Global food prices rose to their highest level in over three years in July, driven by renewed concerns about key grain export corridors and unfavorable weather conditions in major agricultural regions. The United Nations' Food and Agriculture Organization (FAO) reported a 0.6% increase in its food-commodity price index for July compared to the previous month, with grains, sugar, and vegetable oils leading the surge.
This follows earlier increases, including a rise in March due to higher energy prices and freight costs linked to conflicts in the Middle East, specifically the Iran war, which caused a 3-point jump in the FAO index to 128.5 points. Despite a slight dip of 0.2% in May, prices remained near their three-year high.
The current price surge is attributed to a combination of factors described as a "perfect storm." These include intense heatwaves affecting wheat yields in several key producing countries, and concerns over the impact of persistent hot and dry weather on sugar crop yields in the European Union. Geopolitical conflicts, such as the four-year war between Russia and Ukraine, which account for 30% of global wheat exports, and the Iran war leading to the closure of the Strait of Hormuz and a fertilizer shortage, are also significant contributors. Oxford Economics projects global food prices to rise by 12% in 2026 and by 5% in 2027 due to these factors.
Adding to the crisis is an unprecedented El Niño weather pattern, projected by the UK's Met Office to be the largest since the 19th century, with sea temperatures expected to reach 3ºC above their long-term average. This El Niño is anticipated to cause widespread destructive weather events globally, including droughts and wildfires in the Amazon and Australia, torrential rainfall and floods in California, and a reduced South Asian monsoon. Additionally, North America and Europe have already experienced severe heatwaves that have decimated crops and harmed grazing prospects, all before the full impact of El Niño has materialized.
