Food demand should keep the farm sector strong in the next decade and limit the impact from the global economic downturn, the OECD and the UN's FAO food agency said in a report on Wednesday.

"Despite the significant impact of the global financial crisis and economic downturn on all sectors of the economy, agriculture is expected to be relatively better off, as a result of the recent period of relatively high incomes and a relatively income-inelastic demand for food," the report said.

Record highs for crop prices fuelled food inflation last year, sparking riots in some parts of the developing world.

The report said after a pullback from peaks in 2007/08, farm prices were expected to be dampened further in the next two to three years by the global downturn but to stay at or above 1997-2006 averages.

However, the report's authors stressed their price projections were subject to caution given uncertainty over the depth of the economic crisis and the volatility of crude oil, which increasingly weighs on farm prices due to biofuel output.

"We are expecting...a much higher level of price volatility than we've seen in the past," Ken Ash, director of trade and agriculture at the Paris-based Organisation for Economic Development and Cooperation, told a news conference.

MEAT HIT MORE BY RECESSION

Average crop prices were projected to be 10-20 percent higher in real terms in 2009-2018 relative to 1997-2006, while real prices for vegetable oils were expected to rise more than 30 percent, the OECD-FAO Agricultural Outlook showed.

Meat and dairy prices were seen rising less than crops in 2009-2018 as they face a bigger short-term hit from the crisis due to their sensitivity to income levels, the report said.

In real terms, meat is not seen surpassing the 1997-2006 average, while dairy commodities are expected to be slightly higher, supported by rising energy and vegetable oil prices.

Crop and vegetable oil prices in the coming years will be supported by food demand from developing countries, reflecting population growth and rising incomes, and the growing use of plant-based biofuels, the report said.

"A projected rapid expansion of biofuel production to meet mandated use will continue to have inflating price impacts for such feedstocks as wheat, maize, oilseeds and sugar," it said, although OECD officials added this effect was moderate and not the main driver of recent price spikes.