In an outlook report by staff of the World Bank, global commodity prices dropped by 14% in the first quarter of 2023. When compared to its historic peak in June 2022, caused in part by the Russia-Ukraine conflict, the prices were down by more than 30% in Q1 2023.
According to the experts, the prices dropped because of ‘economic activity, favorable winter weather, and a global reallocation of commodity trade flows.’ They also cited the reducing influence of the conflict on international trade due to some agreements like the Black Sea grain deal and other countries adjusting to the new realities.
While the price drop is good news, it is important to remember that this is only in comparison to the spike in 2022, which is unprecedented. “Prices are still expected to remain above pre-pandemic levels, which will continue to weigh on affordability and food security,” the report said.
Agricultural commodity prices remain nearly the same in 2023
At a closer look, the price of energy commodities dropped by 20% in Q1 2023, compared to Q4 2022. Meanwhile, agricultural commodity prices reduced by 14% in the period under consideration from their peak in April 2022.
Apart from the Black Sea deal, major grain-producing countries reported better harvests which drove the price of grain down by 5%. Although, the report shows that it is not all good for other food commodities as their price rose slightly. This led to the prices balancing each other out and showing not much difference.
As the World Bank commodity price indices for low and middle income countries shows, the first quarter of 2023 and the last quarter of 2022 have similar prices for food per metric ton (mt). Although, the average price of food commodity in the past year is higher than the trend which this year has started with. Food commodity prices was about $143.7/mt in 2022 and so far, it is $136.1/mt so far in 2023.
Note that the above statistics is for countries like Nigeria, Bangladesh, Kenya, Uganda, Zambia, and others in the similar income bracket. Food prices in this location are still much higher than periods of 2007/2008 when there was serious food crisis.
Increased food insecure people
The World Food Programme (WFP) says that 345.2 million people across 79 countries will face food insecurity this year. This number is double that of the food insecure people in 2020.
No doubt, Fertiliser prices continue to impact the cost of food as it reached an all-time high in 2022. However, their prices is projected to fall by 37% in 2023 because most of them using natural gas and coal as inputs, two commodities which became cheaper by nearly 80% this past quarter.
Asides food, the price of agricultural raw materials are expected to drop. The World Bank report projects 6% decline in commodity prices for things like cotton, timber, and rubber.
There is still fear that the forecasts may not come true or see changes because of a few factors. One of them is if sanctions affect oil exports in Russia and Organization of Petroleum Exporting Countries and 10 affiliated member countries (OPEC+). Also, increased demand from China for energy and metals is another factor. Not to forget, geopolitical conflicts can breakout anywhere at anytime. And unfavourable weather could affect food production as well as demand for commodities.
