World food prices are starting to decline

As a result of fears of a recession, world food prices are falling. Wheat futures are currently cheapest since February. And eToro's 'Breakfast Index' has dropped 12 percent since its April peak. However, the demand for food will grow as the world's population continues to grow and will exceed 8 billion next year.

Food prices are falling

Recent months have brought serious concerns about the world food market. There was concern that the shock related to the spike in food prices could be stronger and more tangible than that associated with the rise in food prices oil. The more so because the world's population is constantly growing, which is constantly increasing the demand for food. According to UN estimates, the world's population will increase from the current 7,9 billion to 9,7 billion by 2050. Next year, it is expected to exceed 8 billion people. It is estimated that the demand for food will increase by 2050% by 60. Such a significant increase in production will pose a serious challenge for mankind.

Restrictions on the export of agricultural produce

The conflict in Ukraine triggered large increases in raw material prices. They also affected food of which Ukraine and Russia are important producers. In the case of Ukraine, the war cut off the country from its outlets, and also made it difficult to harvest and export, especially of cereals. For Russia, on the other hand, war means cutting off from international markets as a result of sanctions. Global protectionism has also risen as many countries have imposed some restrictions on agricultural exports. One of the most hit has been the wheat market, which accounts for 20% of the total. all the calories that mankind consumes. The high prices of fertilizers also remain a problem. Rising agricultural prices have a much stronger impact on less affluent countries and emerging markets, where they can cause particularly high inflation as well as be a source of political instability.

Food Price Index

The Food Price Index published by FAO (United Nations Organization for Food and Agriculture) recorded an increase of 22,8% at the end of May. y / y This is how much food prices in the world have risen during the year. However, since March, when it reached record levels, it has been falling for two consecutive months. Similarly calculated by eToro's 'Breakfast Index', containing prices of eight popular breakfast products, from sugar to wheat, has already dropped by 9% since the peak on April 2002, 12.

In recent days, data from world economies have been pouring in indicating an increased risk of recession. This triggered further declines in agricultural commodity prices, all the more so as the harvest is taking place simultaneously in the northern hemisphere. The prices of wheat futures in the US market continue to decline and are the lowest since February. Corn prices are also falling.

Food innovation

However, we should remember that even if the downward trend in the food market proves to be permanent, the world will have to face shortages in the coming decades. This is why many producers are looking for new sources of innovative food. These can be alternative methods of obtaining protein from, for example, insects or aquatic vegetation. Or methods that change current agriculture: vertical crops, the use of robots or artificial intelligence systems. The current drop in food prices is hitting traditional producers like Deere (DE), Mosaic (MOS) and CNH (CNHI.MI).

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.

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