Ask AI · How Middle East conflicts affect farmers’ planting decisions, thereby changing future global food supply?

On April 3, the United Nations Food and Agriculture Organization (FAO) said that due to the Middle East conflict escalating and driving up energy costs, global prices of food commodities rose for the second consecutive month in March. The FAO Food Price Index, which tracks the monthly changes in international prices of a basket of globally traded commodities, averaged 128.5 points in March, up 2.4% from February and up 1.0% year over year. The agency noted that the increase in oil prices is the main driving factor, and its effects have already begun to feed through into agricultural product markets.

FAO Chief Economist Máximo Torero said, “Since the outbreak of the conflict, the price increases have been fairly moderate, driven mainly by higher oil prices, while abundant global grain supply has cushioned the pressure.”

He added: “But if the conflict continues for more than 40 days, given high input costs and relatively low current profit margins, farmers will face a choice: reduce inputs to maintain existing planting, scale back planted area, or shift to crops with lower dependence on fertilizers. These choices will affect future production and determine the remainder of this year and the global food supply and commodity prices for the full year.”

The agency also emphasized that disruptions to key energy shipping routes bring broad economic impacts, with the closure of the Strait of Hormuz “hitting the global economy and significantly spilling over into the agriculture sector.”

The FAO said that over the coming months, rising energy, fertilizer, and transportation costs are expected to continue to affect food prices, even if global supply levels remain relatively ample.

Grains slightly up, rice down

The FAO grain price index rose 1.5% month over month, including a sharp 4.3% jump in wheat prices. The reasons for the increase include “worsening crop prospects in the U.S. due to drought, and expected reductions in planting area in Australia due to higher fertilizer costs.”

Corn prices rose only marginally; “ample global supply offset the pressure from fertilizer costs, while higher energy prices are supporting ethanol demand expectations, indirectly propping up corn prices.”

In contrast, rice prices fell sharply. The FAO’s all-rice price index declined 3.0%, driven by “the harvest season arriving, weak import demand, and some currencies depreciating against the U.S. dollar.”

Vegetable oils, sugar prices jump significantly

Vegetable oil prices led the gains, rising 5.1% in March and up 13.2% year over year. Key oil products such as palm oil, soybean oil, sunflower oil, and rapeseed oil all increased, reflecting “the transmission effect of a surge in crude oil prices, and strengthening expectations for biofuel demand.”

Sugar prices rose even more, up 7.2% month over month. The main reason was that “market expectations that Brazil, the world’s largest sugar exporter, will expand the use of sugarcane for ethanol production to offset the rise in international crude oil prices” outweighed the positive outlook from improved supply.

Divergent trends for meat and dairy

The FAO meat price index rose 1.0%, supported by higher EU pork prices and firm Brazilian beef prices, as Brazil’s “tightened cattle supply led to reduced quantities available for export.”

However, lamb and poultry prices fell, partly because “logistics restrictions affected the supply to the Middle East market.”

Dairy prices rose 1.2%, mainly due to a seasonal reduction in supply in Oceania, which pushed up powdered milk prices. EU cheese prices continued to fall as production increased and export demand weakened, while cheese prices in Oceania rose.

Global food production forecast

The FAO also released its latest forecast: in 2026, global wheat production may fall 1.7% year over year to 820 million tons, though it would still be above the five-year average.

Due to weak prices and adverse weather, production in the EU, Russia, and the U.S. is expected to decline; India is expected to have a bumper harvest and set a record, while improved rainfall in Iran, Turkey, and North Africa will also boost yields.

The FAO warned that escalating conflicts are increasing uncertainty in the market. Factors such as higher energy and fertilizer costs, disruptions in supply chains, and farmers shifting to lower-input crops will “bring additional variables to the outlook for wheat and corn.”

Despite concerns, global grain supply remains relatively comfortable. Global grain production in 2025 is expected to reach 3.04B tons, up 5.8% year over year; rice production is expected to hit a historical high of 563.3 million tons.

Global grain stocks are expected to rise by 9.2% to 951.5 million tons, and the stocks-to-consumption ratio is expected to increase to 32.2%. The FAO said that this level “shows that overall global supply is adequate.”

Author’s statement: Content quoted from media outside the site