Global rice prices are not expected to cool down significantly any time before 2025 due to export curbs from major producing countries, including India, and the current threat of EI Nino, according to the latest World Bank Global Commodity Outlook.
The World Bank, however, predicted that prices of agricultural commodities are expected to decline next year as supplies rise.
The report cited India’s export ban and other trade restrictions on rice as one of the main causes of the rise in its global prices. India banned exports of non-basmati rice in response to increased domestic prices and fears of potential El Nino impacts in crucial rice-growing areas, affecting global markets since mid-July.
Rice prices in August and September 2023 reached the highest levels since the 2007-08 food price crisis. The average price of rice worldwide increased by 28% between 2022 and 2023, and another 6% increase is predicted in 2024, the analysis showed.
Because of plentiful supplies, agricultural prices according to the study are expected to decline by 7% in 2023 and by an additional 2% in 2024 and 2025, it said. The report showed that assuming the conflict in the Middle East does not escalate, the grains price index is expected to fall by 3% and 5% in 2024 and 2025, respectively.
Higher rice prices in 2024 due to the ongoing El Nino and India’s export restrictions are forecast to be offset by the continued decline in maize and wheat prices because of improving global grain supplies.
The Indian Meteorological Department (IMD) has said that its models suggest that El Nino conditions are unlikely to continue into the next monsoon season, which may lead to the easing of India’s export restriction.
According to the data, maize prices are predicted to finish the current year 22% lower than they were in 2022 and to drop by 8% and 4% in 2024 and 2025 respectively.
It also said that global wheat prices are trending on an average 20 % lower in 2023 than the 2022 levels, and should decrease further by about 3 and 5 % in 2024 and 2025, respectively.
The World Bank said that sugar and cocoa prices are expected to decline from their 2023 highs, though fruit prices should remain high in 2024 on weather-affected supply shortfalls.
On fertilizers, the report said that prices are expected to decrease as more supplies become available online, but they are likely to stay above historical averages due to some supply constraints and China’s ongoing export restrictions.
Conflict threatens global commodity market stability
The Global Commodity Outlook has warned that an escalation of the latest conflict in the Middle East—which comes on top of disruptions caused by the Russian invasion of Ukraine—could push global commodity markets into uncharted waters. The conflict’s effects on global commodity markets have been limited so far, it said.
“The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s—Russia’s war with Ukraine,” said Indermit Gill, the World Bank’s chief economist and senior vice president for development economics.
“That had disruptive effects on the global economy that persist to this day. Policymakers will need to be vigilant. If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades—not just from the war in Ukraine but also from the Middle East,” Gill said.
Overall oil prices have risen about 6% since the start of the conflict. Under the World Bank’s baseline forecast, oil prices are expected to average $90 a barrel in the current quarter before declining to an average of $81 a barrel next year as global economic growth slows. Overall commodity prices are projected to fall 4.1% next year.
“Higher oil prices, if sustained, inevitably mean higher food prices,” said Ayhan Kose, the World Bank’s deputy chief economist and director of the Prospects Group.
“If a severe oil-price shock materializes, it would push up food price inflation that has already been elevated in many developing countries. At the end of 2022, more than 700 million people—nearly a tenth of the global population—were undernourished. An escalation of the latest conflict would intensify food insecurity, not only within the region but also across the world,” he added.
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