Food prices rose again in March, with a sharp increase in the price of vegetable oils and sugar due to the expected diversion of agricultural raw materials to the production of fuel in conditions of stoppages in the transit of oil and derivatives through the Strait of Hormuz, the United Nations Food and Agriculture Agency (FAO) announced today.
FAO’s price index of a basket of basic food products averaged 128.5 points in March, up 2.4 percent from February, according to revised data.
In February, prices rose for the first time since August last year, by 1.1 percent.
On an annual basis, food prices were up by one percent in March.
The rise in prices in March primarily reflects the impact of the war in the Middle East and the consequent rise in the prices of energy and artificial fertilizers. Traders expect the redirection of certain food products to the production of ethanol and biodiesel, but also the reduction of certain crops due to higher production costs.
Fuel instead of food
In such circumstances, the price of sugar rose the most in March, by as much as 7.2 percent compared to February, with traders’ expectations that, in the conditions of rising oil prices on world markets, the world’s largest exporter, Brazil, will direct most of the sugar cane from the upcoming harvest into ethanol production.
The price of vegetable oils also rose significantly, by 5.1 percent. Sunflower oil rose in price due to the still limited supply from the Black Sea region, while palm and rapeseed oil rose in price primarily due to the rise in oil prices and the expected higher demand for rapeseed in the production of biodiesel.
Cereals also rose sharply, up 1.5 percent from February, with wheat prices rising due to a forecast drought in the US and expectations of weaker sowings in Australia under the influence of higher fertilizer prices.
The increase in prices was moderated to some extent by good weather conditions in Europe and competition among exporters in conditions of still stable supply. Corn prices rose only slightly as abundant supply outweighed concerns about higher fertilizer prices and higher demand for ethanol production.
Milk and milk products rose in price for the first time since July last year, by 1.2 percent, primarily due to the rise in milk powder and butter prices, which outpaced the decline in cheese prices. The price of meat also went up, by 1.0 percent. Strong seasonal demand pushed up pork prices in the European Union, while beef prices rose due to reduced exports from Brazil.
Less wheat
In a separate report on supply and demand in cereal markets, the FAO increased its estimate of cereal production in 2025 to 3.036 billion tons, which would mean a growth of 5.8 percent compared to 2024.
In 2026, wheat production could decrease by 1.7 percent, to 820 million tons, FAO estimates, but should still remain above the average of the last five years.
Lower prices and unfavorable weather conditions could limit wheat production in the European Union, Russia and the US. In India, production should reach record levels, while in Iran, Turkey and across North Africa it should be better than last year thanks to higher rainfall.
FAO warns, however, that the conflict in the Middle East and the pressure of high energy and fertilizer prices on production costs and supply chains are adding additional uncertainty to forecasts, especially for the upcoming sowing in the southern hemisphere and spring sowing in the north.
Smaller profit margins, reflecting higher input prices and stagnant or lower selling prices, could also affect the decisions of farmers to sow corn in Northern Hemisphere countries as they consider switching to crops that require less artificial fertilizers, the FAO noted, noting that the extent of that impact remains uncertain.
World grain consumption should in the 2025/2026 season. rose by 2.4 percent to a record 2.945 billion tons, according to new FAO estimates, reflecting an expected increase in consumption of coarse grains.
Stocks by the end of the season in July this year should be 9.2 percent higher than at the beginning and reach a record 951.5 million tons, according to the report. The new estimate reflects higher stocks in the European Union due to slower exports and increased stocks in Iran due to stronger imports.
Cereal trade should grow by 3.6 percent in the current season, to 505.3 million tons, according to the latest estimates, writes Factor.
