A food shopper searches for vegetables at Hannaford Supermarket on July 1, 2023 in South Burlington, Vermont.
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Rising food prices around the world may finally hit bottom this year.
Global food prices are expected to fall in 2024, bringing some relief to shoppers, Oxford Economics said.
“Our baseline forecast is for an annual decline in world food commodity prices this year, reducing pressure on downstream food retail prices,” the economic consultancy wrote in a recent report.
A key driver of falling food commodity prices is “ample supplies” of many important crops, particularly wheat and corn.
Bumper harvests of two major crops have led to steady price declines in recent months. Wheat futures Corn futures have fallen nearly 10% so far this year, while corn futures have fallen about 6% over the same period, FactSet data shows.
After Russia began its invasion of Ukraine in 2022, prices rose and farmers increased their wheat and corn production.
As a result, the global corn harvest in the marketing year ending in August is likely to reach a record level, according to analysis by Oxford University. Oxford reports that the wheat harvest is also expected to be high, although slightly below the record level in the 2022-2023 marketing year.
Russian-Ukrainian War
The pressure on food supply in Russia and Ukraine has also eased.
Kiran Ahmed, chief economist at Oxford Economics, writes that Ukrainian agricultural exports have held up well despite the failure of the Black Sea grains scheme last July.
Russian wheat exports have also flooded international markets, keeping prices low, he added.
Wheat and corn prices so far this year
Wheat, along with corn and rice, account for more than half of global caloric intake. The report pointed out that this means that its price trend will seriously affect the food budgets of global consumers.
While wheat and corn prices fell sharply, rice prices climbed steadily, India accounts for about 40% of the world’s rice production, and export restrictions imposed by India have hampered global supply. The country’s poor harvest last year also pushed up prices. In contrast to plummeting wheat and corn prices, brown rice futures are up more than 8% so far this year.
Global food prices registered Decline 9% in 2023According to the World Bank. Likewise, the United Nations food agency’s world price index hit a three-year low in 2017. Februarybut saw a Slight rebound in Marchboosted by higher prices for dairy products, meat and vegetable oils.
“We expect prices to fall a further 5.6% this year before recovering year-on-year next year,” Ahmed said.
Still, Oxford Economics noted that risks to its food price forecast remain “overwhelmingly tilted to the upside” due to the presence of adverse weather conditions.
Bad weather has Undermining agribusiness confidence and crop prospects, with cocoa recently surging to record levels as West African farmers battle harsh weather and disease. Harvest prospects in other major crop-growing areas could be affected if adverse weather conditions persist, the report added.
“However, we believe prices are now near a bottom and will begin a gradual increase by 2024 (second half),” the report said.
Ahmed said buyers in Africa and Asia have also stopped buying wheat in hopes of lower prices, and their return to the market could push prices back up. In addition, high rice prices may also encourage India to introduce more export restrictions.
“So, while our base case is for food prices to remain subdued this year, the risk is increasing that prices may rebound more than expected. This could push food price inflation higher than our base case, putting pressure on consumers. ” he concluded.
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