The World Bank projects a modest dip in its agricultural price index this year, with food and raw-material prices broadly steady—but warns that extreme weather, shifts in U.S.–China trade policy, fertiliser costs and biofuel demand could quickly reprice markets.

Global agricultural markets are entering 2026 with prices that look broadly stable, but the World Bank warns that “calm” conditions mask a risk profile increasingly shaped by weather shocks, trade policy swings, input costs and biofuel demand.

In a Feb. 3 blog post drawing in part on the World Bank’s Commodity Markets Outlook, economists John Baffes and Dawit Mekonnen, together with research analyst Kaltrina Temaj, said the Bank’s agricultural price index is projected to decline by about 2% in 2026. Food and agricultural raw material prices are expected to remain broadly steady as supply growth keeps pace with demand, while beverage prices are forecast to fall by around 7% as supply expands.

While risks around the baseline are described as “fairly balanced,” the Bank said the market’s sensitivity to non-fundamental drivers has risen—meaning relatively localised disruptions can have outsized price effects when they interact with policy and logistics.

MACRO BACKDROP: GROWTH, THE DOLLAR AND RATES

The World Bank’s forecasts assume global economic growth eases to 2.6% in 2026 from 2.7% in 2025, with resilience supported by inventory build-ups, risk appetite and investment in artificial intelligence—though downside risks to growth remain. Weaker-than-expected activity would reduce commodity demand and pressure prices, with edible oils and beef singled out as more sensitive to the global cycle than many other food commodities.

Currency and monetary policy are also expected to remain key market drivers. The Bank noted the U.S. dollar depreciated by about 6% against a basket of major currencies in the first half of 2025 before stabilising, reiterating the standard linkage: a weaker dollar tends to lift dollar-priced commodities, while a stronger dollar weighs on them.

On interest rates, it highlighted that the U.S. federal funds rate declined from 5.3% in 2024 to 3.6% by end-December 2025, a shift that can support commodities by easing financing costs and encouraging investment flows, while also working through the dollar channel.

SOYBEANS AS A FLASHPOINT

Trade policy volatility remains a central swing factor. The World Bank said tariff shifts among major economies drove sizeable price swings in 2025, pointing in particular to renewed U.S.–China tensions that widened price gaps and intensified trade diversion in global soybean markets in the second half of the year, before easing late in 2025 narrowed those gaps. A renewed flare-up could again disrupt flows and pricing across U.S.-benchmarked commodities—especially soybeans.

LA NIÑA ASSUMPTIONS UNDERPIN THE BASELINE

On weather, the Bank’s baseline assumes a weak, short-lived La Niña. It cautioned that a stronger or longer episode could bring hotter and drier conditions to key producing areas—including Argentina, southern Brazil and the U.S. Gulf Coast—potentially disrupting output of major crops such as maize, wheat and soybeans and pushing prices above the forecast path.

INPUT COSTS AND FERTILISER

Input costs—particularly fertiliser—remain another potential upside catalyst. The World Bank said fertiliser prices rose 18% in 2025 on demand strength, trade restrictions and production shortfalls, and are projected to fall about 5% in 2026 assuming China continues relaxing export limits on nitrogen and phosphate fertilisers, a process it said began in September 2025. It warned this easing could reverse, and that higher natural gas prices or stronger-than-expected demand could keep fertiliser costs elevated—feeding through into food prices.

BIOFUELS: DEMAND POLICY CAN MOVE EDIBLE OILS

Biofuel demand is increasingly intertwined with food commodity pricing. The Bank said edible oil prices in 2025 were supported by stronger domestic use as biodiesel feedstocks—citing higher blending mandates in Brazil, planned increases in Indonesia, and the expiration of U.S. tax credits for imported biofuels. It expects that support to persist, but said a drop in crude oil prices or relaxed blending requirements could curb demand and weigh on prices.