First came the frost and drought. Now comes the rise in food prices

September 2, 2021, 1:12 PM UTC

Bare shelves. Long delays. Goods that just don’t show up at all.

Wild weather, labor and equipment shortages, and a snarled global supply chain have hit everything from chips to cooking equipment—and food. Now, around the globe, prices for staple commodities from beef to wheat to sugar and vegetable oil are steadily rising, fueled by a mix of drought, fires, frost—and COVID-19 labor shortages.

Prices globally are up nearly 33% since the same period last year, according to the UN Food and Agriculture Organization (FAO)’s monthly food price index, released on Thursday. From July, prices are up by over 3%. Overall, this year the FAO’s index puts food prices at levels not seen since 2011, the peak of rising prices spurred by weather shocks and high oil prices, that fueled a global food price crisis and famously resulted in widespread protests ahead of the Arab Spring.

This year the FAO pointed to a seemingly perfect storm of disruption, but weather seemed to be the most common denominator. It has disrupted crops from Brazil to Kazakhstan, offering a worrying picture of how multiyear droughts and freak events can exacerbate underlying vulnerabilities in the global food system.

Brazilian cane sugar

For Brazil’s sugarcane crops, the arrival of frost was just another hit after a difficult year.

Last year’s drought had prevented the crops from getting off on the right foot, and more high temperatures were paired with fire outbreaks across sugarcane fields. Then waves of frost arrived, damaging production once again in the world’s largest sugar producer.

That has constrained global supply, helping prices jump. The FAO’s Sugar Price Index jumped 9.6% in just one month to August, and was up for the fifth consecutive month, hitting levels not seen since February 2017, when weather events and increasing sugar consumption had pushed sugar prices up.

Futures markets and U.S. retail prices also reflected those jumps. Over the past year, the U.S. sugar futures price has more than doubled, jumping 56% to sit at prices not seen since March 2017. Retail sugar prices in the second quarter of 2021, as tracked by the USDA, were at their highest since 2012.

Canadian wheat

The Canadian Prairies were sizzling.

Earlier this summer, the now-famous “heat dome” across western North America produced record temperatures across the region, while rainfall was less than half the typical levels. In the Canadian provinces that operate as the country’s breadbasket, that meant wheat crops were being toasted alive.

The country’s wheat production is expected to drop by nearly 35% this year, to a 14-year low, according to the Canadian government statistics agency. In the province of Alberta alone, smaller harvest areas and baking heat meant the crop is forecast to drop by 45%. The FAO says that wheat stocks in Canada have now dropped to a 40-year low.

Canada, the world’s fourth-largest exporter of wheat after Russia, the U.S., and the EU, wasn’t alone. The USDA estimates that Russia will see an even larger hit to its wheat crop (between the two countries, wheat production will drop by an estimated 40 million metric tons this year), and U.S. crops were also hit by drought.

That’s helped push up wheat prices worldwide by 8.8% month on month and by 43.5% since August 2020, with the index putting prices at levels not seen on a yearly basis since 2013. On the futures market, the CBOT wheat contract is now up about 27% since the same time last year.

Malaysian palm oil

When the Malaysian government passed the Movement Control Order (MCO) in March 2020, the law would quickly have an unexpected knock-on effect: the price of palm oil.

The country is responsible for about 26% of the world’s palm oil production, according to the USDA, making it the world’s second-largest producer, after Indonesia. The vegetable oil is incredibly versatile—it is used as an ingredient in products from cooking oil to toothpaste to pizza—and fluctuations in its price produces knock-on effects across the food and consumer goods sectors.

The MCO stopped new foreign labor from entering the country and allowed those who were already working in Malaysia to return home. That exacerbated a labor shortage that was already estimated at 31,000 workers, according to the USDA, amid a critical reliance on foreign workers, with many Malaysians unwilling to take the difficult jobs on the palm oil plantations. The USDA estimates that production is down nearly 11% compared to the same period last year.

That has helped push vegetable oil prices as a whole up by 6.7% from July; while international palm oil prices are now sitting at record highs, according to the FAO. USDA data showed a $67 jump in prices from July 2021 compared to a year earlier.

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