Over the past 10 months, world prices of most grains and oilseeds have fallen back to levels prior to the war in Ukraine. Likewise, volatility in prices has also declined considerably from recent highs. With the extension of the Black Sea Grain Initiative, there is hope that the world is recovering from the price shocks of the past year. Yet, while prices have fallen in international markets, they have frequently remained high at local level, particularly in net food importing developping countries reflecting the weakening of their currencies against the US dollar. As a result, food price inflation is still a serious concern in many countries, also because post-farm gate costs for shipping and processing remain subject to inflationary pressures.

With no end in sight to the war in Ukraine and threats of further escalation, uncertainty continues to hang over agricultural markets. Supplies are tight. Reduced plantings in Ukraine mean that other countries will need to produce additional grains and oilseeds to help rebuild global stocks and moderate price levels. The world has so far been relatively fortunate: a combination of good weather and strong producer supply response has kept market prices from rebounding back to the high levels of early 2022. However, tight stocks will mean increased price volatility, particularly during periods of uncertainty such as planting times and the Northern Hemisphere growing seasons. In addition, uncertainty over events like the renewal of the Black Sea Grain Initiative will continue to roil markets.

Fertilizer prices have declined by more than 40 percent since hitting record (nominal) highs last spring, especially due to recent drops in natural gas prices and fertilizer plants reopening in Europe. Though prices remain almost twice the level of two years ago, this development is welcome news for producers making input purchases this spring and should improve profitability margins for many crops. With the price decline most prominent for nitrogenous fertilizers, this could make nitrogen-intensive crops such as wheat and maize more attractive planting choices than they were last spring. Lower prices could also encourage higher application rates, particularly in developing countries where fertilizer use is relatively low and where recent high prices have further reduced application rates.

With northern hemisphere grain and oilseed crops largely harvested, and the Black Sea Grain Initiative extended for another 120 days, market attention is shifting to growing conditions in the southern hemisphere. The third consecutive year of La Niña has prolonged drought conditions in Argentina, resulting in sharply reduced wheat production prospects relative to last year. By contrast, La Niña has resulted in abnormally wet conditions in Australia, which expects aboveaverage wheat yields; however, concerns remain over the quality of the crop, which could impact prices for milling wheat. Planting progress for South American maize and soybeans are on pace, but it is still too early to tell whether yields will return to more normal levels after last year's drought-reduced production.

Concerns are mounting regarding the extension of the United Nations Black Sea Grain Initiative beyond the 18 November deadline, especially after Russia's recent - albeit temporary - withdrawal from the agreement. Through this initiative, Ukraine has been able to ship over 9 million tonnes of grains and oilseeds via its Black Sea ports. While the volume of exports remains below year-ago levels, importers benefitted from larger supplies, especially those who depend on Ukraine's agricultural products, while consumers worldwide have gained through lower market prices. Unfortunately, the pace of exports slowed in recent weeks as inspections could not keep up with the number of shipments; and now the possible termination of the deal threatens to re-ignite market prices and further exacerbate global food security concerns.

Since peaking earlier this year, international food prices have returned to levels last seen prior to the Ukraine war. However, prices of most foodstuffs remain high and continue to be under upward pressure from a range of factors, including low stock-to-use ratios for some commodities, high energy and fertilizer costs, poor weather in several key producing countries, and risks associated to the unresolved conflict in Ukraine. With a majority of countries experiencing food price increases between 10 and 30 percent over the previous year, domestic food price inflation is particularly worrisome, especially for the poor who spend a higher share of their disposable income on food.