[비즈한국] Rising international oil prices and geopolitical risks in the Middle East are pushing global food prices higher once again. The downward trend in international food commodity prices, which had continued since last September, has been broken, rising for two consecutive months to reach a six-month high.
According to the Ministry of Agriculture, Food and Rural Affairs on the 4th, the World Food Price Index released by the Food and Agriculture Organization of the United Nations (FAO) reached 128.5 points in March, up 2.4% from the previous month (125.5p). This is the highest level since September of last year (128.9p). After peaking at 130.0p in August last year, the World Food Price Index had shown a downward trend for five consecutive months until January of this year (124.1p), but it rebounded in February (125.5p) and has continued to rise in March.
Energy market instability spreads to agricultural products
This upward trend was led by sugar and vegetable oils. The sugar price index recorded 92.4 points, an increase of 7.2% from the previous month, marking the highest growth rate among the five product groups. Experts suggest that the rise in international oil prices fueled the price increase, as expectations grew that Brazil, the world's largest sugar exporter, would divert more sugarcane to the production of biofuel, ethanol, rather than sugar. Trade uncertainties caused by the prolonged conflict in the Middle East also played a role.
The vegetable oil price index rose for the third consecutive month, reaching 183.1 points, a 5.1% increase from the previous month. Forecasts of reduced production in Malaysia and increased demand for biofuels due to rising crude oil prices pushed up the prices of palm, sunflower, and rapeseed oils across the board. Palm oil prices reached their highest level since mid-2022.
The cereal price index rose by 1.5% from the previous month to 110.4 points. Wheat prices surged 4.3%, leading the rise due to expectations of reduced sowing in the U.S. caused by drought and higher fertilizer costs in Australia. Conversely, corn prices rose only 0.9% due to favorable global supply conditions, while rice prices fell 3.0% due to the start of the harvest season and slowing demand.
In addition, meat (up 1.0%) and dairy products (up 1.2%) also saw concurrent price increases. For meat, the rise was largely driven by increased demand for pork in Europe and reduced beef supply from Brazil. Dairy products saw their first rebound since July of last year due to reduced production in Oceania and expanded global demand. Pork prices rose due to seasonal demand in the EU, and beef prices also increased as Brazil's exportable volumes declined. Chicken prices fell slightly due to sufficient domestic supply in Brazil. The dairy price index rebounded for the first time since last July as prices for skim milk powder, whole milk powder, and butter rose, driven by seasonal production decreases in Oceania and increased global import demand.
"Prolonged conflict could impact next year's harvest"
Experts are wary of the impact that rising energy prices and logistics instability will have on food security. Maximo Torero, chief economist at the FAO, pointed out, "If the Middle East conflict continues for more than 40 days, farmers may reduce fertilizer use or scale back their planting areas." The analysis suggests that this could affect not only the second half of this year but also food supply and price formation for next year.
Domestic agricultural and livestock prices are maintaining a relatively stable trend. In March, domestic consumer prices for agricultural and livestock products fell by 1.2% year-on-year, remaining below the overall inflation rate (2.2%).
An official from the Ministry of Agriculture, Food and Rural Affairs stated, "We are closely monitoring risk factors such as rising international oil prices and uncertainty in maritime logistics," adding, "We plan to strengthen supply and demand management to ensure that fluctuations in international prices do not translate into a burden on domestic prices."