Global food commodity prices experienced a sharp rise in March, marking the second consecutive monthly increase, according to a report published yesterday by the UN Food and Agriculture Organisation (FAO). The escalation is primarily attributed to the ongoing conflict in the Middle East, which has driven up global energy and freight costs.

The FAO's Food Price Index, which monitors the costs of major food items including grains, sugar, meat, dairy, and vegetable oils, climbed by 2.4% last month. This follows an initial rise in February, which was the first recorded increase in five months. Notable increases were observed in vegetable oil and sugar prices, which advanced by 5% and 7% respectively. Global wheat prices also increased by 4.3% in March.

Concerns are mounting over the potential for sustained food inflation as elevated fuel, fertilizer, and electricity costs translate into higher expenses for transporting, processing, and preparing food. A critical factor is the effective closure of the Strait of Hormuz since the conflict began, a vital shipping lane through which approximately one-third of global fertilizer production travels. UN projections suggest that if the crisis persists, global food prices could average 15% to 20% higher in the first half of 2026. The FAO report noted that price indices across all commodity groups reflected both market fundamentals and responses to heightened energy prices linked to the conflict.

The increase in wheat prices was partly influenced by deteriorating crop conditions and drought concerns in the United States, alongside reduced planting in Australia due to higher fertilizer costs. However, these pressures were partially mitigated by improved crop conditions in Europe and robust export competition.

In the United Kingdom, industry bodies are forecasting significant price hikes. The Food and Drink Federation, representing 12,000 manufacturers, has revised its year-end food price forecast from 3.2% to at least 9%. This revised outlook assumes the Strait of Hormuz reopens to cargo traffic within two to three weeks and that major energy facilities normalize within a year, both outcomes viewed as uncertain. The British Tomato Growers’ Association has also warned consumers to expect higher prices for tomatoes, peppers, and cucumbers within the next six weeks.

In response to rising living costs, UK Chancellor Rachel Reeves held discussions this week with executives from leading retailers, including Tesco, Sainsbury's, Morrisons, Marks & Spencer, Aldi, and Lidl, to explore measures for easing consumer burden and bolstering supply chain resilience. Separately, a Bank of England survey of over 2,000 chief financial officers indicated that companies across the UK anticipate raising their prices by an average of 3.7% over the coming year, with overall inflation expectations rising from 3% to 3.5%.