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Economy

Conflicts and a strong El Nino are tightening grain supplies, with food prices projected to keep rising

2026-11-15

Wheat field beneath dark clouds; illustrative crop image, not a field identified in the forecasts.

A leading development bank's food price index eased in October after reaching a three-year high in September, but it remained 15 percent above its level a year earlier, and prices are projected to keep climbing. The index is forecast to rise 10 percent in 2026 and a further 7 percent in 2027 before easing 5 percent in 2028, with risks tilted to the upside, according to the bank's latest Commodity Markets Outlook. Grain prices surged 9 percent in the third quarter of 2026 compared with the previous quarter, driven by attacks on Black Sea shipping and ports, dry weather in major grain-exporting countries and the early effects of a very strong El Nino; maize and wheat prices rose 8 and 13 percent respectively.

Grain supplies shrink for the first time in four years

Global grain supplies, including production and beginning stocks, are projected to fall by about 20 million metric tons in 2026-27, the first decline in four years, though supplies would remain the second highest on record. Wheat faces the strongest headwinds, with global output projected to decline 2 percent; American output is projected to drop 23 percent to its lowest since 1970-71, and Ukraine's exports are expected to fall 18 percent. Global maize and rice production are also expected to decline, by 3 and 2 percent respectively, with rice posting its first drop in a decade as El Nino weighs on Asian harvests. Edible oil supply is projected to grow by only 2.7 million tons, well below the long-term average of 5.7 million, even as biofuel demand surges on elevated energy prices, record American biofuel volume requirements and Indonesia's increase in the palm-oil share of biodiesel blends from 40 to 50 percent; oils and meals prices remained 17 percent higher than a year earlier.

Inventories leave markets exposed: the global stocks-to-use ratio for maize is projected to fall to 21.5 percent, its lowest since 2012-13, while the ratio for edible oils is set to fall to 12.5 percent, its lowest since 2009-10; wheat and rice ratios are expected to edge down to 34 and 37.2 percent. Median food price inflation in emerging and developing economies rose to 3.9 percent year on year in the third quarter, reaching 7.4 percent in the Middle East, North Africa, Afghanistan and Pakistan region and 122 percent in Iran. Severe food insecurity fell from 837 million people in 2021 to 779 million in 2025, aided by a 21 percent drop in food commodity prices over that period - a tailwind now set to become a headwind, with prices projected to rise a cumulative 18 percent in 2026-27. Under a scenario of prolonged conflicts and stronger El Nino effects, the food price index would exceed the 2027 baseline by 12 percent and surpass its 2022 level. The 3.9 percent median inflation reading was up from 3.5 percent in the second quarter. The projected maize stock ratio remains above the 13.2 percent low in 2010-11.

Grains are forecast to become 14 percent dearer in 2026 and another 9 percent in 2027; oils and meals are projected to rise 17 and 8 percent respectively. Other food prices are expected to remain broadly stable in 2026 and edge up in 2027. Upside risks include stronger El Nino effects, prolonged Black Sea hostilities, export restrictions, higher energy costs and stronger biofuel demand.

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