Food Prices Down in 2024? Time to Revise Your Grocery Budget

It looks like this year will mark the end of rising food costs globally. Oxford Economics projects that global food prices will drop in 2024, providing some respite for consumers.

The key driving force behind the decline in food commodity prices is the "abundant supply" for many important crops, especially wheat and maize.

Bumper harvests in recent months for both staple crops led to a steady decline in prices. Wheat futures have fallen almost 10% year-to-date, while maize futures lost about 6% over the same period, according to FactSet data.

Once Russia started its invasion of Ukraine in 2022, farmers increased their output of both wheat and maize grains in response to rising costs.

According to Oxford's estimate, this means that worldwide 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, but 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 program in July of last year.

He said that the abundance of Russian wheat shipments to foreign markets has also kept prices low.

Together with rice, wheat and maize make up more than half of the world's calories. Thus, the research noted, their pricing strategy will have a significant impact on consumers' global food expenditures.

While the price of wheat and corn has experienced a significant decrease, the price of rice has been rising gradually 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.

Fluctuating Food Prices and Weather Uncertainty

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.

Nevertheless, Oxford Economics pointed out that given unfavorable 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 illness and unfavorable weather, cocoa prices have lately surged to record highs. The letter also stated that harvest prospects might be harmed in other important crop-growing regions if unfavorable weather patterns continue.

In anticipation of further 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.