FAO Chief Economist Maximo Torero had pointed to elevated energy costs and logistical disruptions from the conflict in the Near East as key drivers of the earlier surge . Those forces did not disappear in May; rather, they were temporarily offset by a supply-side adjustment in the vegetable oil complex. Increases in the Cereal Price Index and Sugar Price Index prevented the overall FFPI from falling further .

Vegetable Oil Prices: First Monthly Decline of the Year

The FAO Vegetable Oil Price Index fell to 185.0 points in May, a drop of 9.0 points (4.6%) from April and the first monthly decline since the start of 2026 . The move partially reversed April’s 5.9% surge, which had been driven by disruptions linked to the war in Iran and the effective closure of the Strait of Hormuz .

The decline was broad-based, with lower international prices registered for palm oil, soy oil, rapeseed oil, and sunflower oil. FAO attributed the pullback to a combination of strong current production and anticipated ample output from key origins, alongside lower demand signals in some major importing markets . Bloomberg reported that falling costs for palm and soybean oils, in particular, helped cap the broader food price index even as other key inputs faced disruption .

Despite the monthly decline, vegetable oil prices remained elevated by historical standards and were still contributing to food inflation in import-dependent countries.

Cereals on the Rise—and a Big Production Forecast Shift

While oils retreated, cereal prices increased. The FAO Cereal Price Index rose in May, fueled by tightening wheat supply prospects and continued logistical friction . Elevated fertilizer costs—tied directly to the disruption of shipping through the Strait of Hormuz—are raising input expenses for grain producers globally . The conflict has cut off a critical artery for fertilizer exports, driving up grain production costs and supporting international cereal quotations.

Alongside its monthly price release, the FAO issued new early-season forecasts in its Cereal Supply and Demand Brief for the 2026/27 marketing year. The numbers point to a sharp turnaround from the record output achieved in 2025.

• Record 2025 harvest: Global cereal production for the 2025/26 season is now estimated at 3,043 million tonnes, a 6.1% increase over the previous year . Wheat and maize estimates were both revised higher in May, mainly due to better-than-expected yields in Europe, Argentina, and Canada . Rice production reached an all-time high of 563.4 million tonnes (milled basis) .
• 2026/27 forecasted contraction: World cereal production is projected to fall by roughly 2% to 2,982 million tonnes, led primarily by declining wheat area and output in key producing regions . The FAO characterized the anticipated decline as a consequence of reduced planting and less favorable growing conditions compared to the prior year’s exceptional harvest.

This swing from record output to projected contraction is the most consequential structural signal in the FAO’s May report. It suggests that after a year of robust supply rebuilding, global grain markets may tighten again, all while the Strait of Hormuz disruption continues to elevate the cost of moving and producing food.

Strait of Hormuz: The Geopolitical Overhang

The ongoing war in Iran and the effective closure of the Strait of Hormuz remained the dominant macro risk in the FAO’s May 2026 outlook. The waterway is a critical chokepoint for shipping crude oil, refined fuels, and fertilizers. With it closed, the agricultural sector has faced:

• Higher energy costs: Elevated oil and fuel prices increase production and transport expenses across all food commodities .
• Fertilizer logistics disruption: The closure constricts global fertilizer supply, directly raising costs for grain farmers and contributing to higher cereal prices .
• Supply chain uncertainty: Shipping rerouting and delays are creating unpredictable delivery timelines, adding a risk premium to food commodity contracts.

FAO’s April statement had explicitly tied the three-month price rally to these energy and logistical disruptions . While May brought momentary relief on the vegetable oil side, the underlying risk posed by the Strait of Hormuz closure has not diminished, and it continues to threaten the 2026/27 production season through its impact on input availability for farmers.

A Fragile Market at a Crossroads

May 2026 will be remembered as the month that global food prices showed remarkable resilience to two conflicting forces: a genuine supply-side reprieve in vegetable oils versus the persistent, war-driven disruption of critical agricultural logistics. The FAO’s data confirms that consumers and producers cannot yet count on sustained relief. The modest dip in the overall index was driven by one volatile category, while cereals—the most fundamental staple—are flashing caution. With the 2026/27 production outlook pointing to the first global harvest contraction in two years and the Strait of Hormuz still closed, the global food system is navigating a fragile equilibrium.

FAO Chief Economist Maximo Torero had pointed to elevated energy costs and logistical disruptions from the conflict in the Near East as key drivers of the earlier surge . Those forces did not disappear in May; rather, they were temporarily offset by a supply-side adjustment in the vegetable oil complex. Increases in the Cereal Price Index and Sugar Price Index prevented the overall FFPI from falling further .

Vegetable Oil Prices: First Monthly Decline of the Year

The FAO Vegetable Oil Price Index fell to 185.0 points in May, a drop of 9.0 points (4.6%) from April and the first monthly decline since the start of 2026 . The move partially reversed April’s 5.9% surge, which had been driven by disruptions linked to the war in Iran and the effective closure of the Strait of Hormuz .

The decline was broad-based, with lower international prices registered for palm oil, soy oil, rapeseed oil, and sunflower oil. FAO attributed the pullback to a combination of strong current production and anticipated ample output from key origins, alongside lower demand signals in some major importing markets . Bloomberg reported that falling costs for palm and soybean oils, in particular, helped cap the broader food price index even as other key inputs faced disruption .

Despite the monthly decline, vegetable oil prices remained elevated by historical standards and were still contributing to food inflation in import-dependent countries.

Cereals on the Rise—and a Big Production Forecast Shift

While oils retreated, cereal prices increased. The FAO Cereal Price Index rose in May, fueled by tightening wheat supply prospects and continued logistical friction . Elevated fertilizer costs—tied directly to the disruption of shipping through the Strait of Hormuz—are raising input expenses for grain producers globally . The conflict has cut off a critical artery for fertilizer exports, driving up grain production costs and supporting international cereal quotations.

Alongside its monthly price release, the FAO issued new early-season forecasts in its Cereal Supply and Demand Brief for the 2026/27 marketing year. The numbers point to a sharp turnaround from the record output achieved in 2025.

• Record 2025 harvest: Global cereal production for the 2025/26 season is now estimated at 3,043 million tonnes, a 6.1% increase over the previous year . Wheat and maize estimates were both revised higher in May, mainly due to better-than-expected yields in Europe, Argentina, and Canada . Rice production reached an all-time high of 563.4 million tonnes (milled basis) .
• 2026/27 forecasted contraction: World cereal production is projected to fall by roughly 2% to 2,982 million tonnes, led primarily by declining wheat area and output in key producing regions . The FAO characterized the anticipated decline as a consequence of reduced planting and less favorable growing conditions compared to the prior year’s exceptional harvest.

This swing from record output to projected contraction is the most consequential structural signal in the FAO’s May report. It suggests that after a year of robust supply rebuilding, global grain markets may tighten again, all while the Strait of Hormuz disruption continues to elevate the cost of moving and producing food.

Strait of Hormuz: The Geopolitical Overhang

The ongoing war in Iran and the effective closure of the Strait of Hormuz remained the dominant macro risk in the FAO’s May 2026 outlook. The waterway is a critical chokepoint for shipping crude oil, refined fuels, and fertilizers. With it closed, the agricultural sector has faced:

• Higher energy costs: Elevated oil and fuel prices increase production and transport expenses across all food commodities .
• Fertilizer logistics disruption: The closure constricts global fertilizer supply, directly raising costs for grain farmers and contributing to higher cereal prices .
• Supply chain uncertainty: Shipping rerouting and delays are creating unpredictable delivery timelines, adding a risk premium to food commodity contracts.

FAO’s April statement had explicitly tied the three-month price rally to these energy and logistical disruptions . While May brought momentary relief on the vegetable oil side, the underlying risk posed by the Strait of Hormuz closure has not diminished, and it continues to threaten the 2026/27 production season through its impact on input availability for farmers.

A Fragile Market at a Crossroads

May 2026 will be remembered as the month that global food prices showed remarkable resilience to two conflicting forces: a genuine supply-side reprieve in vegetable oils versus the persistent, war-driven disruption of critical agricultural logistics. The FAO’s data confirms that consumers and producers cannot yet count on sustained relief. The modest dip in the overall index was driven by one volatile category, while cereals—the most fundamental staple—are flashing caution. With the 2026/27 production outlook pointing to the first global harvest contraction in two years and the Strait of Hormuz still closed, the global food system is navigating a fragile equilibrium.