According to the latest Commodity Markets Outlook report published by the World Bank, no major fluctuations are expected in global commodity prices over the next two years. It is predicted that grain prices will fall to the lowest levels in the last five years due to the increasing global grain supply. Specifically, wheat prices are expected to drop by about 21% this year, falling to around $270.
The World Bank’s Commodity Markets Outlook projects a nearly 10% drop in global commodity prices by 2026, driven by a historic oil surplus and improving supply conditions. Grain prices are expected to follow this trend, with wheat and maize prices forecasted to soften through 2025, supported by steady production and favorable stock levels globally.
Global commodity prices are set to tumble to a five-year low in 2025 amid an oil glut that is so large that it is likely to limit the price effects even of a wider conflict in the Middle East, according to the World Bank’s latest Commodity Markets Outlook. Even so, overall commodity prices will remain 30% higher than they were in the five years before the COVID-19 pandemic.
Next year, the global oil supply is expected to exceed demand by an average of 1.2 million barrels per day, a glut that has been exceeded only twice before—during the pandemic-related shutdowns in 2020 and the 1998 oil-price collapse.
From 2024 through 2026, global commodity prices are projected to plummet by nearly 10%. Global food prices are set to fall 9% this year and an additional 4% in 2025 before leveling off. That would still leave food prices nearly 25% above the average level from 2015 through 2019.
GRAIN PRICES PREPARE FOR GRADUAL DECREASE
Grain prices are expected to decrease by 5% in 2025 due to the increasing global grain supply, and stabilize in 2026. Wheat prices, which are forecasted to decline by 21% in 2024 compared to the previous year, dropping from $340 to $270, are expected to fall by another 2% to $265 in 2025. The 2024-25 Marketing Year is expected to see production levels return to the previous season’s figures, with the stock/use ratio decreasing but remaining at a sufficient level. In 2026, with a slight reduction in stocks, wheat prices are anticipated to see a modest 1% increase, rising from $265 to $268.
Global corn supply is expected to remain largely unchanged in the 2024-25 MY compared to 2023-24. After a 26% drop in corn prices from $253 to $187 in 2024, prices are predicted to decline by only 1% in 2025, and increase by 2% in 2026 due to steady global supply.
Strong maize yield prospects in the United States for the 2024-25 season, which more than offset a 4-million-acre reduction in planted area, are being counterbalanced by poor growing conditions in southeastern Europe and parts of Russia and Ukraine.
Rice, which was priced at $554 in 2023, is expected to rise by 8% to $598 in 2024. During the 2024-25 MY, global production is expected to reach a new peak, and with India easing its rice export restrictions, rice prices are forecasted to fall by 11% to $530 in 2025, and by 2% to $518 in 2026. Ample monsoon rains have expanded rice sowings in India for the 2024-25 season, while the probable emergence of La Niña weather conditions, which typically bring more rainfall to South Asia, is expected to improve yields and boost inventories. Production in other major exporters across Asia and the United States is expected to hold steady in 2024-25.
Energy prices are expected to drop by 6% in 2025 and an additional 2% in 2026. Falling food and energy prices should make it easier for central banks to control inflation. However, an escalation in armed conflicts could complicate that effort by disrupting energy supply and driving up food and energy prices.
Prices of several agricultural commodities rose slightly in September and the first half of October on news of bad weather in key exporting countries. Despite declining by 3 percent in the third quarter of 2024, the World Bank’s agricultural commodity price index is expected to be 2 percent higher in 2024 (y/y), driven by a 58 percent spike in beverages and a 4 percent increase in raw materials, partly offset by a 9 percent decline in food prices. The agriculture price index is forecast to decrease by 4 percent in 2025 owing to favorable growing conditions in key exporters, before stabilizing in 2026 as supply and demand come into better balance. Food prices are expected to soften by a further 4 percent in 2025 then level out in 2026. Raw material prices are forecast to remain broadly stable over the next two years. Risks to the forecast are broadly balanced. Upside risks include heat waves, biofuel policies that favor higher blending mandates, and geopolitical tensions that could push energy and fertilizer prices higher. Downside risks include lowerthan-expected crude oil prices, which could reduce demand for biofuel feedstocks, and the onset of a strong La Niña.
“Falling commodity prices and better supply conditions can provide a buffer against geopolitical shocks,” said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President. “But they will do little to alleviate the pain of high food prices in developing countries where food-price inflation is double the norm in advanced economies. High prices, conflict, extreme weather, and other shocks have made more than 725 million people food insecure in 2024.”
MIDDLE EAST CONFLICT FUELS OIL PRICE VOLATILITY, STABILIZATION EXPECTED IN 2025
Over the past year, conflict in the Middle East has brought significant volatility to oil prices—particularly because of concerns that the oil and gas infrastructure of major commodity producers could be damaged if the conflict were to intensify. Assuming the conflict does not intensify, the annual average price of Brent crude is expected to fall to a four-year low of $73 in 2025, down from $80 a barrel this year.
But the report also assesses what might happen if the conflict were to escalate, specifically if it resulted in reducing the global oil supply by 2%, or 2 million barrels per day, by the end of this year—a scale of disruption that occurred with the Libyan civil war in 2011 and the Iraq war in 2003. If a similar disruption were to recur, Brent prices would initially rise sharply to a peak of $92 a barrel. However, oil producers unaffected by the conflict could quickly respond to higher prices by boosting oil production. As a result, the price spike could be relatively short-lived, with the oil price averaging $84 a barrel in 2025. That would still be 15% above the baseline forecast for 2025 but only 5% above the 2024 average.
“The good news is that the global economy appears to be in much better shape than before to cope with a significant oil shock,” said Ayhan Kose, the World Bank Group’s Deputy Chief Economist and Director of the Prospects Group. “That opens up some rare opportunities for policymakers in developing economies: first, declining commodity prices can provide a helpful complement to monetary policy to bring inflation back to targets; second, policymakers have a window to wind back costly fossil-fuel subsidies.”
A special focus section of the report examines why global commodity-price movements were so synchronized during and after the pandemic. It finds that commodity prices moved in tandem during the 2020-23 period because of global economic repercussions of the pandemic as well as large-scale commodity-specific shocks such as Russia’s invasion of Ukraine. Synchronized price increases tend to lead to higher global inflation and lower economic growth. Over the past year or so, price movements have become less synchronize.