Fertilizer shortages and a brewing El Niño are converging in a way JPMorgan says could push global food prices higher heading into 2027. The bank has not attached a single locked-in forecast to the warning. Instead, its research team is tracking two mechanisms that, together, have historically moved food inflation more than either does alone.
The analysis comes from J.P. Morgan’s Climate Advisory team, led by Dr. Sarah Kapnick, global head of climate advisory. Kapnick’s report traces the pressure to a conflict most Americans associate with oil, not groceries.
A war disrupting fertilizer
Since the Iran conflict began, shipments through the Strait of Hormuz have slowed, disrupting a corridor that carries more than a third of the world’s nitrogen fertilizer trade. Over 30% of global urea, a nitrogen-based fertilizer critical to corn, wheat and rice production, is imported from the Persian Gulf, where plants rely on a steady natural gas feedstock.
Nitrogen fertilizer has to reach farmers before or during planting. Applying it late does more harm than good, since surface application after crops emerge can convert the nutrient into ammonia gas that damages the plants it was meant to help. That timing constraint means a shipping disruption today shows up in yields months later, not immediately.
Unlike oil, there is no large strategic reserve of nitrogenous fertilizer sitting in tanks to smooth over a shortage. The compound’s instability makes stockpiling impractical, leaving farmers with fewer options if supply tightens during a planting window.
Rebuilding fertilizer capacity takes years
JPMorgan’s analysis estimates it could take one to four years to restore fertilizer production to full capacity, and some damaged natural gas facilities may need three to five years to repair. That mismatch, a slow industrial recovery against a fixed agricultural calendar, is central to why the bank frames this as a multi-year risk rather than a short-term price spike.
Corn planted in South America between September and January is likely to be affected first, given Brazil’s reliance on Persian Gulf nitrogen. Winter wheat sown in September across the EU, China, India, Russia and the US follows a similar exposure pattern, along with fall and winter rice plantings across South and Southeast Asia.
Farmers facing higher fertilizer costs generally choose one of three paths: pay more to maintain output, cut back on application and accept lower yields, or switch to a less input-intensive crop. JPMorgan’s research points to reduced application as the most likely response in regions with high import dependence, corn in particular, where usage tends to fall quickly when fertilizer prices rise.
A brewing El Niño adds a second variable
Weather is the second pressure JPMorgan is watching. Most current forecasts point to a developing El Niño, with the most aggressive scenarios describing a super El Niño event that would bring Pacific Ocean temperatures roughly 2 degrees Celsius above normal. The probability of that outcome has grown with each successive monthly forecast this year.
Historically, El Niño events have coincided with a production decline of about 3.5% across tropical farming regions, offset partly by a roughly 2.4% increase in temperate zones. That geographic split does not guarantee stability, though. During the 2023-2024 El Niño, several temperate regions saw extreme weather events that cut output anyway, reminding us that background climate warming can override historical patterns.
The last time a strong El Niño overlapped with a fertilizer price spike was during that same 2023-2024 cycle. During this period, India imposed export bans to protect its domestic rice supply as production fell.
JPMorgan’s research identifies India and Brazil as facing similar compounded exposure. Both are among the largest importers of fertilizer from the Persian Gulf and lie within the tropical band where El Niño can cause significant weather disruptions.
Why the risk is described as compounding, not additive
Neither fertilizer disruption nor El Niño alone has historically been enough to justify sustained alarm.
JPMorgan’s concern is what happens when an energy-driven supply shock lands in the same window as a weather-driven yield shock. It also asks whether the two reinforce each other rather than canceling out.
The bank notes that even if the Iran conflict ended immediately, residual effects on fertilizer supply would likely persist given how long production facilities take to restart.
What US shoppers are already seeing
Domestically, the pressure so far looks more modest than the global warning implies. The Bureau of Labor Statistics reported food prices up 3.0% over the year ended June 2026. Grocery store prices were up 2.7% and restaurant prices up 3.4%. Overall consumer prices rose 3.5% over the same period before easing slightly to 3.4% in July.
The Department of Agriculture’s Economic Research Service tracked similar movement at the grocery aisle level. Its July 2026 Food Price Outlook found food-at-home prices flat from June to July but up 2.7% year over year, with sharp divergence by category. Fresh tomatoes were 12.8% more expensive than a year earlier, fresh lettuce rose 7.5%, and sugar and sweets climbed 7.4%. Fresh vegetable prices overall are forecast to rise as much as 8% by the end of 2026.
Consumer sentiment has run well ahead of the official data for some time. Research from Purdue University’s Center for Commercial Agriculture found that shoppers estimated food inflation at 5.4% for 2025. That was roughly twice the official 2.7% food-at-home inflation rate for the year. Looking forward, those same consumers expect another 3.9% increase over the next 12 months.
A risk to watch
JPMorgan’s own language treats this as a scenario built on compounding conditions, not a settled prediction.
Both conditions remain unresolved: Strait of Hormuz shipping tensions have not eased, and El Niño forecasts continue trending toward a stronger event later this year.
Whether the two risks actually compound as the bank’s framework suggests, or ease before they fully collide, will likely become clearer well before 2027 arrives.
