24 May 1996

Cereal prices likely to remain above average

CEREAL prices are expected to fall this year but will remain above 1990-94 average levels for the rest of the century.

A new report from the Organisation for Economic Co-operation and Development bases the projection on expectations of slower growth in cereal production, a modest rebuilding of stocks and a drop in export subsidies.

It sees world wheat trading at about $155/t (£103/t) instead of the $200/t (£133/t) seen this season.

Although EU cereal farmers have been over-compensated for drops in support prices through their aid cheques, the OECD believes direct income payments will continue. But there is a need to target them better to achieve environmental objectives, it says.

Direct payments to farmers will also face stiffer competition for taxpayers funds from pension and health care charges as the population ages.

Supply control measures come in for criticism, as they "lead to economic inefficiencies, create market distortions and have negative effects on other competing products and land prices".

&#8226 Agricultural Policies Markets and Trade in OECD Countries. From HMSO (0171-873 8496). &#42