Global food shortages could accelerate sharply in 2027 as fertiliser shortages and widespread geopolitical tensions collide with powerful El Niño patterns. Food prices are now expected to increase by 8% and “shortages are assumed to arise in some emerging markets and developing economies”. Experts also predict a “greater than 90% chance” of a very strong El Niño event during the second half of this year.
“Fertiliser prices are projected to rise by 26%. Reflecting higher energy and fertiliser costs and more expensive transport, food prices are expected to increase by 8%….Headline inflation is projected to rise from 4.1% in 2025 to 4.7% in 2026 before easing to 3.9% in 2027, with the increase for 2026 driven mainly by higher energy and food prices,” the World Economic Outlook report for July noted.
Economic growth to slow to 6.8% in FY27: Report
Projections from the India Ratings & Research indicate an economic slowdown is likely during the current fiscal year — with GDP growth sliding to 6.8% in FY27. It cited risks from fuel and food inflation stemming from uncertainty amid the West Asia conflict, weak currency, and the likely impact of El Niño on agriculture as key reasons. The figures are a sharp contrast to the real GDP growth of 7.6% recorded during the previous year. The ratings agency also forecast GDP growth at 6.9% for April-June, 6.6% for July-September, 6.7% for the October-December quarter and 6.9% for January-March next year.
According to Fitch Group subsidiary Ind-Ra, the FY27 deficit target of 4.3% remains challenging due to subsidies on liquefied petroleum gas and fertilisers. Chief Economist Devendra Pant warned that indirect tax collection may pose challenges — while direct tax collection and non-tax revenue may support achieving the fiscal deficit target.
“Our crude oil price assumption for FY27 is USD85/bbl. Lower oil prices positively impact the Indian economy by reducing the trade/current account deficit (CAD). However, higher inflation due to El Niño may limit growth upside from lower oil prices,” he told PTI.
Acute food insecurity for millions
According to analysis by the World Food Programme, a powerful El Niño could push nearly 49 million more people into acute food insecurity by the end of next year. The inclement weather patterns are projected to raise the total number of people facing crisis-level hunger or worse to 274 million across 45 vulnerable countries.
“El Niño is expected to peak between September and December 2026, but in many locations the effects will be felt throughout 2027, due to impacts on future harvest cycles. Drought, flooding and extreme temperatures are already putting communities at risk,” WFP warned earlier this month.
The situation is amplified by high baseline food prices, the need for expensive agricultural inputs such as fertilisers as well as localised conflicts. Asia and the Pacific region could see “significant impacts in several already vulnerable countries” as the year progresses — with WFP warning that an estimated 8.2 million additional people are facing acute food insecurity”.
Global fertiliser shortage?
Geopolitical tensions across West Asia and the ongoing ‘closure’ of the Strait of Hormuz has also affected food production. Exports have been delayed or cancelled in many cases, while transport and labour costs skyrocket. Reports indicate that the Middle East accounts for about 42% of global urea exports and 27% of ammonia exports. Crop yields can suffer if fertiliser use is limited due to increasing prices.
“Trade in urea and phosphate fertilisers has been severely disrupted by the conflict in the Persian Gulf. Certain economies in Africa and Asia are particularly vulnerable to resulting fertiliser shortages and price hikes,” the World Trade Organisation Secretariat warned in mid-July.
It added that opening the Strait of Hormuz would in due course contribute to easing trade frictions and restore stability to global markets. The key channel for fertiliser trade has remained blocked for much of this year — since the US-Israeli war against Iran began in end-February. Missiles have also struck multiple facilities across West Asia earlier this year, forcing closures and supply chain disruptions.
- Nitrogen fertilisers, such as urea and ammonium nitrate, are closely linked to energy markets since ammonia production relies on natural gas as both feedstock and fuel
- Phosphate and potash fertilisers are less directly exposed to gas prices but depend on mining activities for extraction. Production is also concentrated in a small number of economies.
- Sulphur is considered as a major secondary nutrient and plays a pivotal role in the production of phosphate fertilisers — with half of the world’s seaborne sulphur trade passing through the Strait.
How does India meet its fertiliser requirements?
India has largely absorbed such hurdles — with the FY27 Budget allocating Rs 1.71 lakh crore to “safeguard farmers against volatility in global fertiliser prices and supply disruptions”. Officials have repeatedly assured that India holds sufficient stocks of fertilisers at almost 20 million tonnes by the end of May. But the fertiliser subsidy bill is likely to touch Rs 3,40,000 crore this fiscal year amid global uncertainties.
“The cost, which prior to this war situation was almost Rs 2 lakh crore in subsidies…It will grow substantially, and it will be a burden for us. Fertiliser subsidy could be more than Rs 3 lakh crore if the problem persists,” news agency ANI quoted government officials as saying on May 26.
The comments were made during a conference led by the Indian Council for Research on International Economic Relations by Krishna Kant Pathak, joint secretary in the Department of Fertilizers. The official added that it remained ‘difficult’ to project the total subsidy bill at this stage.
“The gap between demand (requirement) and production for urea and other fertilisers is met through imports. The import for the season is also finalised well in advance to ensure timely availability,” Union Minister Anupriya Patel assured the Parliament last week.
She added in a written reply to the Rajya Sabha that the Centre had approved a subsidy of Rs 41,533.81 crore under the NBS Scheme for the kharif season. This was intended “to ensure availability of P&K fertilisers which is approximately Rs 3581 crore more than the budgetary requirement for Rabi 2025-26 season”.
El Niño and the southwest monsoon in India
According to the US-based National Oceanic and Atmospheric Administration, a potentially historic El Niño is presently brewing. The phenomenon is expected to strengthen through the end of the year and peak during the Northern Hemisphere winter. This would also mean that India faces its biggest impact after the southwest monsoon has largely ended.
“During the October-December 2026 season, there is a 69% chance of a historic event that would exceed the strength of previous El Niño events dating back to 1950,” a monthly bulletin from NOAA said last week.
Sowing of kharif crops — which typically picks up with the onset of the southwest monsoon in June — was delayed this year on account of El Niño conditions. Data from the India Meteorological Department indicates overall monsoon deficit stood at 12% till August 12. As per data released by the agriculture ministry on Monday, paddy sowing in the ongoing kharif season has fallen 3.65% to 379.07 lakh hectares, against 393.44 lakh ha a year earlier, as deficient rainfall curbed coverage in Karnataka, Jharkhand and Maharashtra.
Union Minister Shivraj Singh Chouhan however assured that the impact of El Niño on kharif production this year was unlikely to be significant. He noted that the gap in the sown area (which stood at 11% last week) had continued to narrow despite deficient rainfall in a few pockets.
“We don’t see a huge impact of El Niño except in some places. The situation by and large remains good. Rainfall was sufficient to meet the full water needs of the crops. We still have to review the situation as it is changing daily,” PTI quoted him as saying during a press conference on Tuesday.