(Bloomberg) -- A rebound in global food prices is threatening to add to consumers’ grocery costs this year, just as the agricultural world braces for potential trade disruptions.
A United Nations index tracking raw commodity costs of food ended the year up almost 7%, the first annual gain in three. While it takes time to filter through to supermarkets and the gauge remains well below a 2022 peak, it could put a fresh squeeze on shoppers hit by broader inflationary pressures in recent years.
Although food supplies and prices are often at the mercy of unpredictable weather, this year could bring more uncertainty with Donald Trump’s return to the White House. The incoming president has proposed tariffs across the board on goods imported into the US, and a key question is how any trade wars — especially with China — will impact global flows and prices of food commodities.
“There is a lot of uncertainty and the future direction of policy is one of those uncertainties,” said Monika Tothova, an economist at the UN’s Food and Agriculture Organization. Weather risks, geopolitics and macro-economic policy will also be key influences on commodity prices in 2025, she said.
While the FAO’s food price index in December eased slightly from the previous month, it’s still near the highest since April 2023. Last year’s gains were mainly driven by higher vegetable-oil costs — palm oil rose on tight supplies — as well as gains in dairy and meat. Grain costs eased amid ample supplies.
The recent trends seen in vegetable oils and grains may continue into this year, Tothova said. Meanwhile, prices of meat and dairy products could fall, barring any significant animal-disease outbreaks, she said.
Rabobank last month said it expects a palm oil shortage to extend into 2025, pushing prices higher. It also sees a deficit for wheat, bucking good supplies in corn and soybeans markets.
For now though, markets await clarity on US trade strategies once Trump is sworn in later this month.
“The new new US administration’s policies and the responses from other regions, particularly China and Europe, will shape the outlook for 2025,” Rabobank analysts Carlos Mera and Oran van Dort said in last month’s report. “Given the trade war outlook, farmers’ and food processors’ margins will be under pressure at different points across different countries and commodities.”
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