The affects of El Nino are starting to reach the dinner table, with global food prices rising the most in three years, on supply concerns for everything from New Zealand milk to sugar in Brazil and Southeast Asian palm oil.
An index of 73 food prices increased 3.9 percent in October to 162 points, the biggest jump since July 2012, the United Nations Food & Agriculture Organization wrote in a report Thursday.
The return of the El Nino weather phenomenon is changing weather conditions around the world, damaging crops with too much rain in some areas and not enough in others. Sugar prices increased more than any other commodity in the FAO report, soaring 17 percent, the most since September 2010. Excessive downpours in Brazil, the world’s largest producer, have slowed harvesting and reduced the amount of sweetener that can be extracted from cane.
“What’s happening in the Asia region is mainly related to the El Nino event,” said Daryna Kovalska, an analyst at Macquarie Group Ltd. in London. “It’s been dry in southeast Asia, Australia is under pressure from drought now too. All is linked to El Nino.”
The increase in prices is a reversal of the trend from earlier this year, when the FAO index steadily declined to a six-year low amid a worldwide oversupply of grain. The gauge remains below July’s level.
Vegetable oil prices jumped 6.2 percent, the most since 2010. Dairy costs rose 9.4 percent, the biggest gain in two years, on concern New Zealand’s milk output will decline.
“The overriding issue is the weather,” said Abdolreza Abbassian, a senior economist at the FAO. “There is definitely more potential for higher prices in the coming months.”