International food prices have risen due to the impact of the Middle East conflict on energy prices

The FAO Food Price Index – which tracks the monthly price changes of the international “food basket” – closed at 128.5 points in March after a 2.4% monthly increase, 1% above its value a year ago.

The cereal price index rose 1.5% compared to February, mainly due to a 4.3% increase in wheat prices, which is related to dry weather in the United States and possible reductions in Australian crop areas due to high fertilizer prices. Maize prices also rose as concerns about fertilizer availability and rising energy prices dominated despite ample supplies. The FAO index, which covers all rice varieties, fell 3% in March due to the harvest season, weaker import demand and the depreciation of some countries’ currencies against the US dollar.

“There have been no significant price changes since the start of the conflict, with the small increase stemming from high crude oil prices, which were offset by ample cereal supplies,” said FAO Chief Economist Maximo Torero. “If the conflict – along with high input prices and low margins – continues beyond 40 days, farmers will be faced with a choice: produce less with fewer inputs or switch to crops that require less fertilizer. Their decision will have an impact on future yields, food supplies and food commodity prices.”

Vegetable oil prices have risen by 5.1% since February, bringing the year-on-year increase to 13.2%. Palm, soybean, sunflower and rapeseed oils all rose due to the spillover effect of higher crude oil prices, which could also generate stronger demand for biofuels.

The meat price index rose 1% from the previous month, driven by seasonally higher European demand for pork and higher beef prices, mainly in Brazil, where the number of animals available for export has narrowed. Mutton and poultry became cheaper, partly due to logistical difficulties that hindered access to Middle Eastern markets.

The dairy price index rose 1.2%, driven by higher prices for milk powder, following a seasonally lower output in the Pacific region. Cheese prices have become cheaper in European Union markets, amid a combination of expanding domestic production and weak export demand, while the opposite trend has occurred in the Pacific region.

The FAO Sugar Price Index jumped 7.2% in March. Expectations that Brazil, the most important sugar exporter, will divert its sugarcane stocks to ethanol production due to the increase in oil prices have proven stronger, while global stocks are stable, thanks to the harvest in India and Thailand.

Further information and details can be read here.

The Strait of Hormuz and the markets

The Agricultural Market Information System (AMIS) has just published its monthly market monitor. It states that the closure of the Strait of Hormuz has had a major impact on the global economy, and the agricultural sector was no exception. The analysis provides further details on the potential direct and indirect impacts of rising energy, fertilizer and transport costs on food and agriculture.

FAO Chief Economist Maximo Torero recently spoke in more depth at a UN press conference on the