JPMorgan makes clear that the scenario does not involve a sudden disappearance of food from the global market
A new and particularly severe global shock in food prices appears to be taking shape ahead of 2027, as this time the risk is not linked to a single cause. Instead, geopolitical conflicts, energy disruptions, fertilizer shortages, and extreme weather events may act simultaneously, creating an exceptionally difficult situation for agricultural production. In its new analysis titled "Food Security Is National Security: A Compounding Storm," JPMorgan describes a sequence of developments that begins in the Persian Gulf, affects fertilizer production, spreads to the agricultural sector, and is ultimately transmitted to the prices consumers pay at supermarket shelves. The most alarming element is the combination of timing and factors. Global agriculture may be called upon to face costlier and less secure supplies, at a time when a potentially extremely powerful El Niño could restrict crop yields.
The team led by the US bank's senior global economist, Nora Szentivanyi, estimates that global food inflation could accelerate to approximately 5% during the first half of 2027, compared to 2.8% in the corresponding period of 2026. Such a development could add about 0.6 percentage points to headline inflation, significantly limiting the price deceleration that was expected for the following year. JPMorgan clarifies that the scenario does not involve a sudden disappearance of food from the global market. The danger involves a far more complex mechanism: lower agricultural output, increased costs, transport bottlenecks, and greater financial burden for households and countries with limited economic resilience.
Fertilizers at the center of the crisis
One of the most critical links in this chain is fertilizers, a product that may not be at the center of consumer attention, but serves as a key factor determining the level of agricultural output and food costs. The Middle East accounts for approximately 42% of global urea exports and 27% of ammonia exports, two essential components for the production of nitrogen fertilizers. This renders the Persian Gulf and specifically the Strait of Hormuz critical not only for international oil and natural gas markets, but also for the global food supply chain. The disruptions caused by the conflict with Iran have already impacted the market. According to JPMorgan data, nitrogen fertilizer prices surged by 25% to 50% between late February and April.
At the same time, the situation is compounded by natural gas, which constitutes a basic raw material for manufacturing nitrogen fertilizers, including urea. Thus, a prolonged energy crisis can generate double pressure, raising both energy expenses and food production costs. Farmers, however, do not have unlimited room to maneuver. Nitrogen must be available at specific stages of the growing cycle, meaning that a shortage at a critical moment cannot easily be made up several months later. Concurrently, if high costs force producers to cut back on fertilizer usage, crop yields may drop, ultimately leading to a smaller overall food supply. Restoring infrastructure is also not immediate. JPMorgan estimates that damaged fertilizer production facilities may require anywhere from one to four years to return to full operation, while for certain natural gas installations, recovery time could stretch from three to five years—assuming, of course, that military conflicts and armed attacks cease. Signs of strain are already surfacing in the markets. The FAO Food Price Index rose to 131.1 points in July, up from 130.3 points in June, reaching its highest level in over three years. During the same period, cereal prices advanced by 3.4%, while wheat recorded a monthly gain of 5.8%, driven by war, Black Sea export disruptions, and extreme temperatures.
El Niño could trigger a new wave of price hikes
Even if the shock from fertilizers could be contained, a second major threat looms from the climate: an exceptionally strong El Niño. JPMorgan calculates an 81% probability of a very strong or "super" El Niño event emerging by the end of 2026, while the likelihood of El Niño conditions persisting into 2027 stands at 97%. This specific weather phenomenon can cause major shifts in rainfall and temperatures across key agricultural regions, driving droughts, heavy precipitation, or flooding depending on the location. Based on historical data examined by JPMorgan, powerful El Niño episodes have been linked to an average reduction of approximately 3.5% in agricultural output across tropical zones. A severe El Niño on its own could add around 0.7 percentage points to global food inflation when its effects reach their peak. The factor causing the greatest concern, however, is that this climate shock could materialize concurrently with energy and geopolitical turmoil. According to calculations by Nora Szentivanyi's team, the simultaneous manifestation of both factors could nearly double the impact on food prices, adding 1.3 to 1.5 percentage points. JPMorgan warns that surging fertilizer costs could temporarily push global food inflation to 4%-5%. At the same time, it emphasizes that the impact will not necessarily appear immediately. This means that a raw material shock today could translate into pricier groceries several months down the line, when the initial cause of the disruption may no longer be dominating headlines.
Wheat, rice, coffee, and cocoa in the crosshairs
The ramifications are not expected to be uniform across all food categories. JPMorgan considers rice, sugar, coffee, and cocoa to be among the commodities with the highest exposure. Coffee and cocoa are particularly vulnerable to the fallout from a strong El Niño, given that their cultivating areas are predominantly situated in tropical belts where global production is geographically concentrated. Simultaneously, pressure on grain markets is being intensified by the situation in the Black Sea region. Ukrainian agricultural exports plummeted by roughly 75% year-on-year during the first two weeks of August, as military strikes inflicted severe disruptions on shipping routes. Ukraine accounts for approximately 6% of global wheat production and 11% of corn output. At the same time, Ukrainian strikes caused operational problems at major grain terminals in Novorossiysk, Russia, injecting further uncertainty into international trade flows. Russia remains the world's largest wheat exporter. International prices are already reflecting market sensitivity. In July, wheat climbed by 5.8%, corn rose by 3.6%, and sugar prices gained 5.6%, as market participants evaluate both weather developments and geopolitical friction.
Poorer economies face the highest risk
A fresh food crisis would not impact the entire globe uniformly. According to JPMorgan, emerging economies in Asia, Africa, and Latin America are likely to stand on the front lines of distress. These nations are more exposed to shifting weather patterns, while their households allocate a larger share of income toward basic food purchases. Consequently, even a relatively modest percentage increase in prices can trigger disproportionately severe social and economic consequences. The starting point is already challenging. Roughly 645 million people faced hunger globally last year, while approximately 2.1 billion experienced moderate or severe food insecurity—a figure representing roughly 25.8% of the global population.
However, certain factors could serve as a buffer. Global grain reserves remain at relatively adequate levels, and rice inventories in Asia are also deemed sufficient. China has built up substantial strategic reserves of food and fertilizers in recent years, with its grain stockpiles estimated at around 700 million tons—an amount roughly equivalent to one full year of domestic consumption. Nevertheless, reserves can only function as a cushion against a temporary shock. They cannot indefinitely neutralize a combination of expensive fertilizers, depressed crop yields, high energy costs, and disruptions along major trade routes. Concerns are not limited to JPMorgan. Goldman Sachs and HSBC have likewise warned of heightened risks surrounding global food inflation, while the latest data from the UN Food and Agriculture Organization indicates that international food prices have already hit their highest point since January 2023. Thus, if all these compounding factors converge, a shock originating today in the Persian Gulf and fertilizer manufacturing plants could transform by 2027 into a full-scale global food crisis, ultimately reaching the dinner tables of billions of people.
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