It’s time to insulate food from oil shocks

International food prices are barely one per cent up year on year, according to the latest FAO Food Price Index for March. That’s as against the nearly 58 per cent increase in the average price of Brent crude for March 2026 over March 2025. It makes the current US-Israel versus Iran crisis somewhat different from the one triggered by Russia’s invasion of Ukraine four years ago. The FAO index touched a record of 160.2 points in March 2022, when Brent prices also spiked to a 14-year-high of $139.1 during that month. Likewise, in 2008 — the year when Brent scaled its all-time-high of $147.5 per barrel on July 11 — there was an oil as well as food price shock. This time round, there has been no food crisis — so far.

In India, retail prices of most food items — rice, wheat, pulses, sugar, potato, onion and tomato — are virtually unchanged from last year’s levels at this time. The exception is edible oils, where India is hugely import-dependent. Landed prices of imported crude palm, soyabean and sunflower oil, at about $1,300, $1,400 and $1,450 per tonne, are higher than their corresponding year-ago range of $1,100-1,200. The FAO’s sub-index for vegetable oils, too, was 13.2 per cent up in March over the same month of 2025. A major driver here is the amenability of palm and soyabean oil to blending with diesel, and the increased probability of such diversion from elevated global energy prices. Indonesia plans to launch B50 — conventional diesel containing 50 per cent fatty acid methyl ester derived from palm oil — from July 1. The world’s largest palm oil producer already has a mandatory 40 per cent biofuel blend programme. Others, such as the US, are also likely to ramp up their biofuel mandates, whether from soyabean oil or maize.

The biofuel link isn’t the only reason food prices cannot stay decoupled from oil prices for too long. This is not simply an oil shock, but a full-fledged energy shock whose effects are being felt even in fertilisers and intermediates for crop protection chemicals. Their availability is a concern for the upcoming planting season, including that of kharif crops in India. The comfortable global and Indian stocks of grain for now may not be so down the line if farmers aren’t able to meet the agrochemical requirements for their crops. Even worse would be if the war does not end soon and is followed by an El Niño event. Proactive management of stocks and supplies, and keeping the import window open, is the only strategy to deal with such extreme uncertainty.