Global Food Prices Stabilize Amid Ongoing Risks, Reports World Bank

The World Bank's April 2024 Commodity Markets Outlook reports a stabilization of global food commodity prices after six consecutive quarters of decline. The food price index is projected to decrease by 6 percent in 2024 and 4 percent in 2025. Despite this positive outlook, several risks could impact these forecasts, including energy and fertilizer costs, maritime chokepoints, and weather-related supply shortfalls.

Energy and Fertilizer Costs: Prices for energy and fertilizers are expected to decline by 3 percent and 22 percent respectively in 2024, with further decreases projected for 2025. However, geopolitical tensions in the Middle East could drive energy prices higher and disrupt fertilizer production, potentially pushing food prices beyond current forecasts. Fertilizer producers in the Black Sea region, Middle East, and North Africa depend heavily on the Suez Canal, which could face disruptions, raising transportation costs.

Maritime Rerouting: Attacks on commercial vessels in the Red Sea have led to significant rerouting of grain shipments from the Suez Canal to the Cape of Good Hope. This rerouting affected 4.3 million tons of grains and oilseeds between December and January, impacting U.S. soybean exports and EU wheat exports to Asia. While prices have remained stable so far, further conflict could lead to increased shipment costs and higher prices.

Weather Conditions: The U.S. National Oceanic and Atmospheric Administration forecasts a transition from El Niño to La Niña conditions by mid-2024. La Niña typically brings wetter conditions to parts of Australia, Brazil, India, and Southeast Asia, while causing drought in regions like Argentina and the U.S. Gulf Coast. This shift is expected to reduce price pressures on commodities such as cocoa, rice, and sugar in 2025, though unanticipated weather changes could still drive prices higher.

Biofuel Policies: Increasing biofuel production could influence food prices. The International Energy Agency anticipates a 30 percent rise in biofuel demand from 2023-2028, driven primarily by emerging economies. In Indonesia and Malaysia, biodiesel demand could account for 30 percent of total palm oil production by 2028. Additionally, the U.S. will permit year-round sales of gasoline with 15 percent ethanol starting April 2025. If biofuel policies shift, this could impact prices of grains, vegetable oils, and sugar.

Food Insecurity: Despite easing global food prices, acute food insecurity remains a pressing issue. The number of people facing acute food insecurity rose from 113 million in 2018 to 282 million in 2023. Any realization of the aforementioned risks could exacerbate this crisis further.

The World Bank emphasizes the need for vigilance and proactive measures to mitigate these risks and ensure food security worldwide.