Why food inflation is no longer just about supply and demand

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Aditya Kondalamahanty:

Hello and welcome to another edition of Platts Commodities Focus Podcast, a series by S&P Global Energy. Today we discuss food inflation, often experienced in grocery stores and restaurants through rapidly rising sticker prices and that familiar feeling of, " Okay, that did not cost as much last month." But these prices are the end result of structural shifts in grain, oil seed, meat, biofuel, freight, and labor markets.

To unpack what is driving food prices right now, and crucially where they may be heading next, we have Sampad Nandy, editor for grains and oil seed markets, Sayona anna John, editor livestock and protein markets, Samyak Pandey, senior editor for biofuels and feedstock markets, and I'm Aditya K., senior editor for vegetable oils. To start off, Sampad, we have lived and worked together through a remarkable run of food inflation since 2020. Could you give us some context on the biggest black swan events that have reshaped global agricultural markets since the pandemic?

Sampad Nandy:

Thank you for inviting me to this podcast and to name the biggest events pushing food prices up since the COVID-19 lockdown where obviously the first one would be the COVID lockdowns that created significant bottlenecks throughout the world. And also we saw global economic agencies and several governments throughout the world announce surpluses that in fact created this rise in food inflation. And then in early 2022, we saw Russia invade the Ukraine and that took wheat and corn supplies and also some floral supplies from the Black Sea. Now Black Sea accounts for about a fifth of the global corn and wheat supplies. And this had its fallout just like we saw India stopping its wheat exports for six years and it has just restarted them this year. And then we had a mild event of El Nino in 2023 and maybe a muted year for 2024 in terms of food inflation.

But in 2025, we saw US starting with country-specific tariffs that created several market uncertainties and we saw several biggest supplies to the US diverting its direct flow to other countries. And now in 2026, we have two different wars going on. We have the Iran war that has given rise to fertilizer prices and energy costs that has in fact given rise to farm input costs. And also we have the current escalation in the Black Sea region that has created a rise in green and oil sea prices very recently.

Aditya Kondalamahanty:

When we speak of Black Sea, it's the largest exporter of wheat, it's the largest exporter of sunflower oil. So a lot of markets have reacted in response to that. And that kind of brings us to something that Samyak's been tracking very closely, which is the UN's food price index. And that's very well established metric when food inflation is measured. So Samyak, can you give us a quick introduction to this and what exactly you have seen in terms of the food price index?

Samyak Pandey:

Yeah, Aditya. So UN, FAO, Food Price Index is probably the closest that we have got to a global benchmark for food inflation. It comprises of a basket covering cereals, veg oils, dairy, meat, sugar, and other relevant food commodity. So it gives us a broad indication of what is happening across the global system. And what makes this index useful is it captures interaction amongst multiple markets. So what happened during this onset of this inflationary curve, during the conflict between Russia, Ukraine, we saw veg oils and grains surging because these two countries and the region was one of the major agriculture exporter of these commodities. And the index hit a all-time record high in March 22 during the time that this conflict broke out. And this was heavily driven by the veg oil prices surge. According to index, this was marked at around 25% month on month.

This in fact trickled down to meat price index climbing its own historic high in mid 2022 due to disruption to Ukrainian corn, barley and fertilizer prices and on and on. Coming back to the most recent disruption that we have seen and that has led to these food prices elevations or inflation equipment, is the weather events, the Middle East disruption, the bio policy changes, trade restrictions. So the recent data point of the August 2026 food price index is again up 2% from the previous month 233 points. And this is again being led by the vege oil price index surging to multi high of 196. So one thing I'd like to stress amongst this argument is the food inflation is no longer just a grain story. It's more like vegetable oils, sugar and proteins have also becoming increasingly important drivers that is being clubbed by the feed and fertilizer costs in turn affecting livestock productions and other staple economy.

So when the index moves, it often reflects several different supply chain interacting simultaneously rather than one single commodity focused shock.

Aditya Kondalamahanty:

Yeah, I remember when the war broke out in the Black Sea region, the UN Food Price Index touched a record high. I think it was some 159 or 160 at that time. And that's the highest since measurement began. And currently it's still in the 130s. So clearly food price inflation has been sticky ever since that war. Turning to Sayona on the proteins markets, could you tell us a little about what's happening in protein markets right now and what's driving prices there?

Sayona anna John:

Hi, Aditya. Thanks. So in protein markets, when we look at falling grain prices, it certainly helps meat producers because corn and soybean meal are major feed costs, but cheaper feed doesn't automatically mean cheaper meat for consumers. Because each protein is starting from a very different supply position and has a different production cycle. Now, beef is the clearest example. Beef is the tightest of all the three meat probably we would consider comparing to chicken and pork where beef global production forecast is expected to fall 1% to 61.6 million metric tons in 2026 as cattle supplies remain constrained across major producers, particularly Brazil, the US and China. The bigger constraint for beef now is cattle availability. Cheaper feed can improve producer margins, but it can't quickly replace cattle that has disappeared from the supply chain. So limited supplies are expected to keep upward pressure on prices.

Now, global beef exports are also forecast down. So trade is being reshuffled by China's new import quotas with Chinese beef import forecast to fall around 30% year over year. Now pork looks more comfortably supplied. Global production is forecast 1% higher, but weak Chinese import demand is weighing on some markets. So the story is less about shortage and more about where that pork finds a home, with Brazil gaining export share while EU shipments decline. Now chicken is the real growth story. Global production is forecast nearly 3% higher, helped by favorable production economics, and job-based expansion. And with beef relatively expensive, chicken's price advantage is attracting consumers, supporting further growth in both demand and production. So the takeaway is that lower grain prices are providing cost relief across the protein complex, but the consumer impact is very uneven. Beef remains the tightest market, pork is more comfortably supplied, while chicken is seeing the strongest production growth. So even with cheaper feed, consumers are seeing very different price dynamics across the three proteins.

Aditya Kondalamahanty:

Yeah. And I mean it sounds like that old age, right? High prices are the cure for high prices. And I think we are seeing price sensitive consumers stepping back and that's affecting trade flows as well. US beef especially is a very interesting market. Sampad, you've been covering it a lot this year. Could you tell us a little about what's happening there and just how tight the situation is?

Sampad Nandy:

Hi. As I know was telling about the production cycle in beef and among other animals, tight supply in the US for beef markets is a very structural thing. But for this year it has reached a historical tightness because the cattle herd availability in the US is about a 75-year low. And just to give you some more context, cattle slaughter, which usually becomes the most important part for domestic cattle supply in the US. So this year in 2026, as per latest available data, is down 5% from 2025 and down 16% from 2024. And now at this moment, US has been forced to increase its tariff-free import quarter till November, and it is forced to import beef at high prices from Brazil, Argentina, Canada, and New Zealand. At this moment, US is looking at a hard consolidation and supply won't be replenished by 2027, maybe by 2027 end because whatever the data suggests from USD at this moment is that the US beef output will not really rise significantly in 2027 as well.

Aditya Kondalamahanty:

So the situation is not a temporary one. We're looking at imports perhaps going into 2027 as well, right?

Sampad Nandy:

We are looking at high prices for beef in the US, not very high, but high prices in 2027 as well. As soon as the herd replenishes and they've been able to rebuild the new cattle supply inventory, the prices will come down hopefully.

Aditya Kondalamahanty:

And that's something of an interesting aspect of the proteins market, right? We have to consider biology. Something that I know Sayona, you cover a lot in terms of news is why compared to other protein markets such as poultry or pork, beef is not something that can easily be replaced, right? Could you tell us a little about that?

Sayona anna John:

Absolutely. So biology is really playing a huge part in it, right? So when you look at chicken, chicken can reach market weight in roughly six to eight weeks. Pork takes around five to six months, while cattle typically takes 18 to 24 months or maybe two to four years to move from bird to slaughter. And with beef, if the herd has already been depleted. Rebuilding supply takes even longer because producers first need to retain breeding animals rather than send them to slaughter. So when beef supply is tight, it can take years to respond, whereas chicken producers can increase supply much more quickly, which is one reason beef prices can stay elevated for longer.

Aditya Kondalamahanty:

Indeed. Very interesting. And speaking of issues which have gotten a lion's share of headlines, I mean weather concerns as well, I think across all geographies we have heard massive variabilities in weather in the past year or so. Sampad, what regions are you watching for most closely in the next six to 12 months in terms of weather?

Sampad Nandy:

So in the next six to 12 months, El Nino is likely to be the biggest headline for weather related issues in agriculture and food supply chains. And for that, I will be looking at Australia, which is a key wheat and beef producer, looking at Brazil, which is a key corn soil bean and beef producer. And I'll also be looking at USA, parts of USA, and let's not forget Southeast Asia, Indonesia, Malaysia, which are the biggest suppliers of palm oil. So this weather event could actually end up hitting all the food groups that we know of.

Aditya Kondalamahanty:

Got it. And this year especially what we have observed is most major food exporting countries are now ramping up crop-based biofuel mandates as well. Samyak, could you tell us a little about how that's playing into food inflation?

Samyak Pandey:

Yeah, Aditya. So the largest scheme of things is biofuel policies have become a structurally important demand driver for agriculture market. And if you go back to 15, 20 years of pre-COVID stages, food and feed were the two dominant source of demand for the sector, for the crops, or even for proteins. But today, fuel is the third major demand pillar. In United States, corn, ethanol remain a major source for farm corn demand. In Brazil, sugar and ethanol economies are constantly competing for same turnoff corn and sugar again again. In Southeast Asia, biodiesel policies are increasingly influencing vegetable oil market and so on in Europe also to a certain extent. So that doesn't necessarily mean that biofuels are always the main reason behind this price rise or behind this inflation because weather still matters.

There are input costs related to fuel and fertilizers and certain farm economics. Geopolitics still matters because of the shipping, the trade and that sort of cost. But biofuel mandate can amplify these moves by creating a relatively stable source of demand that persists even when agriculture supplies tighten. So what we are seeing increasingly is that agriculture commodities are trading not only as food ingredients, but also as energy feedstock, which means energy policy can have a direct impact on the food markets.

Aditya Kondalamahanty:

Right. Since I track vegetable oil markets, India, where we're recording from, it's the largest buyer of vegetable oils in the world, but due to rising biodiesel mandates in the US, Malaysia, Indonesia, of course, which has the largest biodiesel mandate, despite low demand, prices are not coming down, which is affecting price sensitive buyers in India and other South Asian countries as well. So I think right now about 20% of the world's vegetable oils and fats go into biodiesel production. The numbers are a little fuzzier on the grains and ethanol sides, but yeah, we definitely see rising mandates supporting prices. They provide a flow to prices and they in a sense take away from exportable supplies. So I think even in India, we are seeing that with sugar and ethanol, right Samyak, you've been covering the sugar side of things in India. How is that altering the relationship between fuel and food prices here in India?

Samyak Pandey:

India has been quite a case or quite a phenomenon for last few years. The story has evolved quite significantly over a decade or so. Initially what we saw was the debate was largely about sugar cane or the byproducts. The concern was whether diverting more sugar into ethanol would tighten up sugar supplies and in return increased food inflation. But what has changed over the years or over more than a decade is the grain-based ethanol has expanded rapidly. Today, the grain accounts for a majority of India's ethanol production more than three, four, around 76, 77%, meaning the country's ethanol program is no longer dependent primarily on sugar cane, which has reduced some of the direct linkages between sugar prices and ethanol production. However, the relationship hasn't disappeared completely. It remains in the background to a certain extent. When the sugar supplies tighten, policymakers still trade off between maintaining the sugar sweetened availability and encouraging ethanol production.

While at the same time, grain is now playing a much bigger role, which means corn and surplus, rice and damaged grains have become increasingly important to this India fuel ethanol story. So rather than removing the food versus fuel debate, India has effectively broadened it from just a sugar cane alone or sugar alone molasses and byproducts alone to a wider group of agriculture feedstock to a wider range of the options available to the industry. And one of the biggest questions that will remain for the comings is whether ethanol demand growth can continue without creating new competition for food and feed supplies.

Aditya Kondalamahanty:

Yeah, I think that's something that's become a hot potato of a topic in the country right now. And just moving on to the other big headlines, of course, since we're recording in early September, the Trump and Xi meeting is later this month. Soybeans have often sat at the center of US and China relationships. So Sampad, what do you think the US market participants are expecting from the summit with respect to soybeans and other food commodities that the US exports?

Sampad Nandy:

So the US market participants are largely looking forward to the resolution or maybe some breakthrough on additional tariff situations between US and China. So US and China do return a 10% reciprocal tariff on each other. But that is in turn hurting US exports of soybean and among other commodities to China. But if you look at the trade as per trade happening on ground, China has booked so far about nine million tons of soybeans for this marketing that just started this month. And then it has also actually bought nearly one million tons of soybean in the past 11 days from the US. Other market participants currently expect China to increase its soybean purchases from US to nearly to 22 to 24 million tons. Otherwise, apart from soybean, market participants are also expecting China to increase its imports of US beef because US beef used to have a dedicated market in China, but because of the tariff 40s and non-tariff barriers that were put up in China during the early 2025, that market has not really been catered to and that share has gone to other participants like Australia and Brazil.

At this moment, US maybe trying to regain that share, but given US, the domestic tied beef supply situation at the moment, maybe that won't really lead to many more trades happening in this marketing year.

Aditya Kondalamahanty:

Yeah, it's been a moment for Brazil to shine. I mean, their exports to China of soybeans and other agricultural produce has skyrocketed in recent months. Sayona, could you tell us a little about that? How is Brazil filling up the space that US exports have left due to the tariff war?

Sayona anna John:

Sure, Aditya. So Brazil is actually quite central to this equation between US and China, mainly because of its dominant position as a soybean supplier, and especially to China, because as we know, China is the largest soybean importer with almost 60% of global share. Now, to give some perspective or context, I can give you a few numbers. In 2025, Brazil supplied about 74% of China's record 112 million metric ton soybean imports. And comparing that with US, it was nearly 15%. And that trend has continued this year also with Brazil accounting for roughly 72% of China's imports through July versus 70% for the US. So in terms of just the sheer volume that is being exported, obviously there is no debate about it. Brazil is actually a very dominant and a default supplier. But again, when we are talking about it in the context of Trump and Xi meeting, the summit that is about to happen in the US, there is a possibility of a bit of share shifting to the US, but it can't be a complete reshuffle because again, the big caveat here is tariffs.

So when you look at the economics of it, still Brazil is it an advantage because the 10% tariffs on US soybeans really keeps it away from purchases of commercial crushers staying or avoiding US soybeans. So they prefer the Brazilian soybeans because of this advantage and they tend to avoid because of the tariff disadvantage with US. Again, there is a seasonal switch that can happen because we are moving towards the Brazilian end season where the supplies are getting tighter. So obviously there is an interval or there is a window for US exports to happen to China and China has been actively purchasing also. So Brazil will remain the dominant supplier, but it really boils down to the tariff reduction if US soybeans to China will improve or not.

Aditya Kondalamahanty:

Yeah, I mean the US harvest season is beginning now. The assumption is that since the exportable supplies will start piling up, there might be a better case for US soybean exports to China and we might see something coming from the meeting as well.

Sayona anna John:

Yes, only but then the tariff reduction would be very critical because that cost advantage is probably going to matter for further because right now it's just the state enterprises like COFCO and Sinograin that is engaging in purchases. So for the wider crushers and the private buyers in China, this reduction of tariffs would be important.

Aditya Kondalamahanty:

When it comes to US soybeans, right?

Sayona anna John:

When it comes, yeah, to US soybeans.

Aditya Kondalamahanty:

All right. We should wrap this up. I thought it would be interesting to do a little bit of crystal ball gazing in the sense that what do you think will be the major market cues that listeners will have to look out for and how could it add or ease to the food inflation in the coming year? So Sampad, a line from you.

Sampad Nandy:

Yeah, so for the next one year at least, I will be looking at El Nino, how it's impacting the grain and oil seed supplies throughout the world. And also we're looking at the escalation in Black Sea and the fallout of the US-Iran war in the Middle East.

Aditya Kondalamahanty:

Thanks. And Sayona, what would you be looking at?

Sayona anna John:

For proteins, I watch cattle supplies, animal disease, and trade disruptions. Those are the big risks that could quickly tighten supplies and put renewed pressure on meat prices.

Aditya Kondalamahanty:

I see. And on biofuel, Samyak?

Samyak Pandey:

So, Aditya, from a biofuel perspective, which intersects with agriculture, feed, and proteins, I'd like to watch three things in next one year. First would be how Indonesia holds its biodiesel ambition, which is pretty ambitious, B50, B60 and on. The pace of ethanol blending in India and Brazil, again to major sugar-based like economies and the weather impacts on feed stocks, again of palm oil, corn and sugar cane, because those factor increasingly influence both food and fuel market simultaneously. So as I have said, food inflation is no longer just a food stories, increasingly an energy story as well.

Aditya Kondalamahanty:

Got it. So it's geopolitics, disease and protein markets, and energy prices would be the biggest points to watch out for. And also just as a general sort of historic observation, food prices almost never go down. In fact, food price deflation usually means that something worryingly worse is happening, like an economic meltdown.

And with that, we come to an end of this discussion to stay updated on agricultural commodities, prices, and policies. You can check out the links given in the show notes. Platts also runs WhatsApp channels for soybeans and biofuel news along with the weekly newsletter on Monday. So do check those out and give us a follow. This episode was produced by Chandreyee Mukherjee in Gurugram. Thank you again and have a nice day.