Global food commodity prices edged higher in July, mainly due to increases in the prices of cereals, sugar and vegetable oils, according to the latest report from the Food and Agriculture Organization of the United Nations (FAO). The overall rise was partly cushioned by declines in meat and dairy prices.

The FAO Food Price Index, which tracks monthly changes in international prices of major food commodities, averaged 131.1 points in July. This was 0.6% higher than in June and 1.0% above the level recorded a year earlier.

Despite the monthly increase, food prices remain significantly below their historic peak. The July index was still 18.2% lower than the record high reached in March 2022, when global food markets were heavily affected by supply disruptions, energy costs and geopolitical tensions.

What caused cereal prices to increase?

Cereal prices were one of the main factors behind the July rise. The FAO cereal price index increased 3.4% compared with June, reflecting concerns about weather conditions and supply risks in major producing regions.

Wheat prices rose 5.8% during the month, as markets reacted to concerns over possible disruptions to Black Sea exports and heatwaves affecting important wheat-growing areas. Weather-related risks in key production zones raised uncertainty about future supplies.

Maize prices also increased, rising 3.6% due to hot and dry conditions in parts of the U.S. Corn Belt, one of the world’s major corn-producing regions. Stronger energy markets also contributed to higher maize prices. Meanwhile, international rice prices remained largely stable during the month.

Why did vegetable oil prices rise?

Vegetable oil prices continued to strengthen in July, with the FAO vegetable oil price index increasing 2.0% to reach its highest level since June 2022.

The increase was mainly linked to stronger palm oil prices, supported by robust demand from Indonesia’s biodiesel sector and higher crude oil prices. Soybean oil prices also gained strength, adding to the overall rise in the vegetable oil category.

What pushed sugar prices higher?

Sugar prices recorded one of the sharpest increases among major food commodities, rising 5.6% from June.

The FAO attributed the increase to concerns over hot and dry weather in Europe and unfavorable weather risks in major sugar-producing countries in Asia. Markets were also watching developments in Brazil, where a higher ethanol blending requirement could encourage producers to use more sugarcane for ethanol production rather than sugar, potentially reducing sugar supplies.

Which food prices declined in July?

While several commodity groups became more expensive, prices for some products moved in the opposite direction. The FAO meat price index declined 2.8%, reflecting weaker international prices across some meat categories.

The dairy price index also decreased, falling 0.7% during the month. These declines helped moderate the overall increase in the FAO Food Price Index and prevented a sharper rise in global food commodity prices.

What is the outlook for global food prices?

The FAO said that global food prices remain well below the levels seen during the 2022 peak. However, risks remain, particularly from geopolitical tensions, extreme weather events and potential disruptions to agricultural production and trade.

According to the organization, these factors continue to place upward pressure on some food commodities and could contribute to further volatility in global markets.