Oxford Economics: Food prices may start falling in 2024 – What risks remain

According to Oxford Economics, global food prices are expected to fall in 2024, bringing relief to consumers. “Our baseline forecast is that global food commodity prices will register an annual decline this year,” the financial advisory firm wrote in a recent note.

The main driving force behind the decline in commodity prices is the “abundant supply” of many important crops, notably wheat and maize. The rich harvests of the last months for both main crops led to a steady decline in prices.

Wheat futures have fallen nearly 10% since the start of the year, while corn futures have lost about 6% over the same period, according to FactSet data.

Farmers increased production of both wheat and corn after higher prices since Russia’s invasion of Ukraine began in 2022. As a result, global maize harvests for the marketing season ending in August this year are likely to at record levels, according to the Oxford analysis. Wheat harvests are also forecast to reach high levels, although slightly lower than the record 2022-2023 marketing season, the report said.

The role of the Russia-Ukraine war

Grain pressures to Russia and Ukraine have also eased. Despite the collapse of the Black Sea grain initiative in July last year, Ukrainian agricultural exports have shown considerable resilience, Oxford Economics chief economist Kiran Ahmed wrote. Russian wheat exports have also flooded international markets, keeping prices low, he added.

Wheat and maize, together with rice, account for more than half of global caloric consumption. This means that the direction of their prices will significantly affect consumer food budgets around the world, the report notes.

Although wheat and corn prices have fallen sharply, rice prices have been steadily rising, largely due to export restrictions imposed by India, which accounts for about 40% of the world’s rice market. 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.

9% reduction in food prices in 2023

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 showed a small rise in March, boosted by increases in dairy products, meat and vegetable oils.

“We expect prices to decline further by 5.6 percent this year, before rising year-on-year next year,” Ahmed said. That said, Oxford Economics noted that risks to food prices are visible with adverse weather conditions underway.

Bad weather is hitting agribusiness confidence and crop prospects, with cocoa soaring to record levels as West African farmers battle weather and disease. If bad weather conditions persist, harvest prospects could be affected in other key growing areas, the note added.