Food prices likely to fall over next decade, UN report finds

A surge in prices of cereals throughout the last year is expected to level out

Varieties of grains, seeds and raw quinoa (Getty Images)

The price of major food commodities is expected to decline over the next 10 years, the United Nations has predicted.

Global food costs have surged in the last year due to an increase in Chinese imports and slowed production across the rest of the world, but the prices of most agricultural food groups should drop as demand and productivity level out.

A new report, published by the United Nations and the Organisation for Economic Co-operation and Development, examined the changes in demand and prices for cereals, sugar, oils, meat, dairy and fish.

While prices of cereals had been relatively stable for the seven-year period before 2020, they rose significantly in the last year. The surge has been largely attributed to booming Chinese imports.

Last year, China began rebuilding its pig herds following the outbreak of the 2018 African swine fever, a disease that is not harmful to humans but causes deaths in pigs. This led to an increased demand for cereals and oilseed, such as soybeans, to feed its pigs.

The rise in price was further accentuated as global production of cereals slowed in the last year. For example, wheat production in the EU was the lowest it has been in 10 years.

“The surge in grain prices contributed to higher food price inflation in many countries, especially those where the negative economic impacts of the pandemic were already more pronounced,” the United Nations said in its report.

However, as Chinese imports begin to slow and production improves, prices should decrease again over the next decade.

“The fundamentals don’t say to us that we will be moving to a supercycle of commodity prices,” Maximo Torero, the FAO’s chief economist, told Reuters.

The UN also found that consumption of meat and fish has decreased slightly throughout the last two years, but prices have been falling more rapidly since 2019.

Some of the decline was attributed to the pandemic, which curtailed demand and led to reduced household spending on meat due to lower incomes, the report said.

The commodity most impacted by the pandemic was fish, as it is a food that is often consumed outside the home. Lower demand led to a seven per cent decrease in prices in 2020 compared to 2019, with high-value species being lowered the most.