The El Niño weather phenomenon has started to hit food prices as droughts in Southeast Asia and rains in Brazil are affecting crops including sugar and palm oil.

Food prices in October posted their largest month-on-month rise in three years, up almost 4 per cent from September, according to the United Nations Food and Agricultural Organisation.

“The expectation that El Niño and adverse weather conditions will curb output in 2016” was behind the price rise in October, said Abdolreza Abbassian, the FAO’s senior economist.

Price increases in sugar, vegetable oils and dairy led to the rise, although the FAO food price index was still 16 per cent lower on a year-on-year basis.

The FAO sugar price index jumped 17 per cent to an eight-month high.

The sharp month-on-month increase was largely weather-driven, with rains in Brazil, the world´s leading sugar producer, delaying sugar cane harvesting.

Reports of crop damages caused by excessive dryness in leading international producers, including India, Thailand, the Philippines, South Africa and Vietnam also provided further support to international prices.

After three months of declines, vegetable oil prices rebounded, increasing 6 per cent from the previous month.

This was driven by intensifying concerns over El Niño and its effect on next year’s production of palm oil in Southeast Asia — in Indonesia, in particular.

In addition, international soya oil prices strengthened, mainly reflecting slow progress in soyabean plantings in parts of Brazil due to unfavourable weather conditions.

Limited availability of rape and sunflower seed on the international markets also supported the market.

Dairy prices rallied 9 per cent from September, driven by higher prices in Oceania on the back of worries that milk output in New Zealand would fall during the current June-May dairy year.

Dairy farmers have been hit hard by the sharp fall in prices earlier this year and there are also expectations that EU production may also slump.

Prices of whole milk powder, the main dairy product traded internationally, surged by almost 21 per cent over the month, with all the other dairy products groups.

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