Food price inflation remains historically elevated in nearly all markets

Several risks to global food supply have the potential to keep prices high

Food inflation poses one of the major downside risks to the inflation outlook for 2024. Multinationals should monitor the trajectory of food inflation, which will play a large part in the recovery (or lack thereof) of consumer purchasing power; spending on food displaces almost all other spending, and therefore has the potential to increase price sensitivity across most categories of goods and services. This is particularly the case in poorer countries, where food represents on average around 30% of the consumer basket, compared to around 15% in richer countries. High food inflation would also likely delay interest rate cuts in several markets, weighing on overall economic activity. Finally, multinationals in the food sector should keep a close eye on government policy, both globally (such as India’s export ban on rice) and in their markets of operation, as governments are increasingly responding to pressure from consumers to deal with food inflation. 


  • At a broad level, food commodity prices have fallen substantially since the spikes caused by the post-COVID reopening and the war in Ukraine.
  • However, there are two main causes for concern. First, food inflation at the consumer level remains historically elevated in several markets globally, squeezing purchasing power and increasing price sensitivity. Second, global food insecurity, in the form of low crop yields and export bans, is starting to provide upward price pressure to some commodities and threatens to reverse the broad downward trend in prices of the last 18 months. In turn, this could further fuel food inflation.
  • Commodities facing particular supply insecurity into 2024 are sugar, rice, and cocoa, and to a lesser extent grains such as wheat and corn.

Our View

One of the surprises of 2023 when it comes to inflation has been the disconnect between food prices at the wholesale level, and those at the consumer level: the UN FAO’s Food Price Index is down almost 7% since the start of the year, and more than 25% from the peak reached in 2022. Yet, food prices around the world continue to climb at a sustained rate, providing further pressure to consumers who, in many cases, have already faced two years of price increases. Several factors are behind this: along the food value chain, many stakeholders continue to pass through some of the price shocks incurred in 2022, while others are still locked into costly contracts signed when wholesale prices were elevated. In developed markets such as North America, Europe, and ANZ, the rapid increase in wages is proving to be an additional input cost—European businesses face the additional complication of structurally high energy prices. In emerging markets, currency weakness has weakened countries’ terms of trade and fueled food inflation. Finally, and perhaps most crucially, businesses have been able to pass on price increases thanks to stronger-than-expected consumer resilience.

The picture in 2024 will likely be a slightly different one. To start, many input costs involved in food production and distribution (with the admittedly important exception of oil) will ease: labor markets across the world are loosening, relieving pressure on wages, while energy costs are trending downward and transportation costs continue to hover at low levels. The threat now comes from wholesale prices, which are once again at risk of increasing.

Rice is the food commodity currently dominating headlines. In India, a poor harvest this year caused by El Niño, a climatic phenomenon, has led to a spike in rice prices. In turn, the Modi government has imposed an export ban in order to keep domestic prices under control as it heads into a crucial election year. As the world’s leading exporter of the commodity, India’s export ban and its knock-on effects are likely to have a global impact: prices have reached a 12-year high. While global rice stocks are plentiful, 80% of them are controlled by China and India, neither of which is showing signs of alleviating pressures on global markets.

The impact of higher rice prices is likely to be particularly acute in markets directly dependent on India for their rice imports. Countries in Sub-Saharan Africa, such as Benin, Senegal, and Kenya, as well as in the Middle East, notably Saudi Arabia and Iran, are particularly at risk of upward pressure on food inflation. Several Asian markets are also vulnerable, particularly given some policy measures put in place in response to India’s ban. In the Philippines, a price ceiling set by the government is leading to a mismatch between supply and demand, causing shortages. Next year’s outlook for rice supply in Asia remains tilted to the downside, with the lingering impact of El Niño threatening harvests in the region. Ultimately, however, the length and breadth of India’s export ban will be the deciding factor.

Another risk to food inflation comes from the prices of sugar and cocoa, both of which have soared as a result of extreme weather that has affected crop yields. In Côte d’Ivoire, which exports around 70% of the world’s cocoa beans, yields are expected to fall by 15% in the upcoming season. When it comes to sugar, India is once again proving to be a pivotal player; faced with a poor harvest, the government has capped exports at around half of their 2022 levels and is mulling a full ban. A bumper crop in Brazil will help offset this, but only partially. 

Finally, wheat is on a divergent trend. The collapse of the Black Sea Grain Initiative, which once allowed exports of wheat out of Ukraine through the Black Sea, has had a limited impact on prices—in fact, wheat prices have reached their lowest level in three years. Indeed, smaller volumes out of Ukraine have been offset by very strong harvests in Russia: the country’s share of global exports is set to rise from 15.9% to 22.5%. However, geopolitical turmoil and the risk of sanctions on Russia are major downside risks to wheat supply in 2024, and price spikes cannot be discounted as a result.

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