Global food prices at a peak: climate crisis expected to exacerbate the phenomenon

Global food prices climbed in July to their highest level in more than three years, against the backdrop of a combination of extreme weather and an escalation in the wars in the Gulf region and the Black Sea, the UN Food and Agriculture Organization (FAO) announced today, Friday.

The organization's food price index, which tracks monthly changes in the prices of food products traded on international markets, stood at 131.1 points in July, compared to 130.3 points in June. This is the highest level since January 2023. Despite the increase, the index is still 18.2% lower than the peak recorded in March 2022, shortly after the full-scale Russian invasion of Ukraine.

The increase was led by the cereal price index, which climbed by 3.4% compared to June. Wheat prices jumped by 5.8%, partly due to concerns about disruptions in exports from the Black Sea region and due to heat damage to crops in some of the world's main production regions. The ongoing war between Russia and Ukraine continues to weigh on trade routes in the region, which is considered one of the most central in the world for wheat and grain exports.

Vegetable oil prices also recorded a significant increase. The FAO oil index climbed by 2% and reached its highest level since June 2022. According to the organization, the rise in oil prices following the escalation in the war with Iran, alongside strong demand for biodiesel, supported the rise in palm oil and soybean oil prices. Conversely, rapeseed oil and sunflower oil prices fell.

A particularly sharp increase was recorded in sugar prices, which climbed by 5.6%, following concerns about weather damage in Europe and Asia as well as expectations for an increase in demand for ethanol in Brazil.

Not all food groups became more expensive. Meat prices fell by 2.8% after reaching a peak in June, following declines in chicken, pork, and beef prices. In contrast, lamb prices reached a new peak due to limited supply for export from Oceania. Dairy product prices fell by 0.7%.

The data comes after the FAO's chief economist warned this week that the world is facing a new wave of food inflation. According to him, the wars in Iran and Ukraine, rising energy prices, difficulties in fertilizer supply, and the El Niño phenomenon could create a combination of higher production costs and a decrease in crop yields, with some of the impact on consumer prices expected to manifest later this year and during 2027.