Goodbye to the time of cheap food globally.. the "FAO" index stabilizes near the highest price levels
The Food and Agriculture Organization of the United Nations (FAO) Global Food Price Index held steady near its highest level in more than three years in May, marking the end of the era of cheap goods.
Although the index recorded a very slight decline of 0.2 points compared to last April due to the fall in the prices of palm and soybean oils, the overall average stabilized at 130.8 points, remaining 2.9% higher than its levels recorded a year ago, proving that it was directly affected by the disruptions in agricultural input flows caused by regional military tensions in the Middle East.
The ongoing war in the Middle East has led to severe bottlenecks in the movement of fuel tankers and shipments of chemical fertilizers through the strategic Strait of Hormuz, causing successive jumps in the prices of raw materials needed for agriculture, and this increase was directly reflected in the costs of producing basic crops such as corn, rice and wheat, amid warnings by major farmers' unions globally of an inevitable decline in the volume of annual production. Grains, oils, meat, dairy products, and sugar are weighted by international export shares.
Jumps in the prices of cereals, sugar and oils
The FAO Cereal Price Index rose 2.6% in May to 114.3 points, driven by a fourth consecutive month of rise in global wheat prices due to negative weather forecasts and a decline in the quality of the winter wheat crop in the United States to its lowest level in decades.
Maize prices also continued to be supported by growing import demand in emerging markets and a decline in Brazil's supply, in parallel with a 2.7% jump in the rice index due to Asian climate concerns.
The sugar index jumped 7.5% to 95.1 points, its highest level since late 2025, supported by concerns of tighter supplies and the steering of Brazilian sugarcane factories towards the production of biofuels (ethanol).
The vegetable oil index, on the other hand, recorded a decline of 4.6% to settle at 185 points, marking its first monthly decline since the beginning of 2026, benefiting from weak global demand for palm oil and uncertainty in crude oil markets, which covered the continued rise in sunflower oil caused by tight Ukrainian supply.
The dairy index also fell 0.5% to 119.2 points due to increased supply of milk fat and competition between butter exporters in Europe and Oceania.
Production Contraction and the Future of Food Security
These rigid numerical figures are complemented by FAO's pessimistic 2026/2027 forecast, with FAO predicting a 2% year-on-year decline in global cereal production to 2.982 billion tonnes, including post-mill rice.
This decline is a clear contraction compared to the record 2025 harvest of 3.043 billion tonnes, affected by the relative decline in wheat acreage.
The economic balances expect global cereal use to rise by 0.6% and reserve stocks to decline by 0.3% to reach 949 million tonnes.
Capital market experts expect that the combination of high energy costs with the outbreak of geopolitical wars and the loss of the Syrian pound and the currencies of emerging countries against the dollar, will increase inflationary pressures on importing governments, which makes it imperative for the international community to support local production mechanisms and facilitate the transit of agricultural inputs to spare vulnerable communities the risk of supply disruptions and the specter of famine during the second half of the year of the current year.