Global food prices could rise further in 2027, as fertilizer and agricultural production costs increase, with the potential for El Niño-related climate disruptions, according to a report by S&P Global.
And the report warned that El Niño could reach extraordinary levels, threatening agricultural production in key crop-producing regions around the world, at a time when farmers are facing increasing pressure due to a shortage of fertilizers and diesel and their high costs.
And the full impact of these factors on food prices may not appear immediately, but will gradually become clear over the coming months, with the potential for further pressure to shift to markets in 2027.
The report pointed out that changes in oil prices are quickly reflected in the markets, unlike food, whose agricultural production cycle requires more time; Farmers buy seeds, fertilizers and fuel months before harvesting and selling crops.
Accordingly, the pressures currently facing agricultural budgets may not show their full effects on food markets until next year.
Fertilizers and energy increase agricultural production
Global agriculture faces simultaneous pressures from rising fertilizer and energy prices, growing demand for biofuels, and possible El Niño-related climate disruptions.
Fertilizer production is highly dependent on natural gas, while diesel is essential for the operation of agricultural machinery, irrigation systems and the transport of agricultural products.
And so rising energy prices are driving up production costs and squeezing farmers’ profit margins, which could limit their ability to buy the necessary agricultural inputs for the coming seasons.
Fertilizer production is expected to recover gradually, which could help the markets stabilize, the report said, but added that this adaptation needs time.
Increasing crop prices are expected to improve farmers' profit margins, encouraging them to expand cultivated areas and increase fertilizer use. But consumers may face higher food prices before agricultural production recovers and supplies improve.
Wars and biofuels exacerbate pressures
The risks are not limited to weather and production costs, as the report noted that conflicts in Europe and the Middle East contributed to raising diesel prices, making biofuels more economically attractive.
This may, in some areas, increase the economic value of crops used for fuel production at the expense of crops intended for food consumption.
According to the report, what the agricultural sector is witnessing is not a single shock, but a synchronization of several crises; The effects of conflict are shifting to fertilizer, energy and biofuel markets, raising production costs and limiting farmers’ options, in conjunction with climate threats that could affect crops.
He added that the impact of these pressures may be more severe in areas where crop productivity has already declined due to insufficient fertilizer use during successive planting seasons.
El Niño threatens key production areas in 2027
El Niño, expected to peak in late 2026, could increase the risk of severe droughts and floods in key agricultural regions of Asia, Africa and Latin America during 2027, the report warned.
And the danger of this scenario is the possibility of exposure to multiple areas of simultaneous climate disturbances, which may lead to a decline in crops in more than one major production area at the same time.
Global cereal stocks remain at historically low levels as the war in Ukraine continues, limiting the ability of markets to absorb simultaneous shocks caused by crop failures in different regions.
In such circumstances, pressures on supplies and prices may increase, particularly if the decline in production coincides with continued high costs for fertilizers, energy and transportation.
Is the world on the verge of a food crisis?
Despite the warnings, the report does not confirm a global food crisis, but suggests that the possibility of it happening is no longer a remote risk that can be ignored.
And the severity of the expected impacts depends on weather developments, the trajectory of energy and fertilizer prices, the ability of agricultural production to recover, as well as the size of stocks available to meet any supply shortages.
And so, the challenge in 2027 will not be limited to the possibility of higher food prices, but will extend to the ability of countries and farmers to maintain production in the context of the synchronization of climate, economic and geopolitical pressures.
And the S&P Global report warns that the El Niño risk combination with rising fertilizer and energy costs and falling grain stocks could push global food prices even higher in 2027. But the size of the final impact will depend on weather, production and supply developments over the coming months.
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