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

Global food prices could rise in 2027 because several pressures are arriving together. Fertiliser and farming costs are increasing, while a potentially exceptionally strong El Niño could disrupt harvests. Higher costs can reduce farmers’ margins and limit how much they plant or fertilise. Weather damage could then further tighten supplies.

Farmers purchase seed, fertiliser and fuel months before selling their crops. Fertiliser shortages can weaken crop productivity, while expensive diesel raises the cost of machinery, irrigation and transport. If droughts or floods strike major growing regions, less food reaches markets. Basic staples and cash crops could both be affected.

Consumers may face higher prices before production recovers. S&P Global expects fertiliser production to recover gradually, and higher crop prices may eventually encourage more planting and fertiliser use. Yet historically low grain reserves could make it harder to absorb simultaneous crop failures, especially if El Niño peaks in late 2026.

El Niño is a recurring climate pattern in which unusually warm surface waters in the tropical Pacific alter winds and atmospheric circulation. Those changes redistribute heat and moisture around the world. As a result, normal rainfall patterns can weaken in some places and intensify in others. The same event can therefore produce droughts in one region and floods in another.

The report warns that an exceptionally strong El Niño could threaten key agricultural areas in Asia, Africa and Latin America. Drought can reduce water available for crops and irrigation. Heavy rain and flooding can damage fields, delay planting or destroy harvested produce. These effects matter most where productivity is already weakened by repeated underuse of fertiliser.

The report expects El Niño to peak in late 2026, with consequences emerging across 2027. It does not guarantee a global food crisis, but it could act as an environmental multiplier alongside high input costs, conflict-related disruption and low grain reserves.

Farm costs and food prices move on different schedules. Farmers usually buy seed, fertiliser and fuel before planting, then wait months to harvest and sell their crops. This creates a delay between rising input costs and the prices consumers eventually see. Oil prices can register quickly, but agricultural costs move through the growing cycle.

For example, expensive diesel raises the cost of running machinery, irrigation systems and transport. Fertiliser shortages or higher prices can reduce applications, potentially weakening yields. Those effects become visible when crops are harvested and marketed. If farmers need to recover higher costs, crop prices may rise before new production responds.

S&P Global says the squeeze on farm budgets may not reach food markets in force until 2027. Fertiliser production is expected to recover gradually, and higher crop prices could encourage more planting. However, consumers may face higher prices before supply and agricultural production adjust.

The potential disruption is global because the report identifies major crop-producing regions across Asia, Africa and Latin America. An exceptionally strong El Niño could bring severe droughts and floods across these breadbaskets in 2027. Simultaneous problems in several regions would place unusual pressure on international food supplies.

The effects would not be limited to basic grains. The report says commodities other than basic staples, including cash crops important to livelihoods in poorer regions, could also be affected. Weather damage could reduce harvests, while insufficient fertiliser use over successive seasons has already weakened productivity in some areas. High fuel and fertiliser costs would compound those losses.

The article does not identify every crop or country at risk. It does warn that historically low global grain reserves, amid the ongoing Ukraine war, leave limited capacity to absorb multiple crop failures. That makes a geographically broad disruption more dangerous than an isolated harvest loss.

Fertiliser, diesel and energy are basic parts of modern food production. Fertiliser supports crop growth, but its production depends heavily on natural gas. Diesel powers farm machinery and irrigation systems, and it moves agricultural produce to markets. When energy prices rise, farmers and other suppliers face higher costs across the production and distribution chain.

Conflict in Europe and the Middle East has driven up diesel prices, according to the report. At the same time, expensive fuel makes biofuels more attractive. In some regions, crops used for fuel may become more valuable than crops used for food. This can narrow farmers’ choices and increase competition for land and crops.

The result is not one isolated shock. Fertiliser, energy and biofuel markets can reinforce one another while El Niño threatens harvests. Farmers’ profit margins come under pressure, and consumers may pay more. Supply can recover later, but production and transport costs may rise first.

Grain reserves act as a buffer between harvests and food demand. When production falls, stored grain can help maintain supplies while markets adjust. Historically low reserves mean that buffer is already thin. If harvests fail in several regions at once, there may not be enough stored grain to cover the gap.

The report links this danger to the ongoing Ukraine war and warns that global reserves remain at historically low levels. Imagine drought damaging crops in one breadbasket while floods hit another. Grain could become harder to source, and countries and buyers would compete for limited supplies. Prices could rise before farmers can produce replacement crops.

Low reserves do not make a global food crisis inevitable. They do reduce the capacity to absorb simultaneous crop failures. Combined with high fertiliser and diesel costs, biofuel demand and El Niño risks, they make the food system less able to withstand another major shock.

A supply shock forces the food system to share a smaller quantity of food among buyers who still need it. Prices usually rise first. Consumers then face higher bills and may reduce purchases or switch products. Commodity markets transmit these signals, while traders seek supplies from elsewhere. Governments may respond through measures such as reserve releases, trade changes or support for farmers, although the article does not specify particular policies.

The report describes the adjustment on farms. Higher crop prices can improve farmers’ margins, encourage more land under cultivation and increase fertiliser use. But farmers must first absorb expensive inputs and wait for the next harvest. If biofuel crops become more valuable than food crops, competition for land can intensify.

Consumers may face higher prices before production recovers. Markets may stabilise gradually as fertiliser production improves and farmers respond. Yet historically low grain reserves and possible simultaneous failures limit the available cushion, making the adjustment more painful.