Winning Bizness Desk

Mumbai.Food inflation may rise further in 2027 as El Nino, Middle East tensions threaten farm supplies

Food prices could rise sharply across India and the world by 2027, with weaker monsoons, higher oil prices and expensive fertilisers creating fresh pressure on agriculture and household budgets. A warning issued by multinational financial services firm JPMorgan says global food prices could rise by up to 5% in the first half of 2027, compared with 2.8% in the first half of 2026.

Weak monsoon and costly inputs may hit India

The warning is particularly important for India, where agriculture remains closely linked to the southwest monsoon. A weaker monsoon could reduce crop yields, while higher energy and fertiliser costs could make farming more expensive. JPMorgan has also warned that tensions involving Iran and the US could push oil prices higher, adding to pressure across the agricultural supply chain.

The report estimates that rising fertiliser costs could increase the burden on the Indian government by around Rs 3 lakh crore. India already keeps retail fertiliser prices low through subsidies, absorbing much of the difference between domestic prices and the much higher international cost.

Middle East tensions threaten fertiliser supplies

The Middle East has a major role in global fertiliser production. According to the report:

• Around 42% of the world's urea and 27% of its ammonia, a key chemical used to make fertilisers, come from the region.
• Any prolonged disruption caused by war or regional tensions could trigger shortages and push fertiliser prices sharply higher.
• Natural gas is the main input for producing urea, meaning higher gas prices would directly increase production costs.

If fertiliser factories or gas plants are shut or badly affected, restoring their full capacity could take anywhere between one and five years, potentially prolonging supply disruptions.

Government may face a bigger subsidy bill

A 45-kg bag of urea costs Indian farmers just Rs 266.50, while the government buys it from overseas markets at more than ten times that price. The government bears the difference through fertiliser subsidies. Officials estimate that the subsidy bill could cross Rs 3 lakh crore this year.

A prolonged Middle East crisis could push that burden even higher, leaving the government with a difficult choice: continue absorbing the rising cost to keep fertiliser affordable, or encourage lower usage and risk weaker crop yields.

Super El Nino could worsen food inflation

JPMorgan estimates there is an 81% chance of a severe "super El Nino" developing by the end of 2026 and lasting into 2027. Such a weather pattern can bring hotter and more damaging conditions, affecting agricultural output.

• El Nino episodes are associated with an average 3.5% fall in crop yields.
• Global food inflation could rise by another 1.5% because of adverse weather.
• For India, the key risk is weaker rainfall during the monsoon season.

India remains exposed, but El Nino is not decisive

Indian agriculture depends heavily on the southwest monsoon, and El Nino is often linked to weaker rainfall. However, the relationship is not automatic. Other weather patterns can influence the outcome.

In 1997, for instance, India received 2% more rainfall than normal despite a strong El Nino, partly because of other factors, including the Indian Ocean Dipole. The latest warning therefore points to a heightened risk rather than a certainty, with food prices in 2027 likely to depend on the combined impact of weather, energy costs, fertiliser supplies and geopolitical tensions.