A super El Nino and fertiliser shock – are food markets at risk?

Not just another El Nino?

El Nino is a naturally occurring climate phenomenon, defined by unusually warm sea temperatures in the eastern Pacific. These events have long shaped the global weather. This often takes the form of droughts in parts of Asia and Australia, while South America will have much heavier rainfall.

Rising global temperatures are increasing the intensity of El Ninos. The past 11 years have been the warmest since records began, with the three most recent being the hottest ever.¹ Climate models from the World Meteorological Organization (WMO) suggest global average temperatures will remain at or near record levels over the next five years.² They also suggest the strong likelihood of a severe EL Nino occurring in 2026.

The last super El Nino occurred in 10 years ago. It contributed to droughts across southern Africa, with Ethiopia, for example, experiencing its worst droughts in 50 years. Meanwhile, extreme rainfall caused severe flooding across Europe. The havoc wreaked damaged crops and drove up the cost of key foodstuffs, such as sugar, dairy products and vegetable oils.

Even in isolation, the current El Nino would increase pressure on global supplies. But the backdrop in 2026 is worse than it was a decade ago.

Fertiliser disruption’s geographical spread

The Middle East plays a critical role in global fertiliser production. The region has copious reserves of natural gas. This is a key energy source for fertiliser production, as well as being a feedstock (raw material) for nitrogen-based fertilisers. These types of fertilisers are supplied to almost half of global food production.

The Iran war has led to a jump in energy prices. Combined with disruption to shipping though the Strait of Hormuz, which normally accounts for 30% of global fertiliser, there has been a significant supply shock.

The International Rice Research Institute has reported that nitrogen-based fertiliser prices in Thailand and the Philippines have risen by 40-50% since the start of the war. This is placing pressure on already stretched farming systems.

Although many governments across emerging markets subsidise farmers’ fertiliser use, tighter fiscal constraints are limiting their ability to absorb rising costs. As a result, farmers are likely to use less fertiliser, which could reduce crop yields and weaken crop resilience, just as weather conditions become more extreme.

The fragile global agricultural system

Inventories of several key crops are tight by historic standards. This reflects previous supply shocks, as well as higher demand. In addition, fertiliser production capacity has been constrained by years of underinvestment, due to volatile energy prices and high investment costs.

There are some signs extreme weather is on its way. In Australia, low rainfall has disrupted the planting of key crops such as wheat and rapeseed. These are both commodities where Australia is a top five global exporter.

Lower fertiliser availability as well as worse weather conditions during a Super El Nino year will exacerbate these problems. Applying less fertiliser reduces yields and the ability of crops to withstand environmental stresses. As a result, crops become even weaker and more vulnerable to droughts or heavy rains. This increases the likelihood of production shortfalls.

The impact on food prices

These pressures are likely to push up food prices. Wheat and rice are particularly exposed, given their reliance on fertiliser inputs and sensitivity to weather conditions. Both crops are expected to see output fall this year, with the global rice crop expected to show a double-digit decline.

The current environment is also more fragile than previous shocks. Compared with past episodes, inventory levels are lower, while cost pressures are higher. This increases the risk that supply disruptions will translate quickly into price volatility.

Many countries and blocs (including the US, Japan, India and the European Union) provide financial support to their own farmers. This is done by using import/export restrictions, price caps and subsidies. These actions have historically proved expensive and worsened global shortages by reducing supplies. For consumers, the likely outcome is that food prices will remain above trend.

More volatility ahead?

Lifting the blockade on the Strait of Hormuz will ease global energy prices and repair the fertiliser supply chain. But the climatic effects of El Nino are expected to persist into 2027, which could see a prolonged period of uncertainty in global food markets. With global temperatures expected to continue rising, the greater use of trade tariffs as well as the deteriorating geopolitical backdrop, increases the likelihood of food price shocks and volatility over the coming years. 

Sources

¹World Meteorological Organization (WMO) - 14 January 2026
 ²WMO. Global annual to decadal climate update 2026-2035 - 28 May 2026.