According to the Food and Agriculture Organization (FAO), the FAO Food Price Index averaged 128.5 points in March, up 2.4 percent from February and 1.0 percent above its level a year ago.

The increase was largely attributed to higher energy prices linked to the escalation of conflict in the Near East, which has begun influencing agricultural input costs and market sentiment. Pressure on fertilizer supplies and elevated energy costs are adding uncertainty to global markets, even as cereal supply fundamentals remain broadly stable.

The FAO Cereal Price Index increased by 1.5 percent from the previous month. This rise was driven primarily by higher world wheat prices, which climbed 4.3 percent due to drought-related deterioration of crop prospects in the United States of America and expectations of reduced plantings in Australia linked to higher fertilizer costs. Global maize quotations edged up slightly, supported by rising energy prices that boosted ethanol demand prospects, although gains were limited by ample global availability. In contrast, the FAO All-Rice Price Index declined by 3.0 percent in March, reflecting harvest timing, weaker import demand, and currency depreciations against the United States dollar.

FAO Chief Economist Máximo Torero noted that price increases since the onset of the conflict have remained modest and are mainly driven by higher oil prices, with the impact cushioned by sufficient global cereal supplies. However, he cautioned that if the conflict extends beyond 40 days and input costs remain elevated while margins stay low, farmers may be forced to make critical decisions-either reducing input use, planting less area, or shifting to less fertilizer-intensive crops. These adjustments could directly affect future yields and influence food supply and commodity prices for the remainder of this year and into the next.

Beyond cereals, other commodity groups also recorded increases. The FAO Vegetable Oil Price Index rose by 5.1 percent from February and stood 13.2 percent higher than a year earlier, with palm, soy, sunflower, and rapeseed oil prices all increasing due to spillover effects from rising crude oil prices and expectations of stronger biofuel demand. The FAO Meat Price Index increased by 1.0 percent, driven by higher pig meat prices in the European Union and rising bovine meat prices in Brazil due to tightening cattle availability, while ovine and poultry prices declined amid logistical constraints in the Near East.

The FAO Dairy Price Index rose by 1.2 percent, supported by higher milk powder prices due to seasonal supply declines in Oceania. Cheese prices fell in the European Union due to higher production and weak export demand, while increasing in Oceania under opposite conditions. Meanwhile, the FAO Sugar Price Index registered the sharpest increase, rising 7.2 percent in March, as expectations that Brazil would divert more sugarcane to ethanol production outweighed a favourable global supply outlook supported by good harvests in India and Thailand.

FAO also released updated assessments of global cereal production. With most of the world's wheat crop already planted, global wheat output in 2026 is forecast at 820 million tonnes, representing a 1.7 percent decline from the previous year, although still above the five-year average. Lower prices and adverse weather are expected to reduce production in the European Union, the Russian Federation, and the United States of America, while India is projected to achieve record wheat production. Improved rainfall is expected to support yields in the Islamic Republic of Iran, Türkiye, and across North Africa.

The escalation of conflict in the Near East has introduced additional uncertainty into cereal outlooks due to higher energy and fertilizer costs and disruptions to production and supply chains. There is also a risk that farmers may shift toward less fertilizer-intensive crops, which could influence both wheat and maize production levels going forward.

Maize harvesting is already underway in the Southern Hemisphere, with output expected to be above average in Argentina, Brazil, and South Africa. FAO has also revised its estimate for global cereal production in 2025 to 3,036 million tonnes, marking a 5.8 percent increase from the previous year. World rice production is projected to expand by 2.0 percent, reaching a record 563.3 million tonnes, driven by key producers including Bangladesh, Brazil, China, India, and Indonesia.

Global cereal utilization in 2025/26 is forecast to rise by 2.4 percent to 2,945 million tonnes, while global cereal stocks are expected to expand by 9.2 percent to 951.5 million tonnes. The global stocks-to-use ratio is projected at 32.2 percent, indicating an overall comfortable supply situation. FAO forecasts world cereal trade in 2025/26 at 505.3 million tonnes.

The Agricultural Market Information System (AMIS), hosted by FAO, highlighted that the closure of the Strait of Hormuz has sent shockwaves across the global economy, with notable spillovers into agriculture. Rising energy, fertilizer, and transportation costs are expected to have both direct and indirect impacts on food production and trade. FAO has also detailed risks related to the Strait of Hormuz in recent briefings and published an analysis on the global agrifood implications of the 2026 conflict in the Middle East.

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