Global commodity markets are headed for another year of decline, with the World Bank projecting a 7% decline in prices in both 2025 and 2026 as weak demand and ample supply lead to one of the longest deflationary periods in recent memory. The forecast signals relief for inflation-hit economies like India – but also raises concerns over farm incomes amid falling global food and fertilizer prices.
Fourth year of global price decline
According to the World Bank Commodity Price Outlook released this week, the decline is spread across almost all categories – from energy to agriculture. Oil, metals and most food commodities are expected to remain subdued through 2026, while gold and silver may remain out of the market due to safe demand.
Agricultural prices in particular are projected to “rise” in 2026 after a period of stability this year. The World Bank said strong supply conditions in major producing countries – particularly in grains, oil and food – will keep prices limited. Food prices are expected to fluctuate modestly, with grains, edible oils and other agricultural produce remaining close to 2024 levels.
Soybeans, which have been at the center of trade friction between the US and China, are forecast to remain stable as new export flows from Brazil and Argentina fill the void left by restricted US shipments. Beverage goods such as coffee and cocoa could decline by 7% next year due to improving weather conditions, although fertilizer prices – up 21% this year – could remain high despite a modest 5% expected decline in 2026.
Soft landing for global food prices
The World Bank’s analysis suggests a rare period of synchronized moderation: lower demand, stable harvests and cooling energy costs are expected to ease price pressures around the world. “Supply growth for major crops is returning to long-term trends,” the report said, adding that inventories remain comfortable driven by bumper yields in South America and improved yields in Asia.
This is already visible in retail trends in developing economies. The prices of vegetables and pulses have fallen sharply in the last quarter in India. CRISIL’s latest roti rice rate report shows a 10% decline in the price of home-made vegetarian thali due to cheaper onions, potatoes and pulses.
Bank of Baroda’s essential commodities index – a barometer of domestic price trends – has now contracted for six consecutive months, its biggest decline since the beginning, as prices of tomatoes, onions and potatoes entered deep deflation territory.
Good news for inflation, bad news for farmers
For India, this global decline provides near-term relief on inflation. Economists expect headline retail inflation to fall below 1% in October on the back of falling food and fuel costs. Lower global commodity prices also reduce the import bill and may allow the Reserve Bank of India to maintain its current interest rate stance for longer.
Yet its other aspect is coming to the fore in rural areas. Falling prices of cereals, oilseeds and pulses threaten to erode farm incomes, just as high prices of fertilizers and diesel are impacting margins. “We are entering a phase where inflationary relief for consumers may turn into income stress for producers,” said an agricultural policy analyst at a public sector bank.
Energy and Fertilizer Trends to Watch
While the global oil market remains oversupplied, fertilizer prices pose a risk. The World Bank expects fertilizer costs to remain well above their 2015-19 average due to export restrictions from China and Belarus, as well as new EU tariffs on Russian products. These factors could blunt the benefits of lower food prices for farmers who rely on imported nutrients.
Additionally, energy markets remain volatile. Brent crude is projected to average $68 a barrel in 2025 – down from $81 this year – and could fall further to $60 in 2026 due to reduced demand for electric vehicles and renewable energy.
India’s delicate balance
For India’s policymakers, the global slowdown represents both an opportunity and a warning. Cheap imports and low food inflation could help manage the fiscal deficit and ease consumer stress. But continued weakness in agri-commodity prices could dampen rural demand – a key growth engine for the broader economy.
Analysts say the government may need to increase procurement or expand export markets to avert a crisis in sectors like pulses and edible oils. “This is a window to rebuild buffers – not to relax,” said an economist who tracks rural inflation trends.
Bottom line
As 2026 approaches, the world is set for another year of falling commodity prices – a sign of global economic fatigue and abundant supply. For India, this means relief from inflation, but a bigger question is how to balance consumer comfort with the sustainability of agricultural livelihoods.
