Newsflash: World food prices rose in September to their highest in nearly four years as farmers were hit by hot weather and logistics disruptions.

The United Nations’ Food and Agriculture Organization’s Food Price Index, which tracks a basket of food commodities, has jumped to its highest level since November 2022.

The index rose to averaged 136.0 points this month, up from 134.0 for August, with the prices of sugar, meat, oil, dairy and cereals all rising during the month.

The report, which gives a great insight into the global food market, reports:

The Sugar Price Index surged by 11.9% in August, to its highest level since June 2025.

This was riven by fears of weak global sugar supply outlook in the 2026/27 season, partly due to El Niño fears.

The FAO says:

Persistent hot and dry weather led to a downward revision of sugarbeet yield forecasts in the European Union, where planted area was already anticipated to decline from the previous season, while El Niño-related weather conditions continued to affect production prospects in key producing countries in Asia.

Lower sugar production in Brazil’s key Center-South growing region also contributed to the tighter supply outlook. Additionally, India’s announcement of duty-free raw sugar imports further contributed to the increase in international sugar prices.

The Cereal Price Index rose by 2.2% in August, to its highest level since May 2024 due to “robust demand, weather-related concerns over crop prospects in key producing regions, and continued uncertainty surrounding Black Sea export flows.”

Wheat prices were pushed up by persistent disruptions to Black Sea export logistics, and lower production prospects in parts of Europe following hot and dry weather.

[Reminder, the UK is thought to have suffered its worst harvest since detailed records began in 1984].

The Vegetable Oil Price Index rose by 0.6%, its third consecutive monthly increase, to the highest level since June 2022.

Higher world palm and soy oil prices, more than offset lower quotations for sunflower and rapeseed oils, with palm oil prices pushed up, in part, by concerns over the potential impact of El Niño-related weather conditions.

The Meat Price Index rose 1% in August, due to higher poultry, pig and ovine meat prices.

The FAO says:

International poultry meat prices rose, reflecting a rebound in Brazilian export prices amid strong global import demand. Pig meat quotations also surged, principally driven by higher prices in the European Union, where high temperatures continued to slow animal growth, limiting the availability of slaughter-ready pigs.

And….The Dairy Price Index jumped by 2.3% in August, driven by higher milk powder and cheese prices.

The global bond market appears to be steadying this morning.

UK government bond prices are recovering some of their recent losses, which is pulling down borrowing costs (yields).

The yield on two-year UK bonds has dropped by over six basis points (0.06 of a percentage point) to 4.767% – that could help ease the pressure on mortgage rates.

Benchmark 10-year UK bond yields are down 5.5bps to 5.369%, away from the 19-year highs set earlier this week.

30-year bond yields, which hit their highest level since 1998 yesterday, are down too – dropping by 5bps to 5.92%.

Bond yields are dropping in sync with the Brent crude oil price, which is down 1% today to $101.19 a barrel.

Fears that sharply high oil prices will keep pushing up inflation, forcing central banks to raise interest rates, have been a prime factor behind the bond sell-off.

The jump in UK borrowing costs in recent weeks to the highest level in many years has eaten into the ‘fiscal buffer’ which the government created to keep within its fiscal rules.

That buffer was £23.6bn back in March, but some economists estimate it could have halved – even before you account for new spending pledges.

This means John Healey could face a choice between reporting a smaller buffer (which increases the risk of breaking the fiscal rules), or lifting taxes to boost revenues.

Economist Lord O’Neill argues that Healey should accept the buffer will have to be smaller, pointing out that we are facing “remarkable circumstances”.

Jim O’Neill told Radio 4’s Today Programme that this might be the wisest thing to do, given the huge unpredictability surrounding Donald Trump and the Iran war.

The situation could be very different by the budget, or a few weeks later, and oil prices might have dropped, he argues.

As Lord O’Neill puts it:

Rather than risking some tax increases in the way previous governments have to just magically hit some number and keep the buffer bigger, in this instance I personally suspect it might be the wisest thing to do.

He also argues that the UK economic situation is somewhat better than some people realise, pointing out that the economy grew at an annual rate of 2% in the first half of this year.

The euro is trading close to the 17-month low hit yesterday, when the single currency fell by over 0.75% to as low as €1.1214.

Ipek Ozkardeskaya, senior analyst at Swissquote, says jitters about France are hurting the euro:

The sharp weakening of appetite for French debt is a big issue for the broader euro area and the euro itself. France is the euro area’s second-largest economy — we used to call it the ‘core’, along with Germany, back during the 2012 sovereign debt crisis!

So, if concerns spread, other heavily indebted members could also face higher borrowing costs, tightening financial conditions across the region. For the euro, that means weaker growth prospects and a growing risk premium. The EURUSD tanked to 1.1215 yesterday, as the market’s focus shifted from the central-bank convergence/divergence story towards the euro area sovereign debt story.

France’s government did try to cool the situation yesterday, by proposing a budget for next year including €43bn in cuts and tax rises.

Under the proposed plan, the tax burden would rise while spending growth would be slowed through slashing state spending, and capping increases to pensions and civil servant salaries.

Finance minister Roland Lescure explained it was important to put France back on track for deficit reduction.

But even with this plan, the French budget deficit would only fall to 5% of GDP next year.

Analysts at ING warn that this deficit would be “far too high” to prevent France’s national debt (already 119% of GDP) from rising higher.

In a note titled France’s budget offers no quick relief for bond markets, ING say:

France’s fiscal package would prevent the deficit from reaching 6.5% of GDP next year, but it would not stabilise public debt. With a difficult political process ahead, French bonds are likely to remain under pressure, while the threshold for ECB intervention remains high

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Turmoil in the government bond market is reviving memories of the eurozone debt crisis 15 years ago – but this time France is in the firing line.

Concerns over Paris’s fiscal position are pushing its borrowing costs up, amid a global sell-off of sovereign debt. This pushed the gap between France and Germany’s borrowing costs, a key measure of investor concern, to its widest level since 2012.

Yesterday, the yield on French 10-year government bonds (or OATs) yields jumped to their highest level since 2002, before dipping back as the bond rout eased.

Investors are reluctant to eat their OATs due to political uncertainty, with presidential elections scheduled for 2027, and concerns over France’s public debt which has climbed to a record high.

Jim Reid, Deutsche Bank strategist, points out that yesterday the Franco-German 10 year spread (+13.9bps) saw its biggest daily jump since March 2020 at the height of the Covid turmoil.

Reid told clients this morning:

Markets stumbled yesterday as we began Q4, with mounting signs of financial stress focused on Europe. In fact, the daily moves were reminiscent of the Euro crisis in many respects, with sovereign contagion a big talking point.

Inflation fears are also pushing up bond yields – and at 10am we get the first reading on how fast prices rose across the eurozone in September.

If that doesn’t rock the market, then the latest US jobs report might, as pressure mounts on the US Federal Reserve to consider raising interest rates.

The agenda

• 9am BST: UN’s FAO Food Price Index

• 10am BST: Eurozone flash inflation reading for September

• 1.30pm BST: US non-farm payrolls employment report

• 3pm BST: US factory orders report for August