commods

Economics Commodities Digest Global

Food prices rising due to the weather and wars

◆ Grains and ‘finer foods’ prices have risen recently amid an Jamie Culling Economist, Australia, NZ & Global Commodities intensifying El Niño, inclement weather … HSBC Bank Australia Limited ◆ … high input costs and fertiliser constraints due to the Middle Paul Bloxham East and Russia-Ukraine wars Chief Economist, Australia, NZ & Global Commodities HSBC Bank Australia Limited ◆ With these supply-side constraints ongoing and uncertain, we see upside risk to agricultural prices

Supply ‘squeeze’ underway Agricultural supply chains face a number of shocks, including the impact of the Middle East conflict, a recent escalation of the Russia-Ukraine war and extreme weather events, including a Northern Hemisphere heatwave and strengthening El Niño. Having strong supplies and stocks going into this year has helped keep prices from spiking higher, but the buffer is now starting to be run down quickly (see Agricultural prices generally lower on ample supply, 24 February 2026).

On the USDA’s latest forecasts, global grains production is expected to fall to be below consumption in 2026/27 – its first shortfall since 2020/21 and largest shortfall since 2006/07. Stock-to-use ratios are set to tighten, alongside a fall in crop yields.

Agricultural prices have risen. Grains prices are up 22% y-o-y, and some ‘finer foods’ prices, such as cocoa and coffee, have spiked higher too.

The Middle East conflict has been a key disruptive factor for agricultural commodities (see Fertiliser, food, and the Middle East conflict, 17 April 2026). The closure of the Strait of Hormuz has continued to constrain fertiliser and sulphur supply, and kept broader input cost pressures elevated. Export restrictions from some economies in response to this ‘squeeze’ have been another source of pressure.

The recent escalation in the Russia-Ukraine war has seen a sharp drop in shipments from the Black Sea. The region supplies nearly a third of global wheat trade and one- fifth of global fertiliser trade, so this represents a key risk to supply, just as grain harvests are ramping up. Damage to refineries in Russia has also lifted diesel prices.

The weather has also been a big factor, with Northern Hemisphere heatwaves, an intensifying El Niño and a positive Indian Ocean Dipole posing downside risks to agri- commodity supply. The impact of previous El Niño episodes varies by region and commodity, but yields tend to decrease and prices increase. Weather-related risks have seen cocoa prices spike 50% in the past few months and lifted coffee prices. Weather risks can also deliver non-linearities, such as more disease outbreaks.

We see supply-side issues continuing to dominate developments in agricultural commodity prices, meaning risks of higher prices on average, increased price volatility, and greater instances of food insecurity in the coming period.

Disclosures & Disclaimer Issuer of report: HSBC Bank Australia Limited This report must be read with the disclosures and the analyst certifications in View HSBC Global Investment Research at: the Disclosure appendix, and with the Disclaimer, which forms part of it.

Economics ● Global 25 August 2026

1. Grains prices have risen sharply

Agricultural Commodity Prices Index, Monthly, 1990s average = Cereals 'Finer Foods' Raw agricultural materials Source: IMF; Bloomberg; HSBC

Agricultural commodity prices have risen …

A number of negative supply Global agricultural commodity prices have been in an upswing in the year-to-date (Chart 1). shocks have supported a rise While agricultural commodity prices had generally fallen in 2025, largely due to good weather in agricultural commodity and growing conditions delivering ample supply, 2026 has delivered a number of adverse prices … supply shocks that have underpinned the rise in prices.

As of July 2026, the key moves for agricultural commodity prices were: ◆ ‘Cereals’ (wheat, corn, barley, rice, and sorghum) prices rose by 22% y-o-y, in a broad- based upswing led by an uptick in wheat (Chart 2); partial data for August shows further momentum, up 30% y-o-y. ◆ ‘Finer foods’ (meat, dairy, sugar, seafood, cocoa and…