Oxford Economics is confident that high food inflation, which has driven up prices of basic food items, will ease significantly in the second half of 2024.
“Our basic forecast is that the prices of basic food products will be marked significantly at the global level this year, which will also drag down retail prices,” the economists underline, speaking to CNBC.
The driving force behind the de-escalation of prices is the “increase in their supply” in products such as wheat and corn as in recent months, their harvest has been stable, dropping prices significantly.
Wheat futures are down nearly 10% this year and corn futures are down 6% over the same period, according to FactSet data.
For the first year since the war in Ukraine, farmers increased production of both crops, bringing the global corn harvest to record levels and wheat to very high levels.
This has been driven by exports from Russia and Ukraine, which despite the collapse of the Black Sea Grain initiative in July 2023, are at very high levels according to Oxford Economics chief economist Kiran Ahmed.
Wheat, corn and rice account for more than 50% of staple food items, and the drop in their prices is set to affect the prices of many other products as well.
However, while grain and corn prices are falling, rice continues to rise due to export restrictions imposed by India, which accounts for about 40% of global rice production.
Poor harvests in the country last year pushed prices above 8% and forced the government to ban exports to meet domestic needs.
In 2023, although global food prices fell by 9%, according to the World Bank, they started to rise again in early 2024 due to increases in dairy, meat and vegetable oils.
“We expect prices to fall further by 5.6 percent this year,” Ahmed said, but stressed that climate change and bad weather will largely determine commodity prices in the coming years.
