Pre-COVID prices not returning

The international cost of food will continue to fall this year and in 2024, but there will be no return to pre-COVID-19 pandemic prices.

That is the latest assessment from international economic forecasting firm, Oxford Economics.

In an analysis titled How Long Will The Relief From Falling Food Prices Last?, Oxford Economics economist, Diego Cacciapuoti said: “We expect global food prices to continue to decline over the rest of 2023 and into 2024. Supply-chain stresses are easing, most input costs are normalising, supply remains adequate, and stock-to-use ratios aren’t posing an imminent threat to the downward price adjustment.

“But we don’t think prices will normalise to pre-pandemic levels, as some input costs remain historically high and trade restrictions are limiting the ability of markets to adjust.”

The economist added: “Fertilizer prices remain much higher than pre-pandemic. This is one of the factors preventing a larger drop in prices in the short-term as farmers are cutting back on fertiliser use and crop yields will decrease as a result.

“Similarly, trade restrictions, such as tariffs and export bans, remain much more prevalent than pre-pandemic and will be a drag on price normalisation.”

Cacciapuoti said that longer term, “climate change will likely exert upward pressure on food prices”.

“The Intergovernmental Panel on Climate Change forecasts a 7.6 per cent median increase for cereals prices by 2050 due to more common extreme weather events, rising temperatures, and higher frequency of droughts,” he stated.

“Consequently, while we think global food prices will come down, they will remain 25 per cent higher than during the pre-pandemic decade.

“Active government policies have, however, limited the pass-through to the consumer from high soft-commodity prices and have in part stabilised food prices. State aid for imports, in the form of loans and grants, has continued to increase in 2023,” he said.

Cacciapuoti also acknowledged that “the renewal of the Black Sea grain deal has put downward pressure on global food prices, with corn and wheat prices in particular dropping by 7.9 per cent and 2.76 per cent month over month in May 2023”. (SC)

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