FAO warns of cereal pressure as energy costs push global food prices higher
Global food prices rise again as energy-driven costs begin to impact cereal markets, raising concerns over inputs, yields, and farmer decisions worldwide.
Global food commodity prices increased in March 2026 for the second consecutive month, according to the Food and Agriculture Organization (FAO), with the Food Price Index averaging 128.5 points, up 2.4% from February and 1.0% year-over-year. The rise was largely driven by higher energy prices linked to escalating conflict in the Near East, a development that is already influencing agricultural input costs and market expectations across major producing regions.
Despite an overall comfortable supply situation, pressure from rising fuel and fertilizer costs is beginning to reshape global agricultural dynamics, introducing uncertainty into planting decisions and production outlooks.
The FAO Cereal Price Index increased 1.5% in March, led by a 4.3% rise in global wheat prices, reflecting deteriorating crop conditions in the United States due to drought and expectations of reduced plantings in Australia tied to elevated fertilizer costs. Maize prices edged higher, supported by stronger ethanol demand linked to energy markets, while rice prices declined 3.0% amid weaker import demand and currency depreciation against the U.S. dollar.
According to FAO Chief Economist Máximo Torero, the impact of the conflict has so far remained moderate and largely driven by oil price movements, with global cereal availability helping to cushion the effect. However, he warned that prolonged high input costs combined with tight farm margins could force producers to reduce fertilizer use, cut planted area, or shift to less input-intensive crops, decisions that would directly affect yields and future supply.
Other commodity groups also recorded gains. Vegetable oil prices rose 5.1% in March and were 13.2% higher than a year earlier, supported by stronger biofuel demand and spillover effects from crude oil markets. Meat prices increased 1.0%, driven by higher pig meat prices in the European Union and firm bovine prices in Brazil amid tighter cattle supplies. Dairy prices rose 1.2%, reflecting seasonal declines in milk production in Oceania, while sugar prices posted the sharpest increase, climbing 7.2% as Brazil is expected to divert more sugarcane toward ethanol production.
On the production side, global wheat output in 2026 is forecast at 820 million tonnes, down 1.7% from the previous year but still above the five-year average. Lower production is anticipated in the United States, the European Union, and Russia due to adverse weather and price signals, while India is projected to reach record levels. Improved rainfall is expected to support yields in parts of North Africa and the Middle East.
FAO estimates global cereal production in 2025 at 3,036 million tonnes, up 5.8% year-over-year, while rice production is projected to reach a record 563.3 million tonnes. Global cereal stocks are expected to increase by 9.2% to 951.5 million tonnes, with a stocks-to-use ratio of 32.2%, indicating adequate supply conditions.
At the same time, geopolitical developments are adding new layers of risk to agricultural markets. The closure of the Strait of Hormuz has disrupted energy and transportation flows, increasing costs across supply chains and raising concerns about the availability of key inputs such as fertilizers. These dynamics are expected to have both direct and indirect effects on global food production and trade.
