World food commodity prices rose for a second consecutive month in March, supported by higher energy costs linked to escalating conflict in the Near East, the Food and Agriculture Organization (FAO) said on April 3.

The FAO Food Price Index, a benchmark tracking monthly changes in international prices of a basket of globally traded commodities, averaged 128.5 points in March, up 2.4% from February and 1.0% higher than a year earlier. The agency said the increase was driven largely by rising oil prices, which have begun feeding through into agricultural markets.

“Price rises since the conflict began have been modest, driven mainly by higher oil prices and cushioned by ample global cereal supplies,” FAO chief economist Máximo Torero said.

“But if the conflict stretches beyond 40 days with high input costs with current low margins, farmers will have to choose: farm the same with fewer inputs, plant less, or switch to less intensive fertiliser crops,” he added. “Those choices will hit future yields and shape our food supply and commodity prices for the rest of this year and all of the next.”

The agency also highlighted the broader economic impact of disruptions in key energy routes, noting that the closure of the Strait of Hormuz has “sent shockwaves across the global economy, with notable spillovers to the agricultural sector.”

Rising energy, fertiliser and transport costs are expected to continue influencing food prices in the months ahead, FAO said, even as global supply levels remain relatively robust.

Cereals edge higher, rice falls

The FAO Cereal Price Index rose 1.5% month-on-month, led by a 4.3% jump in wheat prices. The increase reflected “drought-related deterioration of crop prospects in the United States of America and expectations of reduced plantings in Australia due to higher fertiliser costs,” the report said.

Maize prices rose only marginally as “ample global availability offset concerns over fertiliser affordability and indirect support from greater ethanol demand prospects linked to the rising energy prices.”

In contrast, rice prices fell sharply, with the FAO All-Rice Price Index declining 3.0% due to “harvest timing, weaker import demand, and currency depreciations against the United States dollar.”

Vegetable oil prices recorded one of the steepest increases, rising 5.1% in March and standing 13.2% above year-earlier levels. FAO said all major oils – palm, soy, sunflower and rapeseed – saw gains, reflecting “spillover effects from the sharp increases in crude oil prices” and expectations of stronger biofuel demand.

Sugar prices climbed even more sharply, up 7.2% on the month. The agency said “rising expectations that Brazil, the main sugar exporter, would use more sugarcane to produce ethanol to counter higher international crude oil prices” outweighed otherwise favourable supply prospects.

Mixed trends in meat and dairy

The FAO Meat Price Index rose 1.0%, supported by higher pig meat prices in the European Union and firm bovine prices in Brazil, where “exportable supplies were curtailed by tightening cattle availability.”

However, ovine and poultry prices declined, partly due to “logistical constraints limiting access to markets in the Near East.”

Dairy prices increased 1.2%, driven mainly by higher milk powder prices amid “a seasonal decline in supplies in Oceania.” Cheese prices continued to fall in the European Union due to “higher production and weak export demand,” while rising in Oceania.

Alongside its price report, FAO released updated forecasts indicating that global wheat production in 2026 could fall 1.7% year-on-year to 820 million tonnes, though still remaining above the five-year average.

Lower output is expected in the European Union, Russia and the United States due to weaker prices and adverse weather, while India is forecast to achieve a record harvest. Improved rainfall is also expected to boost yields in Iran, Turkey and North Africa.

The FAO warned that the escalating conflict is adding uncertainty. Higher energy and fertiliser costs, supply chain disruptions and potential shifts by farmers toward less input-intensive crops “has introduced additional uncertainty into the outlook for wheat and maize,” it said.

Despite these concerns, global cereal supplies remain relatively comfortable. FAO projects world cereal production in 2025 at 3.036 billion tonnes, up 5.8% from the previous year, with rice output expected to reach a record 563.3 million tonnes.

Global cereal stocks are forecast to rise 9.2% to 951.5 million tonnes, pushing the stocks-to-use ratio to 32.2%, a level FAO said “underlines an overall comfortable global supply situation.”