Global food prices rise to six-month high; outlook hinges on energy costs Iran conflict: FAO

Global food prices rose in March to their highest level since September 2025, raising fresh concerns about the trajectory of grocery bills in the months ahead. According to the United Nations Food and Agriculture Organization (FAO), international food commodity prices have now increased for the second consecutive month, signalling renewed inflationary pressure across global food markets.

The FAO Food Price Index, a key benchmark tracking essential commodities, averaged 128.5 points in March, marking a 2.4% rise from February and a 1% increase year-on-year. While the uptick remains moderate, underlying factors — particularly rising energy prices linked to geopolitical tensions in West Asia—are beginning to influence production and supply dynamics.

FAO Chief Economist Maximo Torero noted that the price increases so far have been relatively contained. “Price rises since the conflict began have been modest, driven mainly by higher oil prices and cushioned by ample global cereal supplies,” he said. However, he cautioned that a prolonged conflict could have deeper and more lasting effects on food systems.

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Energy and fertiliser costs

Energy costs remain a central driver of food inflation. Higher crude oil prices increase transportation and production expenses, while also boosting demand for biofuels, which in turn pushes up prices of commodities such as vegetable oils. Fertiliser affordability has also emerged as a concern, potentially influencing farmers’ planting decisions in upcoming seasons.

Among key commodities, wheat prices rose sharply by 4.3%, driven by deteriorating crop prospects in the United States and expectations of reduced sowing in Australia due to elevated fertiliser costs. Maize prices edged up slightly, supported by stronger ethanol demand, although abundant global supply helped limit gains. In contrast, rice prices declined by 3%, reflecting ongoing harvests and weaker import demand.

Vegetable oil prices

Vegetable oil prices recorded one of the steepest increases, rising 5.1% month-on-month and 13.2% year-on-year, largely due to higher crude oil prices and growing biofuel demand. Meanwhile, meat prices increased by 1%, supported by strong demand for pig meat in Europe and constrained cattle supply in Brazil, though poultry and sheep meat prices declined due to logistical challenges.

Other categories also saw upward movement. Dairy prices rose by 1.2%, while sugar prices surged 7.2%, partly because Brazil may divert more sugarcane towards ethanol production instead of exports.

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Looking ahead, the FAO has flagged potential risks to food supply. Global wheat production is projected at 820 million tonnes, about 1.7% lower than last year, indicating early signs of tightening supply conditions.

Torero warned that if the ongoing conflict extends beyond 40 days, the real impact could emerge later. Farmers may reduce fertiliser usage, scale back planting, or switch to less input-intensive crops—decisions that could lower yields and tighten supply in the coming months.

The outlook for food prices in 2026 will largely depend on three factors: the direction of energy prices, farmer input decisions, and the duration of geopolitical disruptions. While current price increases remain manageable, sustained pressure in these areas could translate into higher food costs globally.

(With Reuters inputs)