End of the price rally of food analysts at Oxford Economics predict for 2024, with these estimates giving rise to hopes for a de-escalation of prices on supermarket shelves as well.
According to the analysis firm’s forecasts, the upward rally in food prices is expected not only to stop, but also to turn on a downward trajectory, with prices falling to a one-year low, significantly reducing inflationary pressures and at retail prices.
The breather that will be given to consumers by the reduction in the prices of basic food products is due, according to the data, to the abundant supply found in important crops, especially wheat and corn.
Rich harvests in recent months for both key crops have led to a steady decline in prices. Wheat futures are down nearly 10% since the start of the year, while corn futures are down 6% over the same period, according to FactSet data.
The farmers increased production of both wheat and corn under pressure from higher prices caused by Russia’s invasion of Ukraine in 2022.
As a result, global maize harvests for the marketing season ending in August this year are likely to be at record levels, according to Oxford analysis. Wheat harvests are also forecast to be at high levels, although slightly below the record for the 2022-2023 marketing season, the report said. Despite the collapse of the Black Sea grain initiative in July last year, Ukrainian agricultural exports are significant, notes Oxford Economics chief economist Kiran Ahmed.
Russian wheat exports have also flooded international markets, keeping prices low. The wheat and cornwith the rice, represent over half of the global food chain. This means that the direction of their prices will significantly affect the food budgets of consumers around the world.
Bad weather conditions could overturn the positive scenario, according to the Oxford Economics report.
Although wheat and corn prices fell sharply, rice prices rose steadily, with global supplies hampered by export restrictions imposed by Indiawhich accounts for about 40% of world rice production.
Poor harvests in the country last year also pushed prices higher. In contrast to the decline seen in wheat and corn prices, crude rice futures have rallied more than 8% since the start of the year.
Global food prices recorded a 9% decline in 2023, according to the World Bank. Similarly, the UN Food Organisation’s world price index hit a three-year low in February, but recorded a slight rebound in March, driven by increases for dairy products, meat and vegetable oils.
The report, however, calls for a further 5.6% drop in prices this year, before rising year-on-year next year.
One area that needs attention, however, according to analysts, is poor weather conditions that are hurting agribusiness confidence and crop prospects. Indicative is the impact on price of cocoa, which recently soared to record levelsas West African farmers battle bad weather and disease.
Buyers in Africa and Asia are also taking a wait-and-see stance in the wheat market, hoping for even lower prices, so their return to the market could lead to a price recovery. In addition, rice prices, which remain high, could also encourage more restrictions on exports originating in India.
Therefore, the Oxford Economics report emphasizes that “while our basic assumption is that food prices will remain subdued this year, there are increased risks that prices may recover more strongly than expected. This could keep food price inflation higher than in our baseline scenario, still putting pressure on the consumer,” leaving a bitter aftertaste despite the upbeat forecast.
