The rise of food prices around the world may finally bottom out this year, says the Oxford Economicswhich sees fall in global food prices in 2024; offering some relief to buyers.
“Our baseline forecast is that global food commodity prices will register an annual decline this year, reducing downward pressure on retail food prices,” the financial advisory firm wrote in a recent note.
The main driver behind the decline in food staple prices is “abundant supply” for many major crops, notably wheat and maize, reports the CNBC.
Rich harvests in recent months for both key crops have led to a steady decline in prices. The futures contracts for the wheat they have almost subsided 10% year-to-date, while corn futures have lost approx 6% during the same period, according to FactSet data.
Farmers increased production of both wheat and corn after higher prices since the invasion began of Russia in 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 come in at high levels, although slightly below the record level of the 2022-2023 marketing season, the Oxford report said.
Russia-Ukraine war
Grain supply pressures in Russia and Ukraine have also eased.
Despite the collapse of the Black Sea Grains Initiative in July last year, Ukrainian agricultural exports have held up well, wrote o Oxford Economics Chief Economist Kiran Ahmed.
Russian wheat exports have also flooded international markets, keeping prices low, he added.
The wheat and maize, along with rice, account for more than half of global calorie intake. This means that the direction of their prices will significantly affect the food budgets of consumers around the world, the report points out.
Although wheat and corn prices fell sharply, rice prices are rising steady, with global supplies hampered by export restrictions imposed by India, which accounts for about 40% of global 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 gained more than 8% since the start of the year.
World food prices recorded a 9% decrease in 2023, according to the World Bank. Similarly, the UN Food Organisation’s world price index hit a three-year low in February, but saw a slight rebound in March, boosted by increases for dairy products, meat and vegetable oils.
“We expect prices to decline further by 5.6% this year, before rising year-on-year next year,” Ahmed said.
That said, Oxford Economics noted that the risks to its food price forecast remain “inoverwhelmingly facing upwards“, with adverse weather conditions ongoing.
The bad weather are hitting agribusiness confidence and crop prospects, with cocoa recently soaring to record levels as West African farmers battle bad weather and disease. If bad weather persists, harvest prospects could be affected in other key crop-growing regions, the note added.
“However, we believe that prices are now near a bottom and will begin to rise gradually until [το δεύτερο εξάμηνο του] 2024,” the report states.
Buyers in Africa and Asia have also held back from buying wheat in the hope of even lower prices – and their return to the market could lead to a price recovery, Ahmed said. In addition, rice prices, which remain high, could also encourage more restrictions on exports originating in India.
“So while our basic assumption is that food prices will remain subdued this year, risks are growing that prices could recover more strongly than expected. This could keep food price inflation higher than in our baseline scenario, keeping pressure on the consumer,” he concluded.
