News

Manufacturers face volatility as food prices near four-year high

Commodity pressures are mounting with the Food and Agriculture Organization’s (FAO) Food Price Index reaching its highest level since 2022.

In September 2026, the FAO Food Price Index (FFPI) grew to 136 points, up two points or 1.5% compared to August 2026, the UN announced. The FFPI, which provides a monthly measure of global food prices compared to average prices, is a key indicator of inflation.

At a glance:

• The United Nations’ FAO Food Price Index nears a four-year high but remains below the peak level of March 2022.
• Global food prices are rising, with sugar, cereals, and vegetable oils key ingredients to watch.
• Volatility is driven by overlapping risks, including weather, logistics, geopolitics, and energy.

The latest FFPI figures, which sit at a base level of 100, show global food prices are nearing a four-year high. At 136, the index is at its highest level since November 2022 and has risen for several consecutive months. However, it is still significantly lower than its peak in March 2022, when the FFPI sat at around 160 after Russia invaded Ukraine.

“The recent increase tells us that cost pressures are once again building at the commodity level,” Monika Tothova, senior economist who leads the Food Price Index team at the FAO, told Ingredients Network.

“For downstream processors and food manufacturers, the message is less about today's prices and more about the direction of travel and the risks ahead,” said Tothova.

What rising costs mean for manufacturers

Many food and drink manufacturers, particularly larger companies, secure requirements through longer-term contracts, forward purchases, or other price-risk management strategies. Increases in international commodity prices do not therefore automatically translate into higher input costs overnight.

However, managing price risk is a core part of procurement strategies across the food industry. Hedging exposure, diversifying suppliers, securing volumes in advance, or locking in prices can cushion the impact of short-term market fluctuations.

Increased volatility in commodity markets or elevated prices that persist for an extended period disrupt food manufacturers’ ability to maintain these projections. They become more costly and complex, impacting operations and supply chain management.

Not just a natural part of the food inflation cycle

“Whether and to what extent higher commodity prices are eventually passed along the value chain will vary by product, market, and country,” Tothova said.

“I would be cautious about describing the current situation as a classic food inflation cycle,” she added.

Instead, the FAO’s observation of rising food prices is the result of several factors converging, many of them originating outside food markets. Weather risks, energy markets, logistics disruptions, geopolitical tensions and commodity-specific supply-and-demand conditions are all interacting simultaneously.

Weather concerns have resurfaced across several producing regions, affecting production prospects for key crops. Markets also remain sensitive to disruptions in trade and logistics, particularly regarding Black Sea exports and uncertainty over major shipping routes.

Energy markets are also part of the story. Agriculture remains heavily dependent on fuel and fertilisers, and developments in energy markets tend to work their way through production costs, transportation costs and, then impact commodity prices.

“More recently, concerns regarding freight rates, fuel prices, and fertiliser availability have all contributed to a less comfortable market environment,” Tothova said.

Ingredients at risk: Cereals, vegetable oils, and sugar

Several ingredients are the most exposed to these price increases. “I would point first to cereals, vegetable oils and sugar, as these have been among the main drivers of recent increases in international food commodity prices,” Tothova said. These could ultimately raise the cost base for many processed food and drink products.

The FAO’s price index shows sugar is up by 6.1% from August 2026 and 14.7% from figures 12 months ago. The UN has attributed its price hike to global production conditions, including Thailand’s decreasing sugar production, Brazil’s heavy rainfall, and India’s below-normal rainfall.

It is a similar story for the FAO’s cereal price index too, increasing by 5.1% since August 2026 and 17.2% from September 2025. Logistical constraints on Black Sea exports and weather concerns in key regions are affecting wheat. Tighter supply prospects, lower export availability from some sources, and continued biofuel demand are impacting maize.

Vegetable oils are another market to watch closely due to the position at the intersection of food, energy and biofuel markets.

Adopt a broad risk management strategy

“I would encourage not to focus exclusively on individual commodities,” Tothova said.

Developments in fertiliser, fuel and freight markets often provide important signals about where agricultural commodity markets may be heading.

Agriculture is an input-intensive sector, so rising fertiliser prices, higher energy costs or disruptions to shipping can affect production costs. “They can also reflect market sentiment significantly before their full impact becomes visible in food commodity prices,” added Tothova.

Packaging materials face the same prospect, as many inputs are closely linked to energy markets and industrial raw material costs. Manufacturers can experience a changing cost environment despite agricultural commodity prices remaining relatively stable.

“Perhaps the bigger issue over the next 12 months is not any single commodity, but the fact that several sources of uncertainty are present at the same time,” said Tothova.