The big story of 2026 may have started with oil, moved through gas, but could reach the consumer through a much less prominent place, fertilizers.
The war in the Middle East and disruptions in the Strait of Hormuz affected the supply chain of nitrogen and phosphate fertilizers, precisely at a time when farmers worldwide need to make decisions regarding planting, cultivation areas, and the amount of fertilizer they can afford to use.
Initially, the market focused on the price of urea, which surged sharply, but this is only the first layer of the story.
The real problem is that agriculture operates with a lag.
If fertilizer prices rise today, it does not mean that the price of bread, rice, or meat will rise tomorrow. The farmer first needs to decide how much fertilizer to buy, how much to plant, what to plant, and how to manage costs. Then comes the growing season, harvest, sale of goods, food processing, distribution, and only at the end of the process does the price reach the consumer.
Therefore, there can be a situation where fertilizer prices are already falling, the energy market is calming down, and shipping companies are returning to normal operations, but the economic damage from the disruption is still in the ground.
And this is precisely why JPMorgan's warnings gain greater significance as 2027 approaches.
First of all, what happened in the fertilizer market?
The Strait of Hormuz is one of the world's most important chokepoints not only for oil and gas, but also for raw materials and fertilizers.
In 2025, the Middle East accounted for about 42% of global urea exports and about 27% of global ammonia exports, according to JPMorgan. In addition, more than 36% of imported global urea comes from the Persian Gulf region.
That is, when this trade route is affected, it is not just another small logistical disruption.
It is a blow to a significant part of the supply chain for one of the most important agricultural inputs.
And the market reacted quickly.
The price of urea rose from about $400 per ton to over $850 in April 2026, before falling back to about $453 in June, according to World Bank data cited by the WTO. DAP prices simultaneously rose from about $580 to about $770 per ton.
That is, anyone looking only at the current price might say, "The crisis is behind us".
But this could be a premature conclusion.
Why does a drop in fertilizer prices not necessarily mean the risk has passed?
Because agriculture cannot simply press a reset button.
If a farmer had to buy fertilizer in April at a price of $850 per ton, the fact that the price dropped to $450 a few months later does not return his money.
If he delayed a purchase, reduced the amount of fertilizer, or decided to change the crop type, even a later price drop does not necessarily correct the decision already made.
And this is even more significant due to planting windows.
JPMorgan emphasizes that timing is critical; nitrogen fertilizers must reach the farmer at the appropriate time for the growth cycle, and if the application window passes, it cannot always be compensated for later.
Therefore, the impact can look approximately like this:
Fertilizer price rises → farmer reduces use → planting changes → plant receives fewer nutrients → yield decreases → grain supply shrinks → commodity prices rise → food cost increases → inflation reaches the consumer.
The gap between the first and last stages can be many months.
And this is precisely what makes this shock dangerous.
Nitrogen is the main vulnerability
To understand the story, one must understand why nitrogen fertilizers are so important.
Nitrogen is the most consumed fertilizer in the world by weight, and more than half of global nitrogen demand comes from only three crops:
• Corn, about 20%• Wheat, about 18%• Rice, about 16%
Together, this accounts for about 54% of global nitrogen demand.
And this is a very significant figure.
We are not talking here about a niche crop or an agricultural product that can be easily replaced.
Corn, wheat, and rice are at the heart of the global food system.
They are eaten directly, but corn and wheat are also used as animal feed, so damage to their yields can subsequently roll over into meat, milk, and egg prices.
That is, damage to fertilizer does not remain in the fertilizer market.
It can start there and continue through almost the entire food chain.
And the numbers show that farmers are already reacting
One of the most interesting figures comes from Nutrien.
In Q2 2026, the company's nitrogen sales fell by 25.3% to 2.253 million tons. Reuters reported that the decline in sales volume hurt the company's results, even though fertilizer prices themselves were higher.
This is a figure that needs to be read correctly.
It does not necessarily mean that farmers are stopping food production.
It does indicate that high prices are already affecting purchasing and application behavior.
And this is precisely the variable to track.
Not just the price of fertilizer.
How much fertilizer actually enters the fields?
This is a much more important question.
Because if the price rises but farmers continue to use the same amount, the impact of the shock on yields could be limited.
But if the high price causes farmers to use less fertilizer, then we start to have a supply problem.
There is also a second problem, phosphates
The story does not end with nitrogen.
Phosphates are another key component in fertilizers, and sulfur is an important raw material in their production process.
Here again enters the dependence on the Middle East.
According to the World Bank, almost a third of global sulfur trade passes through the Strait of Hormuz, and about 15% of global DAP exports pass through the Strait.
Sulfur prices surged during the disruption.
The result is that even if nitrogen manages to stabilize, phosphates can still remain under pressure.
Potash is in a more comfortable supply situation, but this is an important point, because not the entire fertilizer market needs to be in crisis for agriculture to feel pressure.
It is enough for one or two of the key components to be expensive or unavailable.
And then comes natural gas
Here the agricultural story connects to the energy story.
Nitrogen fertilizer is mainly produced using ammonia, and its production requires hydrogen primarily derived from natural gas.
That is, natural gas is effectively one of the main raw materials for the nitrogen industry.
When the price of gas rises, the cost of fertilizer production increases.
But the damage does not stop there.
More expensive gas also affects:
• Irrigation• Electricity• Cooling• Food processing• Transportation• Packaging production• Storage• Operation of agricultural facilities
And if oil prices also rise, diesel and transportation become more expensive.
Thus, a situation arises where the same geopolitical shock can harm agriculture from several directions simultaneously.
More expensive energy.
More expensive fertilizer.
More expensive transportation.
More expensive processing.
And in the end, food prices rise.
This is no longer a "fertilizer crisis", but a chain of shocks
One can think of the system this way:
War = energy disruption = expensive gas = expensive fertilizer = less fertilizer use = change in planting = lower yield = higher grain prices = more expensive animal feed = more expensive meat and dairy = more expensive processed food = higher CPI.
And this is even before we factor in weather.
Before delving into El Niño, one needs to understand what it is
El Niño, or El Niño, is a natural climate phenomenon that occurs as part of a broader cycle in the Pacific Ocean's climate system, particularly in the equatorial Pacific Ocean region.
Under normal conditions, trade winds push relatively warm water towards the western Pacific Ocean, towards the Indonesia and Australia region. Simultaneously, off the coast of South America, cold, nutrient-rich waters rise from the depths to the ocean surface.
During El Niño, the pattern of winds and currents changes.
The warm waters that typically accumulate in the western Pacific Ocean begin to move eastward, towards the central and eastern Pacific Ocean. As a result, the sea surface temperature in a very large area rises.
And this is not just a change in water temperature.
The ocean and atmosphere are interconnected, and therefore a significant change in sea surface temperature also alters air movement, atmospheric pressure, and the paths of rain and winds.
In simple terms, El Niño can change the "weather map" in large parts of the world.
But it is important to understand, it does not mean that the entire world warms up in the same way.
The impact varies greatly by region.
In some places it can bring more rain and floods, in others drought, extreme heat, or a decrease in precipitation.
And this is precisely what makes it so important for agriculture.
Agriculture is highly dependent on the quantity and timing of water, temperatures, solar radiation, and the length of the growing season.
If rain arrives at the wrong time, if an overly hot period harms flowering or plant development, or if drought occurs precisely when the plant needs water, the yield can be significantly affected.
The impact is also not limited to a single crop.
El Niño can affect corn, wheat, rice, coffee, cocoa, sugar, palm oil, and other crops, but each region and each crop responds differently.
There is also an important difference between the immediate impact and the economic impact.
When El Niño begins, farmers do not necessarily see an immediate change in prices. The market first needs to understand the implications of weather conditions for future yields.
Therefore, there is also a lag here.
The weather changes today, the plant develops in the coming months, the harvest arrives later, and only then does the full impact on commodity supply and prices begin to be seen.
And this connects almost perfectly to the fertilizer story.
If the farmer enters the growing season with less fertilizer, and then experiences harsh weather conditions, he starts with less safety margin.
In other words, El Niño does not have to create a food crisis on its own.
It can turn an existing shock in the fertilizer market into a much more significant problem.
This is why investors need to look not only at whether there will be an El Niño, but also at its intensity, the areas it will affect, and its timing relative to planting and harvesting seasons.
El Niño is the multiplier that can make the story much bigger
Here, in my opinion, is the most interesting part.
JPMorgan warns of the possibility of a very strong El Niño, and even a "Super El Niño" scenario.
El Niño changes temperature and rainfall patterns worldwide, and therefore its impact on agriculture is not uniform.
Some regions may receive more rain.
Others may face drought.
Tropical regions tend to be more vulnerable to production declines, while some temperate regions may actually benefit from better conditions. JPMorgan notes a historical average decline of about 3.5% in production in tropical regions versus an average increase of about 2.4% in temperate regions during El Niño events, although there is no fixed rule here and each event behaves differently.
And this is precisely what makes 2027 interesting.
If the farmer is already using less fertilizer, and then problematic weather arrives, the damage to the yield could be greater.
Fertilizer and climate do not necessarily combine their damage in a simple way.
They can amplify each other.
JPMorgan is already quantifying the risk
According to JPMorgan, a particularly strong El Niño alone could add about 0.7 percentage points to global food inflation at its peak impact.
And the impact is not immediate.
The peak usually arrives about four to eight months after the onset of the weather shock.
But when more expensive energy, diesel, fertilizers, and packaging are added to El Niño, the impact on food inflation could reach about 1.3%-1.5%.
In JPMorgan's scenario, global food inflation could reach about 5% annually in the first half of 2027.
And the macroeconomic significance is even greater; according to their assessment, the shock could add about 0.6 percentage points to global inflation and moderate the expected decline in inflation during 2027.
But here we need to pause for a moment
Because it is very easy to take these figures and jump straight to the conclusion of a "global food crisis".
I do not think this is justified at this stage.
And the reason is inventories.
According to the latest FAO data, global grain stocks at the end of the 2027 seasons are expected to reach about 957.8 million tons.
The stock-to-use ratio is expected to be about 32%.
This is still a relatively comfortable situation in terms of global food supply.
Rice stocks are also at a relatively high level.
That is, the world is not entering this shock with empty grain warehouses.
And that is a huge difference.
But high inventories do not guarantee low prices
This is perhaps one of the most important points for understanding the commodities market.
Inventories are a safety cushion.
They do not mean that prices cannot rise.
If the world starts the year with 958 million tons of grain, but the next harvest is weaker than expected, inventories begin to fall.
Once the market understands that future inventories will be lower, commodity prices can rise even before there is a physical shortage.
The market does not need to see empty shelves.
It only needs to understand that the supply-demand balance is about to change.
Therefore, even "comfortable" inventories can coexist with high food inflation.
And there is another factor that can exacerbate the situation, governments
When food prices rise, governments almost always step in.
They can subsidize food.
Subsidize fertilizers.
Release inventories.
Impose price controls.
And mainly, restrict exports.
For a single country, export restrictions can be logical.
If the government fears that wheat or rice prices will rise domestically, it can decide to keep more of the produce for itself.
But if several countries do the same thing simultaneously, the amount of food available for international trade decreases.
And this could turn a supply shock into a larger global problem.
The world has already seen this dynamic in the food crises of 2007-08 and 2021-22.
Therefore, emerging countries are at the forefront of the risk
In the US or Western Europe, food constitutes a relatively small part of the consumption basket.
But in many countries in Asia, Africa, and Latin America, food accounts for a much more significant portion of household expenditure.
Therefore, a 10% rise in food prices is not just an inflationary figure.
It reduces the public's purchasing power.
A family that spends more money on rice, wheat, oil, or meat is left with less money for clothing, restaurants, entertainment, electronics, and services.
This results in a very problematic outcome:
Rising inflation + weakening real consumption.
This is essentially a type of stagflation.
JPMorgan identifies India, Indonesia, Brazil, and Colombia among the countries particularly exposed to this scenario. Taiwan and South Korea could also be vulnerable, while in Europe and other developed countries, the direct impact of El Niño on food prices is expected to be more moderate, with the impact coming more through energy.
Indonesia is a good example of a trap
Indonesia can subsidize fertilizers and try to protect farmers.
But subsidies do not eliminate the cost.
It only changes who pays for it.
Instead of the farmer bearing the price, the government bears it.
If El Niño simultaneously damages crops, the government may face both higher subsidy costs and the need to support food prices.
And this is precisely where an agricultural shock becomes a fiscal problem and a monetary problem.
And what can central banks do?
This is one of the most interesting questions.
If inflation comes from a shortage of fertilizer, weather, oil, or food, raising interest rates does not produce another ton of wheat or another ton of urea.
But the central bank still needs to deal with inflation.
It is caught between two forces:
On one hand, higher inflation.
On the other hand, weaker consumption due to reduced purchasing power.
If it reacts aggressively, it could further weaken consumption.
If it does not react, it risks food inflation seeping into wages, services, and inflationary expectations.
Therefore, a food shock is a very problematic type of inflation.
It can create pressure on monetary policy precisely when the economy is already weakening.
What needs to be tracked from here?
In my opinion, investors should stop looking only at the price of urea.
There are several much more important indicators.
1. Quantities of fertilizer purchased
If fertilizer prices fall but purchase volumes remain low, it is a sign that farmers are still cautious.
2. Fertilizer application rates
This is the critical data point for yield.
How much fertilizer actually reaches the fields?
3. Planting areas
If farmers reduce areas due to costs, future supply could be affected even before problematic weather arrives.
4. Natural gas prices
Gas is one of the key variables in the economics of nitrogen production.
5. Urea and ammonia prices
These are important indicators for the state of the nitrogen market.
6. DAP and sulfur
They tell us if the phosphate chain is also under pressure.
7. El Niño
Not just whether it exists, but how strong it is and which agricultural regions are affected by it.
8. Corn, wheat, and rice inventories
Because these are the crops at the heart of the story.
9. Export restrictions
This could be the trigger that turns a local supply problem into an international shock.
10. Consumer food prices
This is the stage where the shock begins to move from the fields to official inflation.
And the point the market might miss
The market tends to price what it sees now.
If urea dropped from $850 to $450, the investor might feel the problem is solved.
But agriculture behaves differently.
The 2027 harvest depends on decisions farmers make during 2026.
If they used less fertilizer, if planting areas changed, if some facilities have not yet returned to full production, and if a strong El Niño arrives simultaneously, then today's fertilizer price no longer tells the whole story.
The important price will be the grain price in a few months.
And this could be too late for those waiting to see the surge in CPI before understanding the trend.
The scenario I see right now
I do not think it is correct to state that a global food crisis is inevitable.
Inventories still provide a significant safety cushion, and fertilizer trade is already beginning to recover.
But it is also difficult to treat high food inflation in 2027 as an extreme scenario.
For the risk to disappear, several things need to align simultaneously:
• Fertilizer production in the Middle East needs to recover quickly• Gas infrastructure needs to recover• Energy prices need to fall• Shipping chains need to remain open• Farmers need to continue using high amounts of fertilizer• Planting areas need to remain stable• El Niño needs to be weaker than the extreme scenario• Key crops need to be strong• Countries need to avoid a new wave of export restrictions
That is a lot of things that need to align simultaneously.
And this is precisely why the risk is worth monitoring.
2026 may have been the year of the shock, 2027 could be the year of consequences
Most of the economic discussion around the war in the Middle East this year focused on oil and LNG.
And that makes sense, because these are the markets that react first.
But it is possible that the more lasting impact will come precisely from fertilizers.
Oil prices rise, we see it quickly.
Fuel becomes more expensive, transportation becomes more expensive, and the impact can reach the consumer within a short time.
Fertilizer works differently.
It goes into the soil.
It affects the planting decision.
It affects the plant.
It affects the yield.
And then it goes through an entire chain before it reaches the food price.
Therefore, the market might already feel that the crisis is over, while agriculture is only beginning to deal with its consequences.
The fertilizer shock occurred in 2026.
It is possible that we will start paying the real price for this shock in 2027.