El Niño risks may push global food prices higher in 2027; full impact to emerge gradually: Report

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New Delhi: Global food prices could rise further in 2027 amid increasing fertilizer and farming costs, coupled with potential El Niño-related weather disruptions, with the impact likely to become more evident over the coming months, however, the full impact on food will take time to appear, according to a report by S&P Global.

The report warned that an exceptionally strong El Niño could threaten agricultural production across major crop-producing regions, while shortages of fertilizer and diesel continue to put pressure on farmers.

“The impact on food will likely become much more apparent over the next few months as farmers wrestle with high costs and with shortages of fertilizer and diesel.”

“Unlike changes in oil prices , which register immediately, the full impact on food will take time to appear. Farmers buy seed, fertilizer and fuel months before they sell a crop,” it said, stressing, “The squeeze now bearing down on farm budgets may therefore not reach food markets in force until 2027.”

According to S&P Global, fertilizer production is expected to recover gradually, allowing markets to stabilise. Higher crop prices could improve farmers’ profit margins, encourage more land to be brought under cultivation and increase fertilizer use. However, the adjustment will take time, with consumers likely to face higher food prices before agricultural production and supply recover.

“Commodities other than the basic staples will be affected by the El Niño, including cash crops that are important to livelihoods in many poorer regions,” it noted.

To describe it further, the report noted, global agriculture is facing pressure from rising fertilizer and energy costs, growing demand for biofuels and potential El Niño-related weather disruptions. It highlighted that fertilizer production depends heavily on natural gas, while diesel is essential for operating farm machinery, irrigation systems and transporting agricultural produce.

Rising energy prices are therefore increasing production costs and putting pressure on farmers’ profit margins.

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“As the conflicts in Europe and the Middle East have driven up diesel prices, biofuels become more attractive. The knock-on effect is that, in some regions, crops for fuel become more valuable than crops for food.”

What is unfolding is not a single agricultural shock, but the convergence of several shocks. Conflict is moving through fertilizer, energy and biofuel markets, raising costs and narrowing farmers’ choices just as an extreme El Niño threatens harvests.

“An exceptionally strong El Niño, expected to peak in late 2026, acts as an environmental multiplier that threatens to unleash severe droughts and floods across key Asian, African and Latin American breadbaskets in 2027,” it said.

The impact could be particularly severe in regions where crop productivity has already been weakened by insufficient fertilizer use over successive growing seasons.

S&P Global also warned that global grain reserves remain at historically low levels amid the ongoing Ukraine war, leaving limited capacity to absorb simultaneous crop failures across multiple regions.

Overall, “A global food crisis is not foreordained. But neither is it any longer a distant risk,” it added.

(Source: ANI)

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