War in Ukraine driving global food prices to record highs

The United Nations’ Food and Agriculture Organization (FAO), Ukraine and Russia are some of the largest exporters of certain agricultural commodities, including wheat, maize, grapeseed, sunflower seeds and sunflower oil. Russia also is the world’s leading exporter of nitrogen fertilizers, second-leading supplier of potassium fertilizers and third-largest exporter of phosphorous fertilizers.

The FAO Food Price Index, which tracks monthly changes in the international prices of commonly traded food commodities, averaged 159.3 points in March, up a whopping 12.6% from February when it reached its highest level since 1990. The latest level of the index was 33.6% higher than in March 2021. The latest increase reflects new all-time highs for vegetable oils, cereals and meat, while those of sugar and dairy products also rose significantly.

“The ongoing conflict in Ukraine is heightening concerns about the impact on food security worldwide,” said Beth Bechdol, FAO deputy director-general. “We are witnessing food price increases across the board.”

The Vegetable Oil Price Index averaged 248.6 points in March, up 23.2% from February and hitting a new record high. The sharp rise of the index was driven by higher sunflower, palm, soy and rapeseed oil prices. International sunflower seed oil, of which Ukraine is the world’s leading exporter, quotations increased substantially in March, fueled by reduced export supplies amid the ongoing conflict in the Black Sea region. Palm, soy and rapeseed oil prices also rose markedly, buoyed by rising global import demand in the wake of sunflower oil supply disruptions. While world palm oil values received additional support from lingering supply tightness in major producing countries, soy oil prices were underpinned by concerns over reduced export availabilities in South America. Noticeably, volatile and higher crude oil values also lent support to international vegetable oil prices.

The Cereal Price Index averaged 170.1 points in March, up 17.1% from February, marking its highest level on record since 1990. The increase reflected a surge in world prices of wheat and coarse grains, largely driven by conflict-related export disruptions from Ukraine and, to a lesser extent, the Russian Federation. The Russian Federation and Ukraine, combined, accounted for around 30% and 20% of global wheat and maize exports, respectively, over the past three years. World wheat prices soared by 19.7% during the month, exacerbated by concerns over crop conditions in the United States. Maize prices posted a 19.1% month-on-month increase, hitting a record high along with those of barley and sorghum. Meanwhile, contrasting trends across the various origins and qualities kept the March value of FAO’s Rice Price Index little changed from February levels and still 10 percent below its year-earlier value.

The Dairy Price Index averaged 145.2 points in March, up 2.6 percent% from February, marking the seventh consecutive monthly increase and lifting the index 23.6% above its value a year ago. Quotations for butter and milk powders rose steeply amid a surge in import demand for near and long-term deliveries, especially from Asian markets and solid internal demand in Western Europe. Cheese markets were also facing a tight supply situation due to strong internal demand in Western Europe, but the index value eased marginally, reflecting the impacts of currency movements.

The Sugar Price Index averaged 117.9 points in March, up 6.7% from February, reversing most of the previous three months’ decline and reaching levels more than 20% above those registered in March 2021. Higher crude oil prices were a driving factor, along with currency appreciation of the Brazilian Real, while favorable production prospects in India, a major sugar exporter, prevented larger monthly price increases.

The Meat Price Index averaged 120 points in March, up 4.8% from February, also reaching an all-time high. In March, pig meat prices registered the steepest monthly increase on record since 1995, underpinned by supply shortfalls of slaughter pigs in Western Europe and a surge in internal demand due to the upcoming Easter holidays. International poultry prices also firmed in step with reduced supplies from leading exporting countries following avian flu outbreaks.