he world is producing food in abundance, yet there is a crisis looming around the corner. Food and Agriculture Organization (FAO) Chief Economist Máximo Torero recently warned that sustained increase in global commodity prices could feed through to consumer food prices, particularly in countries dependent on food and energy imports. External Affairs Minister S Jaishankar also warned of a possible “major food crisis” in the coming months.
The Food and Agriculture Organization (FAO) expects global cereal production at 2.979 billion tonnes in 2026, 2.1 per cent below last year’s record but still the second-highest harvest on record. Global cereal stocks are forecast at about 950 million tonnes at the end of the 2026-27 season, broadly unchanged from the previous year.
Despite this, global food prices are moving in the opposite direction. The FAO Food Price Index, which tracks prices of a basket of globally traded food commodities, averaged 136 points in September 2026, up 1.5 per cent from August and 5.8 per cent from a year earlier.
The risks are unfolding at multiple levels. Conflicts are disrupting grain shipments, energy supplies and fertiliser trade, pushing up the cost of producing and moving food. At the same time, El Niño threatens agricultural output in several regions, raising concerns that current price pressures could eventually translate into a production shock, particularly for the 2027 harvest.
Supply chain disruptions
The US-Israeli strikes on Iran on February 28, 2026, triggered a conflict that has disrupted energy markets and shipping through the Strait of Hormuz, which accounts for around 25 per cent of global seaborne oil trade and one-third of global seaborne fertiliser trade. By April, oil tanker freight rates had risen more than 90 per cent, bunker fuel prices had nearly doubled, and war-risk insurance premiums had surged, adding to the cost of moving energy, fertilisers and other commodities.
According to the World Bank, international urea prices surged 80 per cent between February and April to more than $850 a tonne, while diammonium phosphate (DAP) prices rose over 10 per cent in April.
The Black Sea presents another risk. While disruptions around Hormuz primarily affect energy, fertiliser and freight costs, interruptions to Black Sea trade directly affect grain shipments. The FAO has identified logistical constraints in the Black Sea region as one of the factors behind the recent increase in international wheat prices.
According to the FAO, its Cereal Price Index rose 5.1 per cent in September from August and was 17.2 per cent higher than a year ago. Global wheat prices increased 6.3 per cent during the month, partly because of Black Sea logistical disruptions and dry weather in parts of North America ahead of planting.
Maize prices rose 5.6 per cent month-on-month amid lower-than-expected yields in the US, reduced export availability in Brazil and disruptions to Black Sea trade. The FAO Vegetable Oil Price Index increased 0.9 per cent, reflecting higher palm oil prices driven by strong global import demand and concerns over dry weather in Southeast Asia. International sugar prices rose 6.1 per cent during September.
El Niño adds to the pressure
The US National Oceanic and Atmospheric Administration’s (NOAA’s) October 8 assessment said a strong-to-very-strong El Niño was likely to persist through January-March 2027, with the probability remaining above 83 per cent.
El Niño does not automatically mean a global crop failure. Its effects vary across crops and regions, with some areas facing drought and others experiencing excessive rainfall. According to the FAO, global rice yields during El Niño events are typically 1–1.5 per cent below their expected trend, while wheat and maize yields generally remain close to normal levels. The agency has identified areas in South and Southeast Asia, Southern Africa, the Sahel and Central America as vulnerable to drought, with some locations facing a probability exceeding 50 per cent.
The effects are already visible in India. According to the India Meteorological Department (IMD), the 2026 southwest monsoon ended with rainfall 13 per cent below normal, the lowest since 2015. Southern peninsular India recorded a 24 per cent deficit, while East and Northeast India received 26 per cent less rainfall than normal. The uneven rains have raised concerns about crop yields, soil moisture and irrigation availability for the next planting season.
The concern is that adverse weather could coincide with higher fertiliser and energy costs. If farmers face reduced water availability alongside expensive or delayed agricultural inputs, yields could suffer, potentially tightening food supplies and adding to price pressures during the 2027 harvest cycle.
India shows why grain security is not enough
India has not been insulated from the rising costs of energy, fertilisers and other commodities following the West Asia conflict. According to the Petroleum Planning and Analysis Cell (PPAC), India’s crude oil import bill surged 48.4 per cent year-on-year to $74.8 billion during April–August 2026, an increase of $24.4 billion, even as import volumes declined marginally by 0.4 per cent.
Fertiliser imports have also become significantly costlier. Commerce ministry data show that imports of crude and manufactured fertilisers increased 53.25 per cent to $8.21 billion during April–August, from $5.35 billion a year earlier. Vegetable oil imports rose 11.28 per cent to $9.18 billion. While these increases cannot be attributed entirely to the conflict, they show India’s exposure to international commodity prices and supply disruptions.
The impact has extended to domestic fertiliser production. Following disruptions to natural gas supplies, gas availability for India’s urea plants initially fell to around 60 per cent of normal levels. Urea production declined nearly 27 per cent year-on-year to about 1.8 million tonnes in March, although supplies subsequently recovered.
The government has absorbed part of the international fertiliser cost pressure through subsidies, shielding farmers from the full increase in global prices. According to the Controller General of Accounts, expenditure on urea and nutrient-based fertiliser subsidies rose 20.7 per cent year-on-year to ₹1.03 trillion during April–August, an increase of approximately ₹17,676 crore.
India remains relatively well protected against an immediate cereal shortage. Food Corporation of India data show that central wheat and rice stocks stood at approximately 87 million tonnes on September 1, compared with 70.2 million tonnes a year earlier. Government procurement and free foodgrain distribution to more than 800 million beneficiaries provide an additional cushion against disruptions to staple food supplies.
However, this protection does not extend equally to other food categories. According to the Ministry of Statistics and Programme Implementation (Mospi), retail inflation for cereals and cereal products stood at 3.94 per cent in September, compared with 8.35 per cent for oils and fats, 9.18 per cent for the combined vegetables, tubers and pulses category, and 10.75 per cent for fruits and nuts. Overall food inflation rose to 7.74 per cent from 5.97 per cent in August.
The pressure on household budgets is also evident in the cost of preparing a meal. According to Crisil Intelligence, the cost of a home-cooked vegetarian thali increased 10 per cent year-on-year to ₹30.8 in September, while a non-vegetarian thali became 6 per cent costlier at ₹59.5. Higher onion, cooking oil, rice and liquefied petroleum gas prices contributed to the increase.
India’s vulnerability also has implications beyond its borders. The country accounts for around 40 per cent of global rice exports, making its harvests important to international food markets. With El Niño creating uncertainty around the next crop cycle, any significant reduction in India’s rice production and exportable surplus could tighten global availability and put further pressure on prices, even as the country’s existing grain stocks provide some domestic protection. Crisil expects a 5-6 per cent decline in paddy production because of lower acreage and weaker yields.
Chirag Jain, partner at Grant Thornton Bharat, said higher energy prices raise the cost of fuel, irrigation, transport and other farm operations. Fertiliser disruptions can increase input costs and affect farm profitability. These pressures can then move through storage, transport and processing before reaching consumers.
Jain also pointed to gaps in cold-chain infrastructure and post-harvest management. These matter because food security depends not only on how much a country produces or stores, but also on whether perishable foods can be stored and delivered efficiently.
Satyam Shivam Sundaram, partner, strategy and transactions at EY LLP, told Business Standard that the impact on 2027 production would depend on how long disruptions last, whether fertiliser reaches farmers before critical application periods and whether higher prices lead farmers to reduce usage.
Bhabesh Hazarika, economist at the National Institute of Public Finance and Policy, told Business Standard that the risk becomes more serious if the rabi crop is also affected, energy and fertiliser prices remain elevated, and higher logistics costs begin spreading across the food supply chain.
“Over the next 6–12 months, I would watch pulses, edible oils and vegetable prices; rabi sowing and soil moisture; reservoir levels; crude oil and fertiliser prices; the rupee; freight costs; and government decisions on food imports, exports and stocks. The key signal will be whether inflation remains concentrated in a few commodities or starts spreading across the wider food basket,” he said.
