Oxford Economics says high global food prices may finally bottom out in 2024

A grocery store clerk looks for vegetables at a Hannaford supermarket on July 1, 2023 in South Burlington, Vermont.

Robert Nickelsburg |

Rising food prices around the world may bottom out by the end of this year.

Oxford Economics said global food prices are expected to ease in 2024, bringing some relief to shoppers.

“Our baseline forecast is for an annual decline in global food commodity prices this year, easing pressure on downstream food retail prices,” the economic consultancy wrote in a recent report.

A key driver of falling food prices is the “adequate supply” of many key crops, particularly wheat and maize.

Bumper yields of two major crops have led to steady price declines in recent months. Wheat futures Corn futures are down about 10% so far this year, while corn futures are down about 6% over the same period, FactSet data shows.

Farmers increase wheat and corn production to follow higher prices in 2022 after Russia launches invasion of Ukraine.

As a result, the global corn harvest is likely to reach record levels in the marketing year ending in August, according to Oxford University analysis. Oxford reports that wheat yields are also expected to be higher, although slightly below record levels in the 2022-2023 marketing year.

Food supply pressures in Russia and Ukraine have also eased.

Kiran Ahmed, chief economist at Oxford Economics, wrote that despite the failure of the Black Sea Grain Initiative last July, Ukrainian agricultural exports have held up well.

Russian wheat exports have also flooded international markets, keeping prices low, he added.

Wheat and maize prices so far this year

Wheat and corn, along with rice, account for more than half of global caloric intake. The report notes that this means its price trends will severely impact the food budgets of consumers worldwide.

While wheat and maize prices fell sharply, rice prices continued to rise, with export restrictions imposed by India disrupting global supplies, accounting for about 40% of world rice production. The country’s poor harvest last year also pushed up prices. Brown rice futures are up more than 8% so far this year, in contrast to lower wheat and corn prices.

Global food prices registered a 9% decline in 2023 according to the World Bank. Similarly, the UN Food Organization’s World Price Index hit a three-year low in 2017. February but saw a slight rebound in March boosted by higher prices for dairy products, meat and vegetable oils.

“We expect prices to fall another 5.6% this year before recovering annually next year,” Ahmed said.

Still, Oxford Economics notes that the risk to its food price forecast is “overwhelmingly tilted to the downside” due to the presence of adverse weather.

As bad weather erodes agribusiness confidence and crop prospects, cocoa has recently risen to record levels as West African farmers battle harsh weather and disease. Crop prospects in other major crop-producing areas could be affected if adverse weather conditions persist, the report added.

“However, we believe prices are now on the downside and will begin to rise gradually by 2024 (second half),” the report 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 up again, Ahmed said. Additionally, higher rice prices may encourage India to introduce further export restrictions.

“So, although our base case is for food prices to remain low this year, there is an increasing risk that prices may recover more than expected. This could push food inflation higher than in our base case, which could put pressure on consumers.” .