Why Iran energy shock hasn't spread to food, yet, Pg18

Key Highlights:

• Despite the recent surge in Brent crude prices to $119.5 per barrel in March 2026 due to the US-Israel versus Iran war, global food prices have not seen a corresponding spike.
• The FAO Food Price Index (FPI) in March 2026 was only 1% higher than the previous year, contrasting with the double-digit inflation rates seen in 2006-2008 and 2021-2022.
• Export prices for key commodities like wheat, rice, and corn have either decreased or remained stable compared to the previous year.
• Edible oil prices are the exception, with landed prices of crude palm oil, soyabean oil, and sunflower oil imported into India showing notable increases.

Detailed Insights:

• The current stability in food prices is attributed to ample global supplies of wheat, corn, oilseeds, and sugar, with record production levels estimated for 2025-26.
• Unlike the 2007-08 crisis, there is no significant diversion of crops towards biofuels or financial speculation driving up prices, except for palm oil due to Indonesia's biofuel mandates.
• A potential cost-push effect could arise from the energy crisis impacting supplies of petrochemical feedstocks used in fertilizers and crop protection chemicals, potentially affecting future crop yields.
• Increased diversion of crops for biofuel production, driven by sustained high crude prices, could also lead to food inflation, particularly with Indonesia's aggressive palm oil blending mandates.
• The duration of the current energy supply crisis will ultimately determine whether food prices surge again, despite current abundant reserves of cereals, oilseeds, and sugar.

Key Concepts Involved:

• FAO Food Price Index (FPI): A measure of the monthly change in international prices of a basket of food commodities.
• Biofuel: Fuel derived from renewable biological sources, such as crops like corn, sugarcane, or vegetable oils.
• Cost-push inflation: Inflation caused by an increase in the cost of inputs like fertilizers and fuel, leading to higher prices for finished goods.