JPMorgan Warns Of Food, Fertiliser Crisis In 2027. What It Means For India

Multinational financial services firm, JPMorgan, has warned that global food inflation could accelerate sharply in 2027 as three risks collide -- fertiliser shortages, geopolitical tensions and a potentially powerful El Nino. JPMorgan expects global food inflation to rise to around 5 per cent in the first half of 2027, compared with 2.8 per cent in the first half of 2026. 

For India, the warning matters more as the country is already dealing with higher fertiliser costs. Its farmers also remain heavily dependent on the monsoon. A bad combination of expensive farm inputs and erratic rainfall could squeeze both farmers and consumers.

Fertiliser At The Centre Of The Crisis

The Middle East accounts for about 42 per cent of global urea exports and 27 per cent of ammonia exports, according to JPMorgan. Any prolonged disruption around the Strait of Hormuz can therefore affect fertiliser supplies and prices around the world. 

Natural gas adds another layer of risk. It is a key raw material for making nitrogen fertilisers such as urea. If gas prices rise, fertiliser production becomes more expensive. And if farmers use less fertiliser because it is too costly, crop yields can suffer.

JPMorgan estimates that damaged fertiliser capacity could take one to four years to fully recover. Some natural-gas facilities could take three to five years to return to normal. 

Notably, India is one of the world's biggest urea buyers. Farmers pay only around $2.80, or Rs 266.50, for a 45-kg bag of urea. This is less than a tenth of what the government paid in an April tender, according to a Bloomberg report.

The difference is effectively absorbed through subsidies. But those subsidies are getting increasingly expensive. India's fertiliser subsidy bill could exceed $31 billion, or around Rs 3 trillion, in the current financial year, according to a government official cited in the report. If the Middle East conflict continues, the bill could rise further. 

This leaves the government with a difficult choice. Keep fertiliser cheap and absorb the rising cost. Or push farmers towards lower fertiliser use and risk resistance from a farming community that depends on crop yields for income.

Then Comes El Nino

Fertiliser is only half the problem. The other half is the weather.

JPMorgan has warned that the developing El Nino could become an unusually strong event. Its economists estimate an 81 per cent probability of a very strong or "super" El Nino by the end of 2026, while the probability of El Nino conditions continuing into 2027 has been put at 97 per cent. 

El Nino changes rainfall and temperature patterns across major agricultural regions. Historically, El Nino events have been linked with an average 3.5 per cent fall in production in tropical regions, although outcomes vary by region and event.

A strong El Nino could add about 0.7 percentage points to global food inflation at its peak, according to JPMorgan. If higher energy prices are added to the mix, the impact could rise to roughly 1.3-1.5 percentage points.

For India, the southwest monsoon remains critical for Indian agriculture and water availability. El Nino has often been associated with weaker Indian monsoons, although the relationship is not guaranteed.

There have been exceptions. In 1997, for instance, India received 2 per cent above-normal monsoon rainfall despite a strong El Nino. Other factors, including the Indian Ocean Dipole, can change the outcome. So a strong El Nino does not automatically mean a drought in India.

But it raises the risk. And even a normal amount of rain can be less useful if it arrives at the wrong time. Long dry spells can hurt crops. Heavy rain in a few concentrated episodes can cause flooding and crop damage.

A weaker or erratic monsoon could affect several major crops. These include rice, pulses, oilseeds, cotton and sugarcane. Lower production can tighten domestic supplies. That can push wholesale prices higher and eventually feed into retail inflation.

India has already seen how quickly food prices can become a political and economic issue. During the 2023-24 El Nino episode, the government imposed export restrictions on several agricultural commodities to protect domestic supplies and contain prices. 

Any Possibility Of India Running Out Of Food?

That is not what JPMorgan is saying. The warning is about food inflation and supply pressure, not necessarily empty markets or widespread famine.

India also has buffers. JPMorgan points to adequate global grain inventories and relatively healthy rice stocks in Asia. Besides, India's rice inventories remain strong, with stocks exceeding annual global rice exports. 

But stocks can only cushion a supply shock. They cannot permanently solve a problem of high farm input costs, weaker harvests and prolonged disruptions. "JPMorgan's warning of a 2027 food crisis underscores the urgent need for climate-resilient agriculture. India must aggressively diversify its fertiliser supply chains and accelerate smart farming techniques to buffer its domestic food security against these predictable global shocks. The combination of El Nino weather patterns and severe fertiliser shortages means that safeguarding India's agricultural output requires immediate, proactive policy intervention," Abhishek Bhilwaria, Partner at BhilwariaFinserv, told NDTV.