JPMorgan has warned that global food prices could climb five percent in the first half of 2027 as fertilizer shortages collide with a potentially powerful El Niño weather pattern.
The bank's analysis said the two threats are squeezing the world's food supply and could eventually raise grocery costs for American shoppers, even though the United States may escape the worst direct effects.
The first threat is unfolding in the Persian Gulf, which supplies more than 36 percent of the urea imported worldwide. Urea is a high-nitrogen fertilizer widely used by farmers.
Dr Sarah Kapnick, Global Head of Climate Advisory for JPMorgan, said the Iran conflict has slowed fertilizer production, and that disruption through the Strait of Hormuz has restricted exports and driven up prices.
Kapnick warned the shortages could begin hurting harvests within months, starting with South American corn before affecting wheat crops in the United States and other major producers, and rice crops across Asia.
Climate as a 'threat multiplier'
Kapnick described the overlapping threats as an example of climate acting as a threat multiplier. "I didn't expect so many examples of 'climate as a threat multiplier' to emerge so quickly," she wrote in the report.
"We are seeing some of those vulnerabilities at play today, as emerging supply chain and business continuity threats are growing, amplified by natural gas price volatility and supply chain disruptions from the Iran conflict, a brewing El Niño and existing drought conditions," she wrote.
Why nitrogen fertilizer matters
Nitrogen is the most widely consumed fertilizer by mass and plays a critical role in producing corn, wheat and rice, which together account for more than half of global nitrogen-fertilizer demand, according to JPMorgan. Fertilizer has historically made up 21 percent of corn-production costs and 19 percent of wheat-production costs.
Urea, one of the most common nitrogen fertilizers, is manufactured using natural gas and generally must be placed in the soil around the time seeds are planted. That narrow window makes disruption particularly dangerous, since fertilizer arriving after crops are sown cannot simply be applied months later. Late surface applications can turn into ammonia gas, potentially damaging the plants they were meant to feed.
Unlike oil, nitrogen fertilizer is not backed by widespread strategic reserves because it is unstable and can convert into toxic ammonia. That leaves farmers with few options when shipments fail to arrive: pay higher prices to protect yields, use less fertilizer and accept smaller harvests, or switch to another crop.
South America and Asia face the first tests
The first major test could come in South America, where corn is planted between September and January. Brazil, one of the world's leading agricultural exporters, is also a major importer of nitrogen fertilizer from the Persian Gulf.
Winter wheat planted from September in the United States, Europe, China, India and Russia could also be affected, while fall and winter rice crops in India, Bangladesh, Indonesia and Vietnam face similar risks.
JPMorgan estimated fertilizer production could take between one and four years to return to full capacity, while some badly damaged natural-gas facilities may need three to five years to recover, since plants cannot restart until the gas infrastructure feeding them is operational. Building replacement plants is difficult too, requiring extensive engineering and environmental reviews because of the risk of ammonia leaks.
The El Niño risk
El Niño occurs when unusually warm waters in the equatorial Pacific Ocean release heat into the atmosphere, altering weather patterns thousands of miles away. It can shift rainfall, worsen drought, trigger floods and intensify wildfires, with different effects depending on the region.
Tropical producers face the greatest danger, particularly Brazil and India, where heavy reliance on Persian Gulf fertilizer overlaps with regions historically vulnerable to El Niño crop losses. Past El Niño events have been associated with an average 3.5 percent decline in agricultural production across tropical regions, compared with a 2.4 percent increase in temperate areas, the report found.
Kapnick cautioned that farms farther from the tropics are not necessarily protected, particularly as rising global temperatures increase the risk of damaging heat. Most forecasts cited in the report point toward El Niño developing, while the highest projections suggest an extreme "Super El Niño" in which Pacific Ocean temperatures rise about 3.6 degrees Fahrenheit above normal. The ultimate damage will depend on the event's strength, local weather conditions and whether farmers can switch to more drought-resistant crops.
Lessons from 2023-2024
A similar collision occurred during the 2023-2024 El Niño, when fertilizer prices were already elevated. Global wheat supplies remained relatively stable because larger harvests in the US and India offset losses elsewhere, but rice and cocoa exports suffered sharp declines. India also imposed export restrictions to protect domestic supplies as production fell, showing how crop losses in one country can quickly disrupt food markets elsewhere.
What it could mean for shoppers
For American shoppers, the warning does not mean supermarket shelves will suddenly be empty or that a five-percent price increase is guaranteed. Favorable weather, increased production in other countries and new sources of fertilizer could soften the blow.
However, JPMorgan warned that the combination of missed planting windows, prolonged fertilizer disruption and El Niño-driven crop losses could transform an energy and shipping crisis into a much longer food-price shock.
