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FAO says Ukraine war drives surge in world food prices, updates 2021-22 forecast

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World food prices surged in March as the Ukraine war shocked markets for staple vegetable oils and grains, the United Nations' Food and Agriculture Organization said in a statement on Saturday.

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The FAO Food Price Index – which tracks monthly changes in international prices of commonly-traded food commodities – averaged 159.3 points in March, up 12.6 percent from February when it only reached its highest level since its inception in 1990. The latest increase reflects a new all-time high in prices for vegetable oils, meat and cereal sub-indices, while those of sugar and dairy products also surged significantly.

Last month’s increase reflected a surge in world prices of wheat and coarse grains, largely driven by conflict and disruptions in international food trade caused by the war in Ukraine.

The expected loss of exports from the Black Sea region amid the war exacerbated the already tight global availability of wheat, the FAO revealed. Port closures in Ukraine have significantly limited exports from the country, while financial and freight challenges are hindering exports from the Russian federation. These factors are expected to remain in effect for the remainder of the 2021-2022 season.

The situation has given rise to increased uncertainty in wheat and maize markets, a shift in trade flows and the application of export measures by many countries.

With concerns over crop conditions in the US also adding to the issue, world wheat prices registered a sharp rise in March, soaring by 19.7 percent.

Looking ahead, the FAO’s wheat production forecast for 2022 has been lowered slightly due to the March estimate, pointing to an increase of 1.1 percent to 784 million tons.

Wheat production in Ukraine is now forecast to fall below the five-year average, mainly reflecting expectations that at least 20 percent of the winter planted area may not be harvested due to implications of the war such as destruction, limited access to certain areas and a lack of resources to harvest crops.

Russia invaded Ukraine on February 24 in what it calls a “special operation.” As the Ukraine war enters its 45th day, thousands have been killed, millions have fled the country and Russia continues to launch strikes on several Ukrainian cities.

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