In September, we saw a significant increase in global food prices, rising by 3% compared to August. This marks the highest rise we’ve observed in the past 18 months. The primary driver behind this surge appears to be a widespread increase in commodity prices, particularly for sugar. According to the Food and Agriculture Organization (FAO) of the United Nations, which released data on October 4th, the food price index hit 124.4 points in September—the highest level since July 2023. This monthly increase represents the largest spike since March 2022, with a year-over-year growth of 2.1%.

The sugar price index experienced a dramatic monthly increase of 10.4%, reaching 125.7 points. This climb can be largely attributed to deteriorating crop conditions in Brazil, as well as concerns surrounding the Indian government’s decision to lift restrictions on the utilization of sugarcane for ethanol production, which could potentially affect India’s export supply.

Brazil is currently facing one of its worst droughts in history, with nearly 60% of the country experiencing varying degrees of drought since the latter half of 2023. This situation is posing a grave threat to the sugar supply.

In September, New York raw sugar futures surged by 16%, and this upward trend has continued into October, bringing prices close to a seven-month high. Given that Brazil is one of the world’s leading agricultural exporters, the challenges faced by its agricultural sector are likely to create ripple effects on global food prices.

To add to the concern, climate change is making drought conditions in Brazil increasingly common. Borges, a senior economist at São Paulo-based LCA Consultores, pointed out that Brazil has been contending with “long-term and severe droughts” since 2012, leading to an annual GDP loss of between 0.8% to 1.6%.

“Since 2012, the cumulative loss has exceeded 10%,” Borges emphasized, underscoring the serious implications for an economy where agriculture makes up nearly a quarter of GDP.