Continuous Drop in Food Prices Reflect Past Peaks
Published on: February 1, 2024.
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The World Bank Food Price Index
In 2023, the World Bank’s food price index experienced a decline, averaging 9 percent lower than the previous year. This decrease can be attributed to robust harvests, despite trade restrictions and the non-renewal of the Black Sea Grain Initiative. The ongoing El Niño also had little impact on the decline. Looking ahead, global food prices are expected to continue easing in 2024 and 2025, with projected decreases of 2 and 3 percent, respectively. These developments are supported by an overall improvement in global supply. However, it is important to note that even with these recent declines, food prices remain comparable to previous food price spikes in 2007-08 and 2011-12. In this blog post, we will discuss the balanced risks to this outlook, including further El Niño developments, macroeconomic conditions, and trade restrictions.
Grain Supplies Rebounding
The global grain supply is expected to rebound in 2023-24, with an estimated increase of 42 million metric tons (1 percent) compared to the previous year. This growth aligns closely with the average growth of the past two decades. Specifically, maize exports are set to experience a significant rebound of over 11 percent due to robust production in Argentina, the European Union, and the United States. Conversely, wheat exports are projected to decline by 6 percent, primarily driven by lower exports from Australia (-42 percent) in response to El Niño, as well as decreases from Canada, the United States, and Ukraine. Additionally, global rice exports are expected to drop nearly 4 percent, as increased exports from China, Pakistan, and the United States are unlikely to offset declines from India, Thailand, and Vietnam.
Expected Increase in Oilseed Supplies
Global oilseed supply for 2023-24 is anticipated to increase by 75 million metric tons (4 percent), nearly double the average annual growth observed between 1990 and 2022. The current season’s soybean production, the largest oilseed crop, is expected to surpass the previous year’s record output. This surge is largely attributed to Brazil’s robust output. Similarly, Argentina’s soybean production is projected to bounce back by more than 90 percent from the drought-affected levels of the previous year.
Stable Stock-to-Use Ratios
The stock-to-use ratio provides a rough estimate of supply relative to projected demand. In 2023-24, the ratio for the food aggregate is projected to remain steady. However, the ratio is expected to be slightly higher for maize, while slightly lower for wheat and rice. Although these ratios have moderated since their recent peaks, they remain considerably higher than the levels observed in 2006-08, indicating sufficient supply conditions.
Moderating Domestic Food Price Inflation
In 2023, the global median year-on-year domestic food price inflation averaged above 8 percent in Q3, down from the peak of nearly 14 percent in November 2022. By November 2023, the median food price inflation had further decreased to 6 percent. This moderation in food price inflation can be attributed to the declining global prices of various agricultural commodities. However, it is important to note that food price inflation remains high in many parts of the world, particularly in low-income and lower-middle-income countries, where the median food price inflation stood at 9.5 percent and 8 percent, respectively, in November 2023. In comparison, the median food price inflation for upper-middle-income and high-income countries during the same period was 5 percent and 5.7 percent, respectively.
Source: World Bank Blog
