FAO 2024 outlook: Global food bill to rise amid price hikes

The FAO’s 2024 Food Outlook projects a 2.2% increase in the global food import bill, exceeding US$ 2 trillion, driven by rising prices for cocoa, coffee, tea, and higher costs for fruits and vegetables. Climate change and extreme weather events have exacerbated supply shortages, particularly for wheat, with major exporters like India, Russia, and Argentina facing declines in production.

While rice production is set to achieve record levels, the global food market remains vulnerable to disruptions. Fertilizer prices have fallen significantly, but challenges persist, particularly for oilseeds like rapeseed and sunflower, where production is expected to decline. Rising demand for vegetable oils further strains global food security, highlighting the complex and fragile nature of global food systems in 2024.

The Food and Agriculture Organization (FAO) of the United Nations has released its latest Food Outlook report, projecting a 2.2% increase in the global food import bill for 2024, which is expected to exceed US$ 2 trillion. This rise is primarily driven by significant price hikes in key commodities like cocoa, coffee, and tea, as well as higher import costs for fruits and vegetables.

The surge in cocoa prices is largely due to a global supply shortage, exacerbated by climate change-induced droughts in West Africa, which accounts for about 80% of the world’s cocoa production. Additionally, chronic underinvestment in cocoa farms and investor speculation have contributed to the price spike.

Similarly, extreme weather events, including droughts and irregular rainfall, have fueled concerns over coffee supply in South Asia and Latin America, driving up prices. Bulk tea prices have also risen due to adverse weather conditions, prompting companies like Tata Consumer Products and Hindustan Unilever (HUL) to gradually increase their prices, with more hikes expected.

The FAO’s Food Price Index shows a gradual increase in food prices during the first half of 2024, following a period of declines throughout 2023. While no single factor can fully explain the rising prices, a combination of geopolitical conflicts, extreme weather events, high input costs, and growing global demand are all playing a role in pushing food prices higher.

According to the report, spending on cocoa, coffee, and tea imports is expected to rise by 22.9%, accounting for more than half of the overall increase in import value. These price hikes are largely due to adverse weather conditions and logistical challenges. Cocoa prices, for instance, have reached nearly four times their ten-year average, while coffee prices have nearly doubled, and tea prices have risen by 15% above their typical long-term levels.

Exports of these commodities are crucial to the economies of several countries. In Burundi and Ethiopia, coffee exports cover nearly 40% of their food import bills, while tea exports contribute to more than half of Sri Lanka’s import costs. Similarly, cocoa exports in Côte d’Ivoire offset the entire food import bill of the country.

On the other hand, the outlook for low-income countries appears somewhat brighter, with lower import bills for cereals and oilseeds offering some relief. High-income countries, which account for two-thirds of the global food import bill, will face a 4.4% increase in 2024, while countries in lower income brackets are likely to see their import bills contract.

The FAO’s Food Outlook provides updated forecasts for global food production, trade, utilization, and stocks of major food staples. It also explores topical themes, including olive oil and fertilizer markets.

Positive Crop Outlook Despite Risks

The report highlights a generally favorable production outlook for most major food crops in 2024, although global agricultural systems remain vulnerable to extreme weather events, geopolitical tensions, and policy shifts that could disrupt trade and food security.

Wheat and coarse grains production is expected to decline slightly from high levels in 2023, though it will still be sufficient to meet global demand. Harsh weather is significantly reducing wheat production in major exporting countries, leading to lower inventories already expected to hit nine-year lows and triggering a sharp surge in prices.

Focus on Olive Oil and Fertilizers

The report highlights a dramatic rise in olive oil prices, with Spain’s wholesale price of extra virgin olive oil reaching US$ 9,818 per tonne in January 2024, up from US$ 3,655 two years earlier. Severe heat has cut production by nearly 50% for two years. However, Spain’s 2024 harvest is expected to exceed the 10-year average, with production also improving in Greece, Tunisia, and Türkiye, though Italy faces ongoing challenges. High prices may still curb global consumption.

In fertilizers, prices for nitrogenous and potassium fertilizers have dropped over 50% since their April 2022 peak due to lower natural gas prices, while phosphate prices remain high due to trade barriers. Trade volumes have declined, and geopolitical risks in the Middle East may disrupt supply, especially in Latin America and Asia.

The report also explores the potential of low-carbon ammonia for fertilizer production, emphasizing the need for investments and incentives to offset higher costs and enable farmers to adopt sustainable practices.

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The FAO’s 2024 Food Outlook highlights a mixed global food market, with rising prices for cocoa, coffee, and tea increasing the global food import bill. Harsh weather and geopolitical tensions challenge some regions, while others benefit from favorable crops and lower import costs for staples.

Wheat production faces serious challenges, with extreme heat and drought impacting major exporters, worsening supply shortages and raising prices. Conversely, rice production is projected to hit record levels, and growth in meat, dairy, and aquaculture provides some optimism.

Despite these positives, climate change, supply chain disruptions, and fertilizer market volatility underscore the fragility of global food systems. Significant risks to food security persist, even as some regions show improvement.