It’s a sign that global inflation has peaked.

For central bankers fighting the largest price increases in 40 years, the drop in food prices should give some breathing room to slow down interest rate hikes. For monetary authorities and households in emerging nations, such as India and Brazil, where food accounts for a much larger share of day-to-day expenditures, the drop in farming prices is even more important.

The fall in wholesale agricultural commodities prices will take some time to filter down into the supermarkets. And their high energy and transportation costs will still offset some of the declines. Because of the delay from farm to fork, US families will stay pay dearly for their Thanksgiving turkeys later this month. 

Yet even so, food inflation is reversing. Take the monthly food-cost index compiled by the United Nations’ Food and Agriculture Organisation. Over the last two years, it surged inexorably higher, posting year-on-year increases of as much as 40% by the middle of 2021, and 20% to 30% in early-to-mid 2022. Since then, however, the index has fallen back sharply, paring its annual gains in October to just 1.9%. Based on current trends, the FAO index is likely to post in November its first annual drop in more than two years.

Deflation is already visible in large swathes of food categories, including fish, legumes and certain kinds of meat and vegetables. The cost of lamb, for example, is down 25% since January. Salmon prices are down 40% from their most recent peak. Poultry prices have tumbled more than 25% since the beginning of the year. And from a recent peak only a few months ago, chickpeas, a staple for one billion people in south Asia, are down 20%, while tomato prices in Europe have fallen 40% and palm oil in Asia is down almost 50%.

As important as these price drops are, it’s worth noting that rice — a key agricultural commodity — has remained stable despite dire predictions of shortages. In many ways, rice has single handily prevented a full-blown food crisis this year.

The whole concept of the 2022 food crisis was, from the very beginning, dubious.

Consider the unequivocal sign of a true crisis: food riots. The world saw them in 2007-2008, when protesters took to the streets in more than 50 nations from Haiti to Bangladesh. But other than in Sri Lanka, a nation blighted by much bigger economic problems, the world didn’t face any significant food riots in 2022. The key savior was the stability of rice, a staple for half of the world’s population. The worst food riots in 2007-2008 weren’t about the price of bread but the cost of a bowl of rice.

Despite rising corn and wheat costs, rice prices have remained subdued in 2022. Several consecutive years of bumper harvests boosted global rice stockpiles to a record high, creating a buffer against inflation. Year-to-date, benchmark rice prices have averaged $414 per metric ton, below the 5-year average of $416 per ton and the 10-year average of $434 per ton. In 2007-2008, rice prices climbed, almost vertically, to above $1,000 per ton.

So why are prices now down across other food commodities?

As always in the natural resources industry, the best cure for high prices is high prices — farmers and ranchers have reacted, boosting production. The weather has helped too, with better crops than many observers had predicted earlier this year. For example, Australia, the world’s second-largest  wheat exporter after Russia, will harvest in 2022-2023 its second consecutive bumper crop. Canada and Brazil are expecting good crops, too.

The UN-brokered deal to restart Ukrainian grain exports has also helped. Its likely extension should bring a further drop in corn and wheat prices. Stronger grain exports from Russia, as the US and Europe quietly encourage commodity traders to continue shipping the country’s crop, is also helping. But above all, the world learned the mistakes of the 2007-2008 food crisis, when export bans exacerbated shortages. With the exception of limited trade restrictions by India, most of the world’s top agricultural commodity exporters have this time kept markets largely open.

If anything, that’s the lesson of 2022: The best source of global food security is trade. Governments should make sure they remember it.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Javier Blas is a Bloomberg Opinion columnist covering energy and commodities. A former reporter for Bloomberg News and commodities editor at the Financial Times, he is coauthor of “The World for Sale: Money, Power and the Traders Who Barter the Earth’s Resources.”

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