Do essential commodity prices rise or fall?
Supply and demand are the primary drivers of any price: rising demand pushes prices up, while greater supply pushes them down, and vice versa. The clearest local example is oil, which fell to around 20 dollars during the pandemic and then climbed to 120 dollars per barrel just two years later. Food commodity prices are affected by the dynamics of supply and demand, weather, geopolitical factors, and economic policies, while exchanges facilitate price discovery and the flow of liquidity around the world.
Added to this are factors specific to food commodities, such as drought, wars, and export restrictions, which in turn affect supply and demand, as happens when coffee output in Brazil weakens due to drought, or when India imposes restrictions on rice exports to protect its citizens from the consequences of falling stocks. The world has passed through four extremely difficult years that witnessed two events that do not always recur: an unprecedented pandemic, and a devastating war between major food-producing nations.
Report source
This report draws on Trading Economics, one of the largest platforms tracking commodity prices around the world, providing accurate, reliable, and real-time information that includes historical data for raw materials, forecasts of economic indicators, exchange rates, and prices of essential commodities.
Food commodities are usually traded on commodity exchanges or futures markets. Among the most important is the Chicago Mercantile Exchange (CME Group), where agricultural commodities such as corn, wheat, and soybeans are traded, and the Intercontinental Exchange (ICE), which handles commodities such as coffee, cocoa, sugar, and cotton. Futures contracts set a price for a future delivery date, allowing producers and consumers to hedge against price volatility.
Research criteria
The research focuses on selected commodities that influence the food sectors, using two benchmarks to observe changes: the first is annual, to clarify the current path of a raw material’s price, in addition to a ten-year benchmark to understand the current value of the price and how and when sharp drops or surges occurred, though it does not adjust prices for the annual inflation rate.
Most commodities are traded in dollars, but some are traded in the currency of the largest producing country, as with rice (the Indian rupee) and palm oil (the Malaysian ringgit). Each commodity has a different weight measure recognized globally; for example, coffee is traded by the pound, wheat by the bushel, and sugar by the ton.
Who is this report for?
At Qoyod, our business is not directly tied to the prices of essential or primary commodities, but the businesses of some of our partners among Qoyod’s clients are closely connected to them, and they are of the utmost importance to us, so we present this report to them, especially those working in the restaurant, cafe, confectionery, and food industries in general.
Are these prices real-time?
Yes, the prices are real-time and the global exchanges for each commodity operate year-round, but the impact is not immediate. Suppliers and business owners usually keep their own inventory, so the change does not show up quickly, and a rising or falling wave may be short enough that its effect never reaches the retail outlets this report targets. The longer any wave lasts, the more its consequences appear across the sector in general and on those working in it in particular.
A quick look at the seven commodities
| Commodity | Global price | Trend over 12 months | Key driver |
|---|---|---|---|
| Coffee (Arabica) | 2.25 to 2.50 dollars/lb | Up from 1.60 dollars | Drought in Brazil and Vietnam |
| Cocoa | 7,000 to 8,000 dollars/ton | Jumped roughly 300% then retreated | Supply shortage in West Africa |
| Sugar | 18 to 22 cents/lb | Volatile after a 28-cent peak | India’s export restrictions and Thailand’s heat |
| Tea | About 2.7 dollars/kg | Up 47% | Production disruptions |
| Wheat | About 5.9 dollars/bushel | Down from a 7.6-dollar peak | Expected abundance of supplies |
| Rice | About 19 dollars/CWT | Up from 15 dollars | India’s export restrictions |
| Palm oil | About 870 dollars/ton | Up from 740 dollars | Higher soybean oil and lower Malaysian output |
Coffee
Arabica coffee is the global benchmark for coffee futures traded on the Intercontinental Exchange. It is the higher-quality coffee bean, representing about 75% of world production and the most popular variety in the United States and the Middle East, with Brazil alone exporting 40% of global supply. Among the other prominent Arabica regions are Colombia, Guatemala, Costa Rica, Ethiopia, Kenya, Rwanda, and Yemen. Robusta coffee, on the other hand, is often less costly because it is easier to grow, represents about 25% of production, is most popular in Europe, and is used in espresso, with Vietnam exporting 15% of global supply.
Saudi Arabia has emerged as a rising coffee producer, growing Arabica beans in the south of the country, but production still stands at around 1,500 tons per year, a modest figure given that Saudi Arabia is among the world’s top 10 coffee-consuming countries, consuming about 80 thousand tons annually.
Annual range: Arabica coffee futures fluctuate between 2.20 and 2.35 dollars per pound (a pound = 453 grams) because of persistent supply concerns, as ongoing drought in Vietnam and below-average rainfall in Brazil have aggravated these worries. The past 12 months represent an upward wave, as the price per pound was 1.60 dollars a year ago, rose to a peak in April at 2.50 dollars, then moved back between 2.25 and 2.50 dollars, roughly equivalent to 5 dollars per kilogram (between 18 and 20 SAR).
Ten-year range: Prices saw an unprecedented decline from mid-2018 through late 2020, during which the price per pound was below one dollar, but today’s prices are very close to 2014 prices, and remain below the April 2011 peak when the price per pound reached 3 dollars.
Cocoa
Cocoa is traded on the New York Mercantile Exchange and the Intercontinental Exchange in London, with New York prices based on the South Asian market, while London prices rely on cocoa coming from Africa. Ghana and Ivory Coast together produce about 60% of the world’s cocoa, and among the other main producers are Indonesia, Nigeria, Cameroon, Ecuador, and Brazil. Although the cocoa market is one of the smallest soft-commodity markets, it has global effects on food, confectionery, and retail producers.
Annual range: Cocoa prices saw record jumps; over 12 months they took an upward path, rising from 3,200 dollars per ton to 12 thousand dollars in April, an increase of nearly 300%, before returning to between 7 and 8 thousand dollars, the lowest level since early March, as favorable weather in West Africa led to a large inflow of supply. Maxar Technologies, a firm specializing in geographic forecasting, predicts that cocoa crops will continue to improve and that the coming season will be brighter, with Ivory Coast’s production expected to climb to two million tons. These prices have pushed both large and small producers to raise their prices.
Ten-year range: Although cocoa is among the most price-stable raw materials (between 2,200 and 3,000 dollars per ton), the extreme upward wave in 2024 broke the usual rise-and-fall pattern with a rapid increase of 300%.
Sugar
Sugar is the backbone of the confectionery and food-products industry, which forms an important sector in the Saudi market. Sugar is produced from sugar beet and sugarcane, which are similar in their chemical and physical properties, and is grown mainly in Brazil, India, and China. About 75% of the world’s sugar is produced from sugarcane, which needs periods of heavy rain and heat, while sugar beet needs moderate temperatures, which is why it is grown in Russia and the European Union. Brazil is the largest producer and exporter of sugar, with a 21% share of global production and 45% of global exports.
Annual range: Sugar is measured globally in cents per pound (a cent = 0.01 dollar). Sugar prices rose to 20.2 cents per pound in June, the highest level in two months, driven by concerns about lower supplies from India, the second-largest producer. Over the past year prices reached 28 cents per pound before falling to 21 cents at the start of 2024 and continuing in a range of 18 to 22 cents (about 1.6 SAR per kilogram), with the rise coming mainly from India keeping its export restrictions in place, while record heat in Thailand led to the lowest sugarcane output in 13 years.
Ten-year range: Sugar had two earlier peaks between 20 and 28 cents, the second in 2017 when the pound reached 24 cents, while its only trough was between 2018 and 2021 at an average of 14 cents, and the historical price level in 2011 reached about 34 cents per pound.
Tea
Tea is the second most consumed beverage in the world after water, with several types varying in taste and color and serving recreational and medicinal uses. Its most prominent producers and exporters are China, Kenya, India, and Sri Lanka, accounting for 75% of global production. On average, 10 grams of tea can make a full liter, and it is among the beverages relatively insulated from any changes in prices.
Annual range: Tea prices rose 47% since the start of 2024 to reach about 2.7 dollars per kilogram (about 10 SAR), after averaging 1.5 dollars throughout the first three months of the year. There are no international tea futures, so its prices vary by product type and origin among Kenya, India, and Sri Lanka, but its impact remains acceptable on the thriving tea-shop sector in Saudi Arabia.
Ten-year range: Tea prices averaged between 2.85 and 3 dollars per kilogram with regional differences; they fell at the Mombasa auction in Kenya to around 1.98 dollars in September 2021, while in Sri Lanka they rose from 3.51 dollars in January 2022 to a record level of 4.49 dollars in September 2022 due to economic turmoil. Globally, production doubled over the past two decades while the export market remained relatively stable, putting downward pressure on prices.
Wheat
Wheat futures are available for trading on most global commodity exchanges, as wheat is the foundation of food around the world, used to make bread and affecting the confectionery, baking, restaurant, and cafe sectors. It is government-supported in a number of countries as one of the most important pillars of food security. Among the most important exporting countries are the United States, Canada, France, Ukraine, and Australia, with Russia being the largest exporter, while Russia and Ukraine together produced about 30% of global wheat exports before the war.
Annual range: Wheat prices reached about 5.9 dollars per bushel (a wheat bushel weighs 27 kilograms), near their lowest levels, when the 12-month peak reached 7.6 dollars, with the decline due to expectations of abundant supplies. Wheat stored in the United States rose 23% over the previous year to reach 702 million bushels, while concerns about a shortfall in Russian production remain because of frost damage.
Ten-year range: Prices have not surged the way they did at the start of the Russia-Ukraine war, when in March 2022 they reached about 11.7 dollars per bushel (450 dollars per ton), roughly 1.7 SAR per kilogram in global wholesale prices. Apart from that wave, prices stayed throughout the past decade in a range of 4 to 6 dollars per bushel.
Rice
Rice is the food of half the world’s population, especially in Asia, which grows and eats 90% of global rice production. India is its largest exporter, with about 40% of total exports, which makes the export restrictions imposed by the government a key driver of prices up and down, followed by Vietnam, Thailand, Pakistan, and the United States. China then India topped the list of the largest producers, but China consumes a large amount of its production. Saudi Arabia imports 80% of the rice it uses from India, and 7% from Pakistan, which is not among the major producers.
Annual range: Rice contracts are measured in the CWT unit, which means 100 pounds (45.3 kilograms). The price of rice rose throughout the past 12 months, jumping from 15 to 19 dollars, and the price of Thai white rice (the recognized Asian benchmark) rose by about 20% from 490 to around 620 dollars per ton because of the ongoing export restrictions in India. India is expected to ease these restrictions out of caution against a glut in its domestic markets ahead of the new harvest, and is expected to scrap the 20% tax imposed on exports, which could feed stability in global prices.
Ten-year range: The price curve shows two upward waves, the first during the pandemic and the second currently, both stemming mainly from export restrictions. Although today’s prices are far from their record levels in 2008, when they reached about 1,000 dollars per ton, they are also much higher than their low levels between 2015 and 2019.
Cooking oil
Palm oil is a vegetable oil extracted from the fruit of the oil palm tree, and is the most consumed in the world as a key ingredient in cooking and in the manufacture of biofuel, as it contains a balanced mix of saturated and unsaturated fats and has a high boiling point of 232 degrees Celsius. It represents about 40% of the world’s oil consumption, with Indonesia and Malaysia providing 85% of its supply, followed by Nigeria, Thailand, and Colombia.
Annual range: Malaysia is the second-largest producer after Indonesia, and palm oil is traded in Malaysian ringgit on the Kuala Lumpur exchange. Twelve months ago its price was 740 dollars per ton before rising sharply in April to reach 955 dollars, supported by higher soybean-oil prices (the closest substitute for palm) and expectations of lower production in Malaysia, before returning to around 870 dollars.
Ten-year range: Palm oil recorded its highest peak at 1,500 dollars per ton at the start of the Russia-Ukraine war (Russia and Ukraine are among the major producers of competing sunflower oil), and from there Saudi Arabia saw large increases in cooking-oil prices. Before the war, prices moved between 700 and 800 dollars per ton, while during the COVID crisis they recorded a trough at 420 dollars per ton.
Conclusion
With the exception of cocoa, the commodities tracked by this report are trading at moderate levels relative to historical rise-and-fall waves; they are neither extremely high nor extremely low. As a result, no major additional operating costs are expected within the raw-materials line item in the near term for the food and catering sectors and coffee and tea shops. Cocoa, however, has a different story, with its record increase of up to 300% relative to its levels over the past ten years, and global and local brands have begun responding to it by raising prices to cover costs.