Global food prices hit a three-year high as extreme summer heat, worsening weather conditions and conflicts affecting major trade routes push up the cost of internationally traded agricultural commodities. The UN Food and Agriculture Organization’s (FAO) food price index climbed to 131.1 points in July, from 130.3 in June, reaching its highest level since January 2023.

Cereal, sugar and vegetable oil prices all increased, with the impact likely to reach consumers in the coming months as higher commodity and production costs move through global food supply chains.

Wheat and Maize Prices Rise Amid Extreme Heat

• Cereal prices increased 3.4% month on month in July, with global wheat prices rising by 5.8%.
• The FAO linked the increase partly to heatwaves affecting wheat yields in several major producing countries.

The war between Russia and Ukraine has added another layer of pressure.

• Continued disruption to Black Sea export routes and damage to export infrastructure following intensified attacks have made grain shipments more difficult, contributing to higher wheat prices.
• Global maize prices also climbed 3.6%, with the FAO citing concerns about hot and dry conditions in parts of the U.S. Corn Belt.

Key Changes in FAO Food Price Index

European Heatwaves Add to Crop Losses

Extreme heat has become an increasingly important factor behind agricultural price pressures.

• The severe heatwave that swept Europe in June is estimated to have caused farmers to lose around 9 million tonnes of crops, including wheat, barley, maize and oats.
• Sugar prices rose 5.6% in July, with the FAO pointing to concerns about prolonged hot and dry weather affecting European Union crops.
• Developing El Niño conditions are adding further uncertainty over agricultural production in several regions.
• Brazil is also influencing sugar markets after new rules increased the amount of ethanol permitted in gasoline, boosting demand for sugarcane from ethanol producers.

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Middle East Conflict Raises Fertiliser Costs

Food production is also being affected by disruptions beyond the fields. The conflict involving Iran has contributed to higher food costs partly because around one-third of global fertiliser production travels through the Strait of Hormuz.

Higher fertiliser, fuel and transportation costs can eventually increase the expense of growing and transporting food, creating additional pressure on farmers and consumers.

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El Niño Raises Food Security Concerns

The situation is particularly worrying for vulnerable populations. The World Food Programme has warned that El Niño could push around 50 million additional people into acute hunger by the end of next year, with Central and South America, the Caribbean and southern Africa expected to face some of the greatest risks.

Analysts have warned that the current El Niño could become the strongest in decades, creating further uncertainty for crops and food supplies.

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Higher Commodity Costs Could Reach Consumers

Not every food category became more expensive in July. Meat prices declined 2.8%, marking their first monthly fall of the year, while dairy prices slipped 0.7%. However, the broader rise in agricultural commodities remains significant.

Higher commodity prices generally take time to appear in supermarkets because suppliers, processors and retailers absorb or pass on costs at different stages. With extreme heat, drought, conflict and changing weather patterns continuing to affect agricultural production, the latest FAO figures suggest global food prices hit a three-year high and food markets could remain under pressure well beyond the summer.

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