Global food prices fell nearly 14% in 2023, marking the steepest annual decline since 2015, the United Nations reported. However, prices for some key staples like rice and sugar bucked the downward trend.
- The UN Food and Agriculture Organization’s food price index dropped to an average of 132.4 points in 2023, down from 154.2 points in 2022
- The 2023 index remains above the five-year average of 115.4 points between 2014-2018
- Prices fell for staple commodities like grains, vegetable oils, meat and dairy
- Sugar and rice prices rose in 2023 due to tight supplies
Annual Food Price Changes
The FAO’s food price index tracks monthly changes in international prices across a basket of food commodities. Prices in the index are weighted to account for global trade volumes of individual items.
In 2023, the index saw sharp declines after hitting an all-time high in 2022 amid issues like Russia’s invasion of Ukraine, adverse weather, and high production costs stemming from expensive energy and fertilizers.
The annual decline brought prices down from near-record levels, but the 2023 index still topped the five-year average between 2014-2018 by nearly 15%.
|Avg. Food Price Index
|5-yr Avg (2014-2018)
(Source: UN Food and Agriculture Organization)
The rally in global food commodity prices unwound in 2023 thanks to a combination of factors:
Improved supply conditions – Favorable weather boosted harvests in major growing regions. Ukrainian grain shipments partly resumed after disruptions from Russia’s invasion. These developments eased global supply tightness that prevailed in 2021-2022.
Declining input costs – Prices for key farming inputs like fertilizers and fuels retreated from multi-year highs hit in 2022, helping lower production costs.
Weaker global demand – Cooling economic growth, especially in import-dependent emerging markets, trimmed import appetites and world food demand.
These dynamics collectively put downward pressure on international food commodity costs through 2023.
Bucking the Trend: Rice and Sugar
World sugar and rice prices moved against the grain in 2023, registering gains amid unique supply pressures:
Sugar – Raw sugar futures averaged nearly 20 cents per pound, up 6% from 2022. Below average crops in top producers Brazil and India kept supplies relatively tight.
Rice – Export prices for high quality Asian rice varieties gained 12% in 2023. Stockpiles shrank in Thailand and India, two major rice exporters.
Tighter availability prevented sugar and rice costs from following other food staples lower.
Outlook for 2024
While the UN flagged risks like high debt and extreme weather, analysts expect the current food price correction has room to run in 2024. Grain stockpiles are recovering, planting conditions appear favorable in the Northern Hemisphere, and demand looks set to remain subdued.
Barring unexpected disruptions, experts believe the FAO index could sink toward the five-year average price level this year. The grains complex with crops like corn, wheat and soybeans seems poised for further declines after steep drops in 2023.
However, rice and sugar markets look set to remain relatively firm. Supplies are still constrained, and any weather-related production shortages could stoke further upside.
Impact on Consumers and Food Industry
While international food commodity costs do not directly determine retail food prices, they influence ingredients expenses for food makers. Declines for items like grains, edible oils and meats will help lower input costs for packaged food manufacturers and restaurants.
For average consumers, retail food inflation may continue gradually easing after hitting multi-decade highs in 2022. But prices are not yet falling in absolute terms.
Going forward, extreme weather events present an ever-present risk that could quickly send food commodity prices swinging in 2024. But barring any unforeseen shocks, the world could see continued respite from near-record food costs this year.
To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.