Shocks in economic growth = shocking effects on agricultural markets?

Projections on the development of agricultural commodity markets underlie a given set ofassumptions on economic growth. However, recent economic and financial crisis, as well assigns of quicker recovery in emerging economies, increase uncertainty in the forecasts ofmacroeconomic developments. This paper analyses the effects of different economic growthscenarios on agricultural commodity markets. In particular we assess the potential impacts ofa faster economic growth in emerging economies on the one hand and of a replication of therecent economic downturn on the other hand. The empirical analysis uses the AGLINKCOSIMOmodel and builds upon the recently published European agricultural outlook of theEU Commission. The simulation results demonstrate that higher economic growth influencesdemand more than supply, resulting in higher world market prices. Emerging economies tendto import more and stock less in order to cover their demand needs, while the rest of the worldincreases its exports. In total the ending stocks decrease and combined with the increasedconsumption, the stock-to-use ratio decreases. Replication of an economic downturn affectsthe markets differently, depending on how elastic or inelastic the markets react to pricesignals. Livestock markets appear more stable and do not regain their baseline levels within a5-year period. The magnitude of the effects is smaller the longer the simulated time path isand certainly depends on the introduced shock.