High food prices compound food insecurity, says World Bank

The World Bank’s latest Commodity Markets Outlook has shown that high food prices are compounding food insecurity.

The report released in Washington DC on Thursday, however, predicts that global commodity prices should decline by 8 per cent this year at the fastest clip since the onset of the COVID-19 pandemic.

The pandemic, it said, has clouded the growth prospects of almost two-thirds of developing economies that depend on commodity exports.

The drop in prices is expected to relieve nearly 350 million people across the world who face food insecurity.

The World Bank’s Chief Economist and Senior Vice President for Development Economics, Indermit Gill, said: “The surge in food and energy prices after Russia’s invasion of Ukraine has largely passed due toslowing economic growth, a moderate winter, and reallocations in the commodity trade.  But this is of little comfort to consumers in many countries. In real terms, food prices will remain at one of the highest levels of the past five decades. Governments should avoid trade restrictions and protect their poorest citizens using targeted income-support programs rather than price controls.”

Commodity prices, the report said, are expected to fall by 21% in 2023 relative to last year.

“Energy prices are projected to decline by 26% this year. The price of Brent crude oil in U.S. dollars is expected to average $84 a barrel this year—down 16% from the 2022 average. European and U.S. natural-gas prices are forecast to halve between 2022 and 2023, while coal prices are expected to decrease 42% in 2023. Fertilizer prices are also projected to fall by 37% in 2023, which would mark the largest annual drop since 1974. However, fertilizer prices are still near their recent high last seen during the 2008-09 food crisis,” said the statement announcing the report.

The World Bank’s Deputy Chief Economist and Director of Prospects Group, Ayhan Kose, said: “The decline in commodity prices over the past year has helped reduce global headline inflation. However, central bankers need to remain vigilant as a wide range of factors, including weaker-than-expected oil supply, a more commodity-intensive recovery in China, an intensification of geopolitical tensions, or unfavorable weather conditions, could push prices higher and reignite inflationary pressures.”

The report said prices of all major commodities will remain well above their 2015-2019 average levels.

“Metal prices, which increased slightly early in the year, are expected to fall by 8% relative to last year, primarily because of weak global demand and improved supplies,” said Valerie Mercer-Blackman, Lead Economist in the World Bank’s Prospects Group. “In the longer term, however, the energy transition could significantly lift the demand for some metals, notably lithium, copper, and nickel.”