Multiple supply shocks compound, global food inflation may accelerate and spread through 2027.

Note that global food inflation is expected to accelerate in the coming months and persist through 2027, as war-induced shipping disruptions and El Nio-driven droughts squeeze grain supplies, putting additional pressure on vulnerable consumers such as those in Indonesia. In Indonesia, rice prices have already soared to record highs amid forecasts of delayed rainfall; bread prices in Egypt have risen by a quarter; and sugar prices in India have hit record highs as the weakest monsoon in more than a decade has curbed output. "All of this is putting considerable pressure on the entire system," said Mximo Torero, chief economist at the UN Food and Agriculture Organization (FAO). "We will see a greater impact toward the end of this year, early next year, and possibly throughout next year." As food prices surge in low- and middle-income countries across the Middle East, North Africa and Asia, the world's poorest consumers are being hit hardest, because food accounts for a larger share of household spending in these regions. According to World Bank data, in 22% of the 150 countries it analyzed, food price increases in the September quarter exceeded overall inflation, up from 14% in the previous quarter. The FAO Food Price Index, which tracks monthly changes in a basket of internationally traded commodities, averaged 136 points in September, the highest reading since November 2022. Rising prices heighten the risk of social unrest and could prompt governments in major supplying countries to impose export bans, further exacerbating shortages. Multiple supply shocks Attacks on Black Sea grain infrastructure have disrupted wheat shipments, forcing top importers Egypt and Indonesia to seek alternative supplies, while insecurity in the Red Sea has forced ships onto longer, more expensive routes around Africa. The US-Israel war against Iran has pushed up fuel prices and disrupted fertilizer exports through the Strait of Hormuz, driving up agricultural costs, while El Nio-driven drought has reduced output in India and Southeast Asia. Wheat prices have risen more than 30% in 2026, while rice prices in major Asian exporters have climbed 10% to 13% despite ample stocks. Fertilizer prices have retreated from highs touched early in the Iran war but remain elevated. "Rising inflation, especially food inflation, is a reality," said Manish Tiwary, chairman and managing director of Nestl India, citing a "challenging environment" partly due to higher commodity costs. In Egypt, the price of unsubsidized bread has risen from 4 Egyptian pounds per loaf in July to about 5 pounds (about $0.093), while in the UAE cooking oil prices have risen about 40%. Although Indonesia is the world's largest palm oil producer, its vegetable oil prices have risen 7% this year. Due to insufficient output, prices of sugar, onions and pulses in India rose more than 10% month-on-month in September. As oil prices and war premiums soared, freight rates on some key global routes, such as from the Black Sea to Southeast Asia, rose by about 50%. Inflation catalyst While food prices have been rising since late 2025, reduced local supplies and higher commodity costs passing through to consumers could accelerate inflation. Major importers in the Middle East and Africa, which held off purchasing after strong local harvests, now need to return to global markets, potentially triggering a wave of demand. "In a few months, as importing countries return to the market, there could be a significant wave of new demand," said Alexander Karavaytsev, senior economist at the London-based International Grains Council. The FAO's Torero said the buffer provided by record global grain stocks is thinning. "Previous stocks and good harvests provided a buffer, but these buffers are beginning to come under strain," he said. "That means the increase in commodity prices could become more pronounced." Food processors, which typically buy raw materials on three- to six-month contracts, are now renewing those contracts at higher prices, with weaker local currencies further amplifying costs. "Shipping costs have also risen, and when converted into rupiah, the depreciation of the Indonesian currency has further amplified the impact," said Franciscus Welirang, a director of Indofood, Indonesia's largest food company. Traders say that in addition to higher prices, food processors are also facing procurement difficulties. An executive at a flour milling company in Jakarta, who requested anonymity because he was not authorized to speak to the media, said several wheat processing plants in Indonesia are operating below capacity because the Russia-Ukraine war has reduced arrivals. Kpler data show that Indonesia's wheat arrivals plunged 41% year-on-year in September to 491,000 tonnes. Soybean and corn stocks are currently ample, and future supplies depend on output in the US and South America, although higher oil prices have supported both crops due to their expanded use in biofuels. The International Grains Council's Karavaytsev said a good wheat harvest is expected in the Southern Hemisphere, and any downside risk to output in exporters such as Australia and Argentina could add new bullish factors to prices. "There is significant upside risk to prices," he said.