Category Insights & Outlook 2023 h2




Food & Agriculture

In June 2023, the UN Food and Agriculture Organisation’s (FAO) global food price index fell to 122.3 points, its lowest level in more than two years and 23.4% below an all-time peak reached in March 2022.*1  

While the high food commodity prices and supply shortages that occurred following the onset of the Russia-Ukraine War have eased considerably compared to their peaks last year, the food market remains volatile and continues to be marked by supply chain risks and macroeconomic pressures.

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Geopolitical tensions between Russia and Ukraine and uncertainty regarding the Black Sea Grain Initiative

Sustained impact of a strong US dollar contributing to high domestic food prices

Continued supply chain pressures and high production costs

Rising interest rates constraining borrowing for producers

Climate change and animal diseases impacting overall yields

In H1 2023, the renewal of the Black Sea Grain Initiative continued to help keep grain exports from Ukraine flowing to global markets. Other factors contributing to the decrease in agricultural commodity prices include better harvests in other major grain-producing countries and lower energy prices compared to 2022.

However, Russia officially pulled out of the Black Sea Grain Initiative on 17 July 2023, as the UN and Western countries have refused to meet the country’s demands to remove sanctions on its state agricultural bank. The end of the grain deal could cause food prices to climb again, but the impact is expected to be muted, with other countries – including Argentina, Brazil, and European nations – now producing more grain to counterbalance losses from Ukraine.

Importantly, domestic food prices in many countries remain high or continue to increase due to the strength of the US dollar and the resulting depreciation of the real exchange rate of other currencies against the dollar. Annual domestic food price inflation across 146 countries reached a peak of 20% in February 2023 – the highest level in the past 20 years.

Note that this data and related contents refer to circumstances as at end of September 2023.

FAO Food Price Index

Future outlook and key risks

Overall, food commodity prices are forecast to remain broadly unchanged for the remainder of 2023 and into 2024 amid improved supply prospects and weakening global demand. Nonetheless, they remain elevated when compared to pre-pandemic levels.In addition, food markets are vulnerable to shocks stemming from extreme weather, geopolitical tensions, policy changes, and developments in local supply markets – all of which have the potential to tip the delicate supply-demand balances. 

Key risks include:

  • Disruptions in trade routes: Trade route disruptions could limit supply and raise prices, particularly for grains around the Black Sea and Ukraine amid sanctions and countermeasures. The Black Sea is becoming increasingly dangerous for commercial vessels. The Black Sea Grain Initiative, which relieved pressures on grains prices in H1 2023, expired in July and the extent of the impact remains to be seen. 
  • Climate change: The occurrence of unexpected adverse weather events affecting crops in major global food-producing regions could result in food price increases and availability challenges. This is likely to persist, with unpredictable weather becoming more frequent due to global warming.
  • Domestic policies of key supply countries: Key supply nations are implementing policies to limit exports in the face rising domestic food prices. For example, India’s recent export ban of non-basmati white rice is expected to constrain global supply and push prices up further.


Category Insights & Outlook H2 2023

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