UN Food Agency Warns: War, Oil, Fertilizers and El Niño Set to Spark New Inflation Spike

Why the FAO Sees a New Food Price Shock on the Horizon

The world is on course for a new wave of food inflation as three powerful forces collide, according to Máximo Torero, chief economist of the UN Food and Agriculture Organization (FAO). He warns that the escalation of the Iran-Israel war, the ongoing conflict in Ukraine, and the intensifying El Niño weather pattern will jointly drive up agricultural commodity prices later this year, with consumers feeling the pinch by the end of 2026 and through 2027.

Torero told Reuters that the transmission from commodity markets to supermarket shelves typically takes three to six months. “I believe commodity prices will start rising more now, and food will become more expensive by the end of the year. Next year, the increase will certainly be even greater,” he said. This marks a sharp reversal from the relatively tame food prices seen in much of 2026, which had helped offset stubbornly high energy costs in several economies.

A key flashpoint is the Strait of Hormuz, a critical chokepoint for global oil and gas shipments. Torero stressed that any disruption there hits every agricultural input: Brent crude is used for water pumping, packaging, processing and transport, while natural gas is essential for fertilizer production. Simultaneously, Ukrainian strikes on Russian energy infrastructure have squeezed exportable supplies of diesel and natural gas—another blow to food producers worldwide.

The pressure is already visible on the ground. Wheat and corn planting has contracted in the first months of the Iran-Israel war, while some US farmers have switched to soybeans, which require less fertilizer. The American Farm Bureau Federation estimates that growers of the nine main US crops could face losses of up to $32 billion in 2027 without federal support. In Australia, a major agricultural exporter, the government forecasts a 21% drop in winter crop output, blaming the surge in fuel and fertilizer costs. In India, a delayed and potentially below-average monsoon threatens rice production, which could add another layer of pressure to global food prices.

How Geopolitics, Energy and Climate Are Converging to Pressure Global Food Supplies

The Strait of Hormuz as an Agricultural Chokepoint

While the Strait of Hormuz has long been a strategist’s concern for energy markets, the FAO’s warning underscores how directly it feeds into global food security. Roughly a fifth of the world’s oil and a significant share of natural gas pass through the waterway. Any disruption—whether from actual conflict or heightened insurance and transit costs—ripples into diesel for tractors and transport, gas for nitrogen fertilizer, and energy for food processing. That makes food inflation more sensitive to Middle Eastern tensions than at any point since the 1970s.

Fertilizer and Diesel Scarcity Hits Planting Decisions Worldwide

The FAO’s field reports show farmers responding to the cost squeeze before commodity prices have even fully adjusted. The shift from wheat and corn to soybeans in the United States is a classic margin-protection move, but it reduces global grain acreage just when stocks need replenishing. In Australia, the projected 21% winter crop decline ties directly to uncertainty over whether fuel and fertilizer will be available and affordable. This pattern of “planting down” the input ladder risks smaller harvests in 2027 across several key exporters, magnifying the price transmission the FAO expects.

El Niño’s Threat to Grain and Rice Supplies

An unusually strong El Niño adds a climate wildcard. By altering rainfall patterns it can slash yields in both hemispheres. India’s late and potentially weak monsoon is the most immediate concern for rice markets; the country is the world’s largest rice exporter, and any supply shock there typically lifts global benchmarks. If El Niño disrupts corn and wheat belts in other regions later in the year, the world could face simultaneous price spikes across multiple staple grains—a scenario last seen in 2012.

A Reprise of 2022—But Potentially More Protracted

The 2022 food price surge was largely triggered by the Ukraine war and pandemic-era supply chain snarls. This time, Torero’s outlook combines the war in Ukraine with a new Middle Eastern conflict, an energy price catalyst, and a climate event of global scale. Because all three pressures are structural rather than transient, the inflationary cycle for food may stretch further into 2027, leaving central banks and governments with a politically sensitive cost-of-living challenge just as they hoped to declare victory over inflation.

What Governments, Businesses and Consumers Should Do as Food Inflation Returns

For governments:

• Prepare social safety nets and targeted food subsidies now, given the FAO’s 3–6-month lag before commodity prices hit consumers. The 2022 experience showed that delayed action exacerbates political instability.
• Avoid the knee-jerk imposition of export restrictions on grains and rice; such measures amplified price spikes in 2008 and 2022. Coordinate through the World Trade Organization and the G20’s agriculture market information system to keep trade flowing.
• Monitor India’s monsoon performance closely. A poor rice harvest could trigger export curbs similar to those seen in 2023, forcing major importers in Africa and the Middle East to seek alternative suppliers.

For businesses:

• Food manufacturers and retailers should begin hedging commodity exposure for Q1–Q2 2027 delivery, as the FAO’s transmission timeline suggests ingredient costs will rise markedly by then.
• Agricultural input suppliers and logistics firms may see increased demand for fertilizer substitutes, alternative fuels, and drought-resistant seed varieties—prepare for a shift in procurement patterns.
• The projected $32 billion loss for US farmers signals that without a new support program, crop supply could contract further, creating opportunities for large grain traders and processors to secure strategic inventory.

For consumers:

• Expect higher grocery bills for bread, pasta, rice and meat by early 2027. The FAO’s warning implies that the relief seen in 2026 was temporary, and household budgets should begin factoring in a 5–10% rise in core food costs over the next 12–18 months.