Food prices spike as Russia halts grain deal

The UN Food and Agriculture Organization (FAO) reported that global prices for food commodities, including rice and vegetable oil, have risen for the first time in months. The increase was attributed to Russia’s withdrawal from a wartime agreement that allowed Ukraine to export grain to the world and India’s restrictions on some rice exports.

In July, the FAO Food Price Index, which monitors monthly changes in international food prices, rose by 1.3 percent compared to June. This uptick followed a decrease in commodity prices since record highs reached last year, caused in part by disruptions in supplies from Russia and Ukraine, major exporters of wheat, barley, and sunflower oil to regions like Africa, the Middle East, and Asia.

Concerns emerged when Russia exited a UN and Turkey-brokered deal that offered protection to ships carrying Ukraine’s agricultural products through the Black Sea. Attacks on Ukrainian ports and grain infrastructure further affected wheat and corn prices globally.

India’s trade ban on certain non-Basmati white rice varieties also contributed to rising prices. This decision came as an early El Niño brought drier and warmer weather, potentially harming rice production. Consequently, rice prices increased by 2.8 percent in July from the previous month and 19.7 percent this year, reaching their highest level since September 2011.

Additionally, vegetable oil prices surged by 12.1 percent in July, ending a seven-month decline. The FAO attributed the increase to a 15 percent surge in sunflower oil prices following uncertainties about supplies after the grain deal’s end.

While global food supplies remain adequate, supply challenges caused by conflicts, export restrictions, or weather-induced production shortfalls can lead to imbalances in supply and demand across regions. This situation may result in higher prices and potential food insecurity, particularly in sub-Saharan Africa, a significant rice importer.

Despite falling prices on world markets, local food prices are still rising in many developing countries due to weakened currencies against the dollar, which is used for grain and vegetable oil purchases. As a result, lower commodity prices have not yet translated into relief for households, making the recovery longer than expected.