World food commodity prices rose for a second straight month in March, with increase largely driven by higher energy costs tied to the conflict in the Middle East.
The Food and Agriculture Organization (FAO) of the United Nations on Friday reported that its food price index averaged 128.5 points in March, up 2.4% from February. That is the highest since September and sits 1% above a year earlier. It marked the first release of the monthly index since the U.S. and Israel launched military strikes against Iran at the end of February, a conflict that has sent both energy and fertilizer costs soaring.
Although this past month’s increase in the food price index – which tracks monthly changes in the international prices of a basket of globally-traded food commodities – was relatively mild compared to the aftermath of the Russian invasion of Ukraine in February 2022, FAO Chief Economist Maximo Torero warned the impact will increase as the conflict drags on.
"Price rises since the conflict began have been modest, driven mainly by higher oil prices and cushioned by ample global cereal supplies," Torero said. "But if the conflict stretches beyond 40 days with high input costs with current low margins, farmers will have to choose: farm the same with fewer inputs, plant less, or switch to less intensive fertilizer crops.
“Those choices will hit future yields and shape our food supply and commodity prices for the rest of this year and all of the next."
In March 2022, the FAO food price index surged 12.6% in a single month to a record 159.3 points, as Russia-Ukraine war disruptions sent grain and vegetable oil prices sharply higher.
This time around, cereals again played a central role in the overall monthly increase. The FAO cereal price index averaged 110.4 points in March, up 1.5% from February and 0.6% above a year earlier. Wheat posted the strongest gain among the major grains, rising 4.3% as drought concerns hurt U.S. crop condition ratings and expectations grew for smaller Australian plantings because of anticipated higher fertilizer costs. Those bullish factors were partly tempered by favourable crop conditions in Europe and strong export competition supported by still-comfortable global supplies.
Corn prices rose a much smaller 0.9% in March, with abundant world supplies continuing to cap the upside. Even so, corn found some support from concerns about fertilizer affordability ahead of Northern Hemisphere planting and from better ethanol demand prospects as higher crude oil prices filtered into biofuel markets. Barley and sorghum prices also moved higher in March. Rice was the exception in the cereals complex, with the all rice price index falling 3%.
Vegetable oils showed the strongest momentum of all the major food categories. The FAO vegetable oil price Index jumped 5.1% from February to 183.1 points, marking a third consecutive monthly increase and leaving the index 13.2% above a year earlier. Palm oil led the advance, climbing to its highest level since mid-2022 and moving to a premium over soyoil as soaring crude oil prices boosted the broader biofuels complex and Malaysian production came in below expectations. Soyoil prices rose only modestly, as stronger U.S. biofuel demand expectations were partly offset by seasonally increasing South American export supplies. Sunflower and rapeseed oils were also supported, the former by lingering Black Sea supply tightness and the latter by expectations of stronger feedstock demand amid elevated energy prices.
Meanwhile, the meat price index rose 1%, led by stronger pork prices in the European Union and firmer Brazilian beef values, while poultry and sheep meat eased.
Sugar posted the sharpest rise outside vegetable oils, jumping 7.2% as traders anticipated Brazil would divert more cane into ethanol production because of stronger crude oil prices.
Dairy prices gained 1.2%.
