What Lies Ahead for International Agricultural Trade?

The future of international agricultural trade is at a crossroads. On one hand, global demand for food is steadily rising, driven by population growth, urbanization, and shifting diets in emerging economies. On the other hand, a wave of protectionist policies, geopolitical tensions, regional trade blocs, and economic slowdowns is making the path forward increasingly complicated. For countries like India – a major agricultural producer that holds only a fraction of global export share – navigating this terrain requires understanding both the global headwinds and the domestic constraints that limit its ability to capitalize on emerging opportunities.

The global demand picture: growth with caveats 🔗

There is no shortage of optimism when it comes to long-term food demand. The OECD-FAO Agricultural Outlook 2025-2034 projects that global agricultural and fish production will increase by 14% over the next decade, primarily through productivity gains in middle-income countries. More significantly, approximately 22% of all calories consumed globally are projected to cross international borders by 2034 – up from 17% two decades ago – highlighting the growing importance of trade in feeding the world.

The driving forces behind this demand are concentrated in Asia, Africa, and Latin America. Calorie intake in middle-income countries is expected to rise by 7%, fueled by greater consumption of staples, livestock products, and fats. India and Southeast Asia are expected to expand their share of global food consumption as urban populations grow and incomes rise. Meanwhile, Sub-Saharan Africa is forecast to increase its GDP by nearly 4% annually, creating new consumer markets for food imports. This should, in theory, present a significant opportunity window for agricultural exporters.

However, the OECD-FAO report also warns that real agricultural commodity prices are expected to maintain a slightly declining trend, as productivity improvements outpace demand growth. This puts pressure on farmers – particularly smallholders – to continuously raise their efficiency simply to stay competitive. The promise of growing demand, in other words, comes with a tightening margin.

Rising protectionism: a structural shift in trade dynamics 🔗

Perhaps the most significant challenge facing international agricultural trade today is the resurgence of protectionism. What was once episodic is increasingly becoming structural. According to analysts cited by World Grain, heightened geopolitical tensions and a wave of national elections have substantially elevated the risk of trade protectionism globally, with agriculture routinely becoming the first sector targeted when countries engage in economic retaliation.

This pattern has been clearly visible in recent years. When the European Union imposed tariffs on Chinese electric vehicles, China signaled it would retaliate through agricultural products – a well-established tactic given the political sensitivity of farm goods. The Economics Observatory notes that the concentration of grain production among a small number of major exporters amplifies systemic risk: when one key supplier shifts its trade policy, alternative suppliers cannot easily absorb the displaced demand, triggering price volatility and supply shortages across global markets.

The United States has been a central actor in this dynamic. Broad import tariffs, combined with uncertainty around trade agreements, have created a new and unpredictable trade environment. Research published in The World Economy finds that such import tariffs do not reduce trade deficits as intended – instead, they negatively affect exports and provoke retaliation, ultimately harming the agricultural sectors they were meant to protect. The interconnected nature of global agri-food supply chains means there are few winners in a protectionist spiral.

Export restrictions: another face of protectionism 🔗

Beyond import tariffs, export restrictions have become an increasingly common tool. The Center for Strategic and International Studies (CSIS) documented that since the Russia-Ukraine conflict began, 25 countries implemented export restrictions on food items, accounting for nearly 9% of the global trade share in calories. Wheat faces restrictions in 13 countries; corn faces barriers in 10 countries. These measures, while intended to protect domestic food security, disrupt the predictability that global buyers depend on.

The FAO’s analysis of agricultural trade policy reinforces this concern: when countries protect and subsidize their own agricultural sectors, global markets become distorted, disproportionately hurting low-cost producers in the developing world who depend on open markets to sell their surplus production. A rules-based multilateral framework, therefore, isn’t just an ideal – it is a prerequisite for stable international agricultural trade.

Trade blocs and regional fragmentation 🔗

Another dimension reshaping global agricultural trade is the growing importance of regional trade agreements (RTAs) and blocs. While multilateral negotiations under the WTO have stalled on agriculture for decades, bilateral and regional deals have proliferated. FAO data shows that trade within regional clusters has grown faster than trade across them, indicating a fragmentation of the global agricultural market into regional spheres of influence.

For exporters outside dominant blocs – or those with incomplete trade coverage – this creates real disadvantages. Preferential tariff rates within blocs effectively raise the relative cost of goods from non-member countries. The Heliyon journal study on trade agreements and agricultural producer prices in Asia found that while regional trade agreements generally increase intra-bloc agricultural trade significantly, their benefits do not automatically extend to all producers, and the phase-in periods and product exclusions often limit market access for the most sensitive commodities – precisely those in which developing countries hold a comparative advantage.

India’s agricultural exports: trapped between potential and structural constraints 🔗

India’s position in global agricultural trade is paradoxical. It is the second-largest agricultural producer in the world and a top-ten exporter, yet it accounts for only about 2.4% of global agricultural exports. Despite ranking among the world’s top producers of rice, wheat, milk, and several horticulture products, India’s export share is far below its production potential. Understanding why requires looking at both structural constraints and policy inconsistencies.

India’s agricultural exports reached USD 48.9 billion in FY 2023-24, down from USD 53.2 billion in the previous year – an 8.2% decline. While exports recovered to USD 51.9 billion in FY 2024-25, recording a 6.4% growth, agricultural imports surged by 18.7% during the same period, shrinking the trade surplus. The agricultural trade surplus, which peaked at USD 27.7 billion in 2013-14, has fallen to around USD 16 billion – a structural erosion that reflects deeper systemic challenges.

Policy-driven disruptions 🔗

One of the most prominent factors limiting India’s export performance has been erratic and reactive export policy. Over the past few years, the government has imposed export bans or duties on several key commodities to manage domestic food inflation – with significant trade consequences. Export bans on sugar (October 2023) cut sugar revenue from USD 5.77 billion to USD 2.82 billion in a single year. Wheat exports, which stood at USD 2.12 billion in 2021-22, dropped to just USD 56.74 million in 2023-24 following the May 2022 export ban. Non-basmati rice exports were similarly restricted in 2023, with only parboiled varieties permitted under a 20% export duty.

While these interventions serve domestic food security goals, they damage India’s credibility as a reliable supplier in international markets. Importing countries that planned to source from India found their supply chains disrupted, prompting many to seek alternative long-term suppliers – a trust deficit that is difficult to reverse quickly.

Structural and competitive disadvantages 🔗

Beyond policy, structural constraints continue to limit India’s competitiveness. The OECD’s Agricultural Policy Monitoring and Evaluation 2025 report on India identifies the low productivity of smallholder farmers – who dominate India’s agricultural landscape – and their limited access to finance and technology as substantial challenges. Fragmented land holdings, complex supply chains with numerous intermediaries, and inadequate cold storage and port infrastructure further add to post-harvest losses and reduce the export-readiness of Indian produce.

Non-tariff barriers (NTBs) imposed by importing countries compound these challenges. Stringent Sanitary and Phytosanitary (SPS) standards and Technical Barriers to Trade (TBT) have led to bans on Indian basmati rice, tea, and cut flowers in European and Japanese markets. Meeting these standards requires investment in testing infrastructure, traceability systems, and farmer training – areas that are still underdeveloped across much of India’s agricultural value chain.

The issue of an uneven playing field in global subsidies is equally significant. Developed nations provide massive farm support that artificially lowers the cost of their exports. The United States provides approximately USD 61,286 per farmer annually in support, compared to just USD 282 per farmer in India. This disparity depresses global prices and directly undercuts the competitiveness of Indian agricultural exports in third markets. India’s Minimum Support Price (MSP) policy, intended to protect domestic farmers, is itself being challenged at the WTO by developed countries as potentially trade-distorting under the Agreement on Agriculture.

Growing import dependence 🔗

India’s rising import bill is another warning sign. Cotton output fell from 398 lakh bales in 2013-14 to 291 lakh bales in 2024-25, making India a net importer of a commodity it once led in globally. Edible oil imports continue to rise sharply, and India remains heavily dependent on imports for pulses and certain fruit varieties. This growing import dependence is a direct reflection of productivity stagnation and resource constraints – including water scarcity, soil degradation, and the high cost of agricultural inputs – that are steadily eroding India’s competitive advantages in several commodities.

The path forward: opportunities within constraints 🔗

Despite these headwinds, the future is not entirely bleak. Several strategic opportunities remain for India and other developing agricultural exporters to navigate an increasingly uncertain global trade environment.

First, market diversification is critical. Africa and Southeast Asia are emerging as high-growth import markets, and India’s geographic proximity and established trade relationships give it a natural advantage. Africa and Southeast Asia are already being identified as promising new destinations for Indian agricultural exports, particularly rice, spices, and processed food products.

Second, value addition and processing can insulate exporters from commodity price volatility. India’s Economic Survey 2024-25 notes that the share of processed food exports within agri-food exports has risen from 14.9% in FY18 to 23.4% in FY24 – a positive trend that should be accelerated. Higher-value exports are less vulnerable to global price swings and command better margins.

Third, stable and predictable export policy is non-negotiable for building long-term trade relationships. The pattern of sudden bans and duties, while understandable in domestic crisis situations, extracts a high reputational cost. As analysts at Drishti IAS point out, policy stability, investment in productivity, and stronger regulatory compliance systems will ultimately shape India’s future as a competitive agricultural exporter.

Finally, on a global scale, the OECD-FAO Outlook 2025-2034 emphasizes that multilateral cooperation and a rules-based agricultural trade system remain essential for balancing food deficits and surpluses across countries, stabilizing prices, and enhancing food security. Without a functioning multilateral framework, even growing global demand will fail to translate into equitable and sustainable trade growth for developing nations.

What do you think? As protectionism continues to reshape global agricultural trade, can developing countries like India effectively protect their farmers while remaining competitive exporters – or are these goals fundamentally in tension? And given the rising share of calories crossing borders, should food and agriculture be granted special treatment in global trade rules, separate from industrial goods?

References

1. https://www.oecd.org/en/publications/2025/07/oecd-fao-agricultural-outlook-2025-2034_3eb15914.html
2. https://www.world-grain.com/articles/20239-growing-protectionism-complicating-global-trade
3. https://www.economicsobservatory.com/how-are-us-tariffs-reshaping-global-agricultural-trade
4. https://onlinelibrary.wiley.com/doi/full/10.1111/twec.13731
5. https://www.csis.org/analysis/food-thought-how-should-we-secure-global-trade-agriculture
6. https://www.fao.org/3/cc0471en/online/state-of-agricultural-commodity-markets/2022/geography-trade-policies-agriculture.html
7. https://pmc.ncbi.nlm.nih.gov/articles/PMC10828095/
8. https://eng.ruralvoice.in/opinion/performance-challenges-and-future-prospects-in-indias-agricultural-exports.html
9. https://www.dhyeyaias.com/current-affairs/daily-news-analysis/enhancing-india-s-agri-exports
10. https://blog.pazago.com/post/india-agriculture-export-policy-objectives-challenges
11. https://www.oecd.org/en/publications/2025/10/agricultural-policy-monitoring-and-evaluation-2025_354e7040/full-report/india_a08610a6.html
12. https://indiadatamap.com/2025/08/20/indian-states-by-agricultural-export-value-2025/
13. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2097960