Global food prices hit three-year high as conflict and heatwaves push up cereal costs
Newsflash: Global food commodity prics have hit a three-year high, as the Ukraine war, conflict in the Middle East and extremely hot weather push up crop prices.
The United Nations’ Food and Agriculture Organization’s Food Price Index, which tracks key food prices, has just risen to its highest since January 2023.
The FAO reports that prices for cereals, sugar and vegetable oils all rose in July, while meat and dairy product prices fell.
The report shows that global wheat prices surged by 5.8% in July, and were almost 10% higher than a year ago.
The FAO says this was due to “continued disruptions to Black Sea export flows and damage to export infrastructure, further compounded by the impact of recent heatwaves on crop yields in several key producing countries.”
There was a surge in attacks in the Black Sea last month, amid the renewed military escalation between Russia and Ukraine.
World maize prices rose by 3.6%, “supported by concerns over hot and dry weather in parts of the Corn Belt in the United States of America and spillover effects from firmer energy markets amid heightened geopolitical tensions.”
The FAO adds:
International sorghum prices edged higher in line with the increases in maize prices in the United States of America. By contrast, barley prices fell by 1.9 percent, as favourable crop prospects in Australia and the Black Sea region more than offset heat-related yield losses in the European Union.
On the other hand, the FAO All Rice Price Index held broadly steady in July 2026, as a mild increase in Indica quotations was offset by demand-driven price declines for all other major traded rice varieties.
This helped to push the FAO Food Price Index up to 131.1 points in July, a rise of up 0.7 points.
More details to follow…
Key events
Financial markets could rally if today’s US jobs report is weaker than expected, and cuts the chances of interest rate rises.
That could push up shares in London, as well as in New York. The UK’s FTSE 100 index is near a record high today, at 10,947 points.
Markets brace for US jobs report
It’s nearly time for the final major economic news of the week – the US jobs report for July.
Economists are expecting to see a pick-up in hiring last month. The non-farm payroll is expected to have increased by around 80,000 in July, ahead of the 57,000 incresed reported in June.
We get the report in just over half an hour – 1.30pm UK time, or 8.30am in New York.
Matthew Ryan, head of market strategy at global financial services firm Ebury. says today’s jobs report has “huge importance” given that markets are completely torn down the middle as to whether or not the Federal Reserve will raise rates in September.
Ryan explains:
Consensus points to no change in the unemployment rate and a job creation number around the 80k mark.
“While we think that this would be solid enough to confirm that the jobs market remains in a “low hire, low fire” state, we do not think that it would be enough to validate the hawkish dissenters at the July FOMC meeting.
“Instead, a print in that range would likely reinforce the case for patience, shifting the market’s focus onto developments in the Iran conflict and the upcoming CPI prints.”
Motoring groups are hopeful that the jump in UK fuel costs could be peaking.
RAC head of policy Simon Williams says:
“Drivers will be relieved to know that the fuel price rises of recent weeks appear to be slowing down and should hopefully top out over the weekend.
Since 6 July the average price of petrol has gone up 11p a litre adding £6 to the cost of a full tank (£89). Diesel has been even harder hit, going up 17p a litre since 9 July which has made a fill-up up nearly £10 more expensive at £100.
“The change in drivers’ forecourt fortunes has been brought about by crude oil falling to around $80 a barrel this week, having briefly gone above $100 in late July before then settling at $90 until the end of the month. Providing there are no more shocks to the oil price from the conflict, the picture at the pumps for petrol particularly looks optimistic.”
Boeing 737 Max operators told to check fuselages for cracks
Gwyn Topham
Elsewhere in the transport world, the US aviation regulator has ordered inspections of the fuselages of Boeing 737 Max planes for possible cracks in a component.
The Federal Aviation Administration airworthiness directive will affect an estimated 471 aircraft and follows reports of cracks in earlier Boeing models.
The inspections, which will start from September, follow a similar FAA regime for previous Boeing 737 Next Generation models dating back to 2021.
Cracks were found in a component called the bear strap – sheets supporting the fuselage around the exit doors – on the older planes. The FAA said on Thursday that no such cracks have yet been found in 737 Max craft but that the similar design and build process makes the model susceptible to developing them.
More here:
Volkswagen’s board chairman Hans Dieter Pötsch has declared the struggling carmaker “is at a historic crossroads”.
Pötsch said.
“For the sake of the company and its sustainable competitiveness, everyone must now step up and take responsibility,”
“The longer decisions are delayed, the bigger the problems will become,” he added.
Pötsch, who is also the chair of Porsche – VW’s largest shareholder – was speaking after Porsche reported a 14.5% drop in earnings in the first half of the year.
VW is looking to cut up to 100,000 jobs, as it tries to fend off rising competition from China.
Another threat to food production this year is that grass growth is unusually weak.
Grass growth in the UK is almost half its average level for 2019-24, new data from the the Energy and Climate Intelligence Unit (ECIU) today shows, following very weak rainfall this summer.
That risks leaving farmers with a shortage of feed, which could force them to spend more on imported feed.
Tom Cantillon, senior analyst for carbon and land at the ECIU, explains:
“Grass is the cheapest feed British livestock farmers have, and this summer it has fallen to half its normal rate. Two short forage years back-to-back is a different proposition to one. Farmers went into this summer carrying the costs of last year’s drought, and this will exacerbate the pressures they face.
“What we are looking at is not a bad week or a difficult month, but a structural squeeze on the foundation of grass-fed farming in this country.”
European heatwaves and El Niño fears push up sugar prices
Sugar prices were also driven up by the summer heatwaves in July, and fears of El Niño disruption.
The UN FAO reports that its sugar price index rose by 5.6% last month.
It says:
The increase was mainly driven by concerns about the potential impacts of persistent hot and dry weather on crop yields in the European Union and of El Niño-related weather conditions on production prospects in key producing countries in Asia.
Sugar prices were also pushed up by expectations of stronger demand for ethanol in Brazil, due to a temporary change to add more ethanol to gasoline.
Vegetable oil prices rose by 2% in July, to their highest level since June 2022.
This was driven by higher palm and soy oil prices, the UN’s FAO reports, saying:
International palm oil prices rose for the second consecutive month, following a brief decline in May, largely underpinned by firm demand from Indonesia’s biodiesel sector and higher crude oil prices, which outweighed downward pressure from seasonally higher production in Southeast Asia.
Similarly, world soy oil prices increased, underpinned by persistently robust feedstock demand in the United States of America and stronger global import demand amid greater price competitiveness.
S unflower and rapeseed oil prices dropped, but the FAO adds that renewed tensions in the Black Sea region prevented them falling further.
Global food prices hit three-year high as conflict and heatwaves push up cereal costs
Newsflash: Global food commodity prics have hit a three-year high, as the Ukraine war, conflict in the Middle East and extremely hot weather push up crop prices.
The United Nations’ Food and Agriculture Organization’s Food Price Index, which tracks key food prices, has just risen to its highest since January 2023.
The FAO reports that prices for cereals, sugar and vegetable oils all rose in July, while meat and dairy product prices fell.
The report shows that global wheat prices surged by 5.8% in July, and were almost 10% higher than a year ago.
The FAO says this was due to “continued disruptions to Black Sea export flows and damage to export infrastructure, further compounded by the impact of recent heatwaves on crop yields in several key producing countries.”
There was a surge in attacks in the Black Sea last month, amid the renewed military escalation between Russia and Ukraine.
World maize prices rose by 3.6%, “supported by concerns over hot and dry weather in parts of the Corn Belt in the United States of America and spillover effects from firmer energy markets amid heightened geopolitical tensions.”
The FAO adds:
International sorghum prices edged higher in line with the increases in maize prices in the United States of America. By contrast, barley prices fell by 1.9 percent, as favourable crop prospects in Australia and the Black Sea region more than offset heat-related yield losses in the European Union.
On the other hand, the FAO All Rice Price Index held broadly steady in July 2026, as a mild increase in Indica quotations was offset by demand-driven price declines for all other major traded rice varieties.
This helped to push the FAO Food Price Index up to 131.1 points in July, a rise of up 0.7 points.
More details to follow…
UK house price inflation lowest since November 2023
Back in the UK housing markets, annual price inflation slowed to its lowest rate in more than two and a half years.
The 0.1% year-on-year rise in prices is the slowest since November 2023, Lloyds’ house price report shows.
Amanda Bryden, head of mortgages at Lloyds, says:
“More broadly, average house prices have remained relatively stable for almost two years, moving within a narrow range over that period and sitting just +0.5% higher than they were in November 2024.
That trend has persisted even as buyers and sellers have faced a more uncertain economic backdrop this year. “Affordability remains a challenge for many would -be buyers and, following recent events in the Middle East, mortgage rates have edged higher again after easing earlier in the summer”.”
TransPennine Express are urging passengers to “please check carefully before any travel on Friday morning”.
Various ticket restrictions have been eased to help passengers, with train tickets being accepted on Bee Network buses and Metrolink trams in Greater Manchester.
Railway operator Northern has said its “do not travel” alert first issued on Thursday afternoon would remain in place until 10am on Friday, as “some services will be amended and may not be able to run at all”.
Disruption in the Greater Manchester / north west of England expected until noon
Disruption to rail services in the Greater Manchester area and the north west of England expected to continue until 12:00pm, according to Network Rail’s website.
The disruption between Newport and Cardiff is due to a fire next to the railway track last weekend.
Normal service was restored between Preston and Lancaster, on the West Coast mainline, shortly after midnight.
Network Rail: Rail services largely restored across North West
Happily, Network Rail are reporting that “most train services across the North West are running this morning” after yesterday’s power cut – but there is still the risk of disruption.
Network Rail is warning that some TransPennine Express services continue to be affected as trains and crew return to their normal positions following yesterday’s disruption. That suggests there could be problems travelling between major cities in the region today.
Passengers planning to travel this morning are advised to check before they travel using National Rail Enquiries or their train operator’s website for the latest travel information, it says.
Chris Wright, Network Rail’s North West route director, explains:
“I’d like to thank passengers for their patience following yesterday’s power outage and the disruption it caused across the North West.
“Our engineers worked through the night to restore signalling systems and recover the railway, and I’m pleased that most services are now running this morning. While some passengers may still experience disruption, we’re continuing to work closely with train operators to return services to normal as quickly as possible.
“Anyone planning to travel this morning should continue to check before they travel for the latest information.”
Avanti West Coast, CrossCountry, East Midlands Railway, London Northwestern, Northern, TransPennine Express, and Transport for Wales were all hit by yesterday’s power outage.
Rail passengers facing more disruption after power outage
Train passengers face across the Midlands and north-west England are facing the threat of further travel chaos today, after a power outage ground trains to a halt.
Network Rail has reported that further disruption is likely today because many trains and their crew “are not where they would normally be after this unexpected incident”.
The disruption means some trains will be delayed, cancelled, or sent on revised routes across the network.
Network Rail’s engineers have been working to fix signalling issues caused after electricity cut out in the main control hub for north-west England’s railways, the Manchester Rail Operating Centre, which led to widespread cancellations and delays to services.
Chris Wright, Network Rail’s North West route director, said yesterday:
“I’m extremely sorry for the disruption today and the very difficult journeys many people have experienced.
Our engineers are working tirelessly to restore the signalling systems impacted by the power cut at lunchtime.”
Introduction: UK house price stagnant
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The Iran war is continuing to have a dampening inpact on the UK’s property market, as persistently high borrowing costs restrain buyers.
Lloyds has reported this morning that average house prices were flat month-on-month in July, and only up by 0.1% compared with a year ago.
Emeritus professor Joe Nellis, head of economic research at MHA, points out that affordability is a ‘huge challenge’ facing potential busyers, explaining:
According to Lloyds Bank’s Affordability Review released late last year, the typical first-time buyer house costs nearly 6 times average annual earnings. For aspiring homeowners, the biggest hurdle is no longer simply finding the right property – it is raising a deposit and passing increasingly demanding mortgage affordability tests.
Although the Bank of England has left interest rates on hold so far this year, mortgage rates have fluctuated as the Middle East conflict has raged, with higher oil prices threatening an inflationary spike.
The agenda
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7am BST: Lloyds house price index
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9am BST: UN’s FAO Food Price Index
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9.30am BST: Public service productivity, quarterly, UK: January to March 2026
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1.30pm BST: US non-farm payroll jobs report for July
