Daily Management Review

Oxford Economics Predicts High Cost Of Food May Have Finally Peaked Globally By This Year


It looks like this year will mark the end of rising food prices globally.
Oxford Economics projects that global food prices will drop in 2024, providing some respite for consumers.
The economic advice firm stated in a recent statement that "our baseline forecast is for world food commodity prices to register an annual decline this year, reducing pressure on food retail prices further downstream."
The "abundant supply" of numerous vital crops, particularly wheat and maize, is the main factor for the drop in the prices of food commodities.
Prices have been steadily declining as a result of both staple crops' recent bumper harvests. According to FactSet statistics, wheat futures have down about 10% year to far, while maize futures have lost roughly 6%.
Once Russia started its invasion of Ukraine in 2022, farmers increased their production of both wheat and maize grains in response to rising costs.
According to Oxford's estimate, this means that global maize harvests for the marketing year that ends in August of this year are probably going to be at record levels. According to the Oxford research, wheat harvests are also expected to be strong, albeit marginally lower than the record level in the marketing years 2022–2023.
War between Russia and Ukraine
Grain shortage pressure in Russia and Ukraine has also decreased.
Lead Economist Kiran Ahmed of Oxford Economics said that Ukrainian agricultural exports had held up well despite the demise of the Black Sea Grain programme in July of last year.
He said that the abundance of Russian wheat shipments to foreign markets has also kept prices low.
Wheat and maize prices since the year's beginning
Together with rice, wheat and maize make up more than half of the world's calories. Thus, the report noted, their pricing strategy will have a significant impact on consumers' global food expenditures.
While the price of wheat and maize has experienced a significant decrease, the price of rice has been rising steadily due to export limitations enforced by India, which produces around 40% of the world's rice. The nation's poor crops the previous year also contributed to price increases. Rough rice futures have increased by more than 8% so far this year, in contrast to the decline in the prices of wheat and maize.
The World Bank reports that in 2023, food costs fell by 9% worldwide. Similar to this, the world price index of the United Nations food agency fell to a three-year low in February but slightly increased in March due to rises in the prices of dairy, meat, and vegetable oils.
"We anticipate a further 5.6% decline in prices this year, followed by an annual increase the following year," Ahmed stated.
Nevertheless, Oxford Economics pointed out that given unfavourable weather forecasts, risks to its food price estimate are still "overwhelmingly skewed to the upside."
Agribusiness confidence and crop outlooks have been negatively impacted by bad weather; while West African farmers struggle with disease and unfavourable weather, cocoa prices have recently surged to record highs.
The letter also stated that harvest prospects could be harmed in other important crop-growing regions if unfavourable weather patterns continue.
The report did state, "But we believe prices are now close to a floor and will begin to rise gradually through [the second half of] 2024."
In anticipation of even lower prices, buyers in Africa and Asia have also refrained from buying wheat; according to Ahmed, their return to the market may spark a price rebound. Furthermore, the persistently high price of rice may lead to further export limitations from India.
“Thus, while our base case is for food prices to remain subdued this year, the risks are building that prices could rebound more sharply than anticipated. This could keep food price inflation higher than in our base case, maintaining pressure on the consumer,” he concluded.