Agricultural prices may fall by 7% in 2023: WB
The prices of agricultural products are projected to fall by 7 percent in 2023, according to the World Bank's latest Commodity Markets Outlook report.
The global lender also forecasted that the agricultural prices will see a further 2 percent decline in 2024 and 2025 thanks to ample supplies.
It said the baseline forecasts assume that the latest conflict will have a limited impact on commodity prices, with prices ultimately being driven by fundamental demand and supply factors.
Prior to the latest conflict in the Middle East, agricultural commodity prices fell 3 percent in the third quarter, mainly driven by declines in the price of food, the WB said.
"The food price index fell by 3 percent, led by a 7 percent drop in grains. The non-renewal of the Black Sea Grain Initiative, India's export ban of non-basmati rice, and the impending El Niño drove volatility in agricultural prices, but ample supplies kept prices on a mild downward trend."
Agricultural prices have risen since September and ticked up almost 4 percent since the beginning of the conflict, the WB said.
"Domestic food inflation has moderated but remains at double-digits in four out of ten low-income countries and a third of middle- and high-income countries, adding to the burden of food insecurity in many parts of the world."
Meanwhile, commodity prices rose in the third quarter of 2023 owing to energy prices before beginning of the latest conflict in the Middle East, it said.
"However, they remain only slightly below levels just before the Russian invasion of Ukraine and well above pre-Covid levels. Though food inflation worldwide is trending down, food insecurity remains a concern, especially for those living in fragile and conflict situations."
Commodity prices are set to fall gradually in 2024 and stabilize in 2025, the World Bank forecasted.
Food and beverage prices will decline slightly more, while agricultural raw materials will rise by over 1 percent, it said.
"Following a more than 11 percent fall in 2023, the grains price index is projected to fall by 4 percent on average in 2024 and 2025 amid ample supplies and adequate stock levels."
However, rice prices will remain high into 2024, assuming India maintains its export restrictions, it said.
Sugar and cocoa prices are expected to decline from 2023 highs, though fruit prices should remain high in 2024 on weather-affected supply shortfalls, the WB said.
"Fertiliser prices are expected to decrease as more supplies come online, but they are likely to stay above historical averages due to some supply constraints and China's ongoing fertilizer export restrictions."