that lower income countries, especially upper middle income countries have become much more competitive in these products as their exports grew at an average annual rate of almost 11%. Exports of processed products from low income countries, even though starting from a much smaller base, also expanded substantially over this time period suggesting that they too have become more competitive. As illustrated in Figure 4.4, lower income countries have increased their market share considerably over this time period at the expense of high income countries. Upper middle income countries have been especially successful almost doubling their market share to 16% of the total, while high income OECD countries lost about 8 percentage points over this time period, albeit still exporting about 73% of the total. While for low income countries, it is evident from Figure 4.4 that despite the impressive growth rate, the absolute value of their exports of processed products hardly registers at the world level.

Figure 4.4. Share of processed products exported by income classification

Percentages

Comparing exports of processed products from the five enhanced engagement countries (EE) (Brazil, China, India, Indonesia and South Africa) to the OECD countries (not just those with high incomes) presents a similar picture as above. Exports of processed products from the OECD countries are significantly larger by an order of magnitude (Table 4.1). In 2008, the OECD countries exported some eight times more processed products than the EE countries, but exports of processed products are growing much faster in the EE countries ranging from Brazil’s almost 12.6% per year (double the growth rate for the OECD members) to South Africa’s 6.1% rate. Hence, while at the beginning of the period EE countries supplied about 6% of processed products exports, in the latest three years, they supplied 9% of total processed products. The four countries that become OECD members in 2010 (Chile, Estonia, Israel and Slovenia) and Russia (an OECD accession country), as a group are relatively small agricultural exporters supplying about 2% of total processed products to world markets during 2006-08.

Table 4.1. Exports of processed products for OECD and Enhanced Engagement countries

Million USD

OECD: 30 Members in 2008.