With the arrival of 2023, what everyone is most concerned about is the trend of food prices. After all, people depend on food! Most institutions and media around the world have also made predictions on the trend of food prices in 2023. Based on the data from all parties: in 2023, the center of gravity of food prices is expected to decline, but the price outlook still faces multiple risks.
Food price center of gravity expected to decline, but expected to remain at historically high levels
According to World Bank statistics, after reaching a record high in April 2022, global food prices fell by 12% year-on-year in the third quarter, but the index is still nearly 20% higher than a year ago. Looking forward to 2023, the center of gravity of food prices is expected to decline.
From the perspective of supply, it is expected that the global food supply will tighten overall in 2023. According to the latest forecast data from the United States Department of Agriculture (USDA), the wheat production in this planting season is basically flat year-on-year, with a slight increase of 0.4%; due to the decline in corn production in the United States and the European Union, the supply of corn is expected to drop by 5%; due to the decline in production in my country and India, it is expected that Supplies of paddy will fall by 2 percent; in contrast, supplies of edible oils will increase by 4 percent, with increases mainly coming from palm, rapeseed and soybean oils.
In terms of stocks, global grain stocks are expected to decline for three consecutive quarters. Affected by the reduction in supply, the total inventory-to-use ratio of grain commodities (a measure of the supply-to-consumption ratio) fell to 27%. Although this ratio has fallen from the high of 30.6% in 2017, it is fortunately much higher than the historical low of 17.2% in 2006-2007, which led to the global food crisis.
From the perspective of food prices, in 2022, domestic food prices in many countries will continue to rise. Disrupted supply chains, rising production costs and continued dollar rate hikes have put upward pressure on domestic food inflation in most countries. In the first three quarters of 2022, food prices in South Asia will increase by an average of 20% year-on-year, and prices in most other regions will increase by 14%. The price of rice, the staple food, remained stable.
Based on this, according to the data predicted by the World Bank, food prices may drop by about 5% in 2023, and then stabilize in 2024, but overall, in 2023, food prices will still run at a high level. Because for most agricultural products, prices fall not because of increased production, but because of weaker demand. It is expected that in 2023, inflationary pressure will still exist for a long time.
