UN food price index rises for second month

Global food prices rose for a second straight month in March, the UN’s Food and Agriculture Organization said on Friday, with its benchmark index now about 1% higher than a year ago. The FAO attributed the move to the Middle East conflict’s knock-on effects on energy and fertiliser, rather than to any immediate shortage of grain, sugar or cooking oil on world markets.

According to Euronews, FAO economist David Laborde warned that the pressure point is not today’s shelves but the next harvest: higher fuel and fertiliser costs raise the cash required to plant, irrigate, refrigerate and ship. Laborde singled out the Strait of Hormuz as a critical conduit: roughly one-third of globally traded fertilisers and about a fifth of traded natural gas move through the route, with gas a key input for nitrogen fertiliser. Even without a physical blockade, the risk of disruption shows up first as price and credit—shipping companies face higher war-risk premiums, cargo owners see tighter terms, and importers pay more for working capital.

That mechanism helps explain why the price response has been relatively muted compared with the 2022 spike after Russia’s invasion of Ukraine. Laborde noted that recent harvests in the United States and parts of Asia have been strong and inventories are high, giving buyers a buffer. But buffers are a stock; they do not lower the marginal cost of producing the next tonne. If farmers respond to higher input costs by applying less fertiliser or planting less acreage, yields fall later, after the financial decision has already been made.

The inflation impulse is uneven. Business Insider points to US produce as a case study: items that travel long distances and require refrigeration—berries, citrus, limes—are sensitive to diesel prices and cold-chain costs. Those costs are passed through faster than staple grains because the supply chain is shorter and the product perishes quickly, leaving retailers with less room to delay price changes.

For governments, the political temptation is to treat food inflation as a retail problem—price controls, subsidies, or headline-grabbing “anti-gouging” measures. The FAO’s framing is less convenient: the critical variables sit upstream in energy markets, fertiliser trade and maritime risk pricing, where decisions are made by insurers, banks and shippers long before consumers see an empty shelf. In that world, “availability” can remain stable while affordability deteriorates.

The FAO’s index moved up again in March even as Laborde described current global supplies as “well supplied.” The bill is being written for the next planting season, not the last harvest.