Global Food Prices at Three-Year High as Heatwaves and Conflict Bite

London, United Kingdom – Global food commodity prices have hit a three-year high, as the Ukraine war, conflict in the Middle East and extremely hot weather push up crop prices, while markets brace for the US jobs report that could shape Federal Reserve policy.

The United Nations' Food and Agriculture Organization's Food Price Index, which tracks key food prices, has risen to its highest since January 2023, reaching 131.1 points in July – a rise of 0.7 points.

The FAO reports that prices for cereals, sugar and vegetable oils all rose in July, while meat and dairy product prices fell. Global wheat prices surged by 5.8% in July, and were almost 10% higher than a year ago.

The FAO says wheat price increases were 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."

Markets Brace for US Jobs Report

The final major economic news of the week – the US jobs report for July – is expected to show a pick-up in hiring. The non-farm payroll is expected to have increased by around 80,000 in July, ahead of the 57,000 increase reported in June.

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."

Boeing 737 Max Fuselage Inspections Ordered

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.

Volkswagen at 'Historic Crossroads'

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."

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.

UK House Price Inflation Slows

UK 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, said: "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. Affordability remains a challenge for many would-be buyers."

Sugar and Vegetable Oil Prices Surge

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, driven by concerns about the potential impacts of persistent hot and dry weather on crop yields in the European Union and El Niño-related weather conditions in Asia.

Vegetable oil prices rose by 2% in July, to their highest level since June 2022, driven by higher palm and soy oil prices.

What's Next

Key developments to watch:

• US jobs report: July data at 1.30pm UK time
• Federal Reserve: Rate decision implications from jobs data
• Food prices: Continued impact of conflict and weather
• Boeing inspections: September start for 737 Max checks
• Volkswagen restructuring: Potential job cuts of up to 100,000