Americans could soon be hit by a grocery-price surge as two global threats collide to squeeze the world’s food supply.
A new analysis from JPMorgan has warned that global food costs could climb five percent during the first half of 2027 as fertilizer shortages converge with a potentially powerful El Niño.
The first threat is unfolding in the Persian Gulf, which supplies more than 36 percent of the urea, a high-nitrogen agricultural fertilizer, imported worldwide.
Dr Sarah Kapnick, Global Head of Climate Advisory for JPMorgan, said the Iran conflict has slowed fertilizer production, and disruption through the Strait of Hormuz has restricted exports and driven prices higher.
Those shortages could begin hurting harvests within months, starting with South American corn before affecting wheat in the US and other major producers and rice crops across Asia, Kapnick warned,
At the same time, El Niño could disrupt rainfall and temperatures around the world, exposing important farming regions to drought, flooding and extreme heat.
Tropical producers face the greatest danger, particularly Brazil and India, where heavy reliance on Persian Gulf fertilizer overlaps with areas historically vulnerable to El Niño crop losses.
Although the US may escape the worst direct effects, Americans could still pay more for food as global harvests shrink and the cost of crops, fertilizer and imported staples rises.
A new analysis from JPMorgan has warned that global food costs could climb five percent during the first half of 2027 as fertilizer shortages converge with a potentially powerful El Niño
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.’
Nitrogen is the most widely consumed fertilizer by mass and plays a critical role in producing three of the world’s most important foods.
More than half of global nitrogen-fertilizer demand comes from corn, wheat and rice, according to JPMorgan, while fertilizer has historically represented 21 percent of corn-production costs and 19 percent for wheat.
Urea, one of the most common nitrogen fertilizers, is manufactured using natural gas and must generally be placed in the soil around the time seeds are planted.
That narrow window makes any disruption particularly dangerous.
If fertilizer arrives after crops have already been sown, farmers cannot simply apply it months later and expect the same results. Late surface applications can turn into ammonia gas, potentially damaging the plants they were intended to feed.
Dr Sarah Kapnick, Global Head of Climate Advisory for JPMorgan, said the Iran conflict has slowed fertilizer production, and disruption through the Strait of Hormuz has restricted exports and driven prices higher
Unlike oil, nitrogen fertilizer is not supported by widespread strategic reserves because it is unstable and can convert into toxic ammonia.
That leaves farmers with few alternatives when shipments fail to arrive: pay higher prices to protect yields, use less fertilizer and accept smaller harvests, or switch to another crop.
Each option risks raising costs or reducing the amount of food entering global markets.
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 US, Europe, China, India and Russia could also be affected, while fall and winter rice crops in India, Bangladesh, Indonesia and Vietnam face similar risks.
Even a swift end to the supply disruption would not immediately solve the problem.
JPMorgan estimated that 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.
Fertilizer plants cannot restart until the natural-gas infrastructure feeding them is operational, creating an additional bottleneck.
Constructing replacement plants is also difficult because the facilities require extensive engineering and environmental reviews due to the risk of ammonia leaks.
El Niño occurs when unusually warm waters in the equatorial Pacific Ocean release heat into the atmosphere, altering weather patterns thousands of miles away
Meanwhile, El Niño threatens to place additional pressure on the same countries already struggling to obtain fertilizer.
The climate phenomenon 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 dramatically different effects depending on the region.
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.
However, 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.
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, demonstrating how crop losses in one country can quickly disrupt food markets elsewhere.
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.
