El Niño, fertilizer shortages and the Iran war: Why food prices in India could rise in 2027

What if the next food-price shock begins long before crops reach the market? That is the risk highlighted in a new report by S&P Global, which warns that the combination of rising fertilizer and diesel costs, conflict-driven supply disruptions and a potentially powerful El Niño could threaten global harvests in 2027. For India, where agricultural production depends heavily on the monsoon and food prices affect household budgets, the warning carries particular significance.

The report, published on October 19, says the pressure on farmers is building now, but consumers may feel its full effects only in the months ahead. “The squeeze now bearing down on farm budgets may therefore not reach food markets in force until 2027,” it notes.

How the Iran war could make food more expensive in India

The immediate concern is not simply the price of food, but the cost of producing it. Fertilizer manufacturing depends heavily on natural gas, while diesel powers farm machinery, irrigation pumps and the transport of crops. When energy prices rise or supplies become harder to obtain, farmers face higher bills even before planting or harvesting begins.

The conflict in the Middle East has disrupted shipping through the Strait of Hormuz, a crucial route for global energy and fertilizer supplies. According to S&P Global, around 29% of internationally traded urea normally passes through the strait. The region is also an important source of sulfur, used in phosphate fertilizer production. Meanwhile, reduced diesel exports from the Middle East and Russia have tightened fuel markets.

India is exposed through both fertilizer imports and the energy needed to manufacture fertilizer domestically. S&P Global estimates that liquefied natural gas supports around 85% of India's domestic urea production. Higher gas prices can therefore increase the cost of producing urea, while disrupted trade can make imported supplies more expensive.

India’s monsoon adds another layer of risk

The timing matters. India has already experienced a difficult monsoon season in 2026. Reuters reported on August 24 that rainfall from June to September was projected to be around 15% below average, potentially making it the country's weakest monsoon in nearly two decades. The shortfall threatened crops including cotton, soybean, maize and pulses, while also raising concerns about soil moisture for winter crops such as wheat and rapeseed.

A stronger El Niño could compound these pressures. The climate phenomenon, characterised by warmer-than-usual Pacific Ocean surface temperatures, can alter rainfall patterns across the world. Its effects vary by region, but a weaker Indian monsoon can put rain-fed agriculture under strain. If rainfall disruptions coincide with higher fertilizer and fuel costs, farmers may have fewer resources to protect yields.

Fertilizer use and farm costs could shape the next harvest

The latest domestic figures offer an early indication of the pressures on India's farm sector, although they do not establish a nationwide fertilizer shortage. The Indian Express reported on October 26 that fertilizer sales declined across major categories during April–September 2026 compared with the same period a year earlier, amid deficient rainfall and weaker agricultural demand. Sales of complex fertilizers fell 22.2%, while urea production rose 4.3% and imports increased 40.5%. The government has also sought alternative gas supplies and additional fertilizer imports as Middle East shipments face disruption.

Lower fertilizer use can affect crop yields, particularly if farmers cut application because they cannot afford sufficient inputs. India’s fertilizer subsidies help shield farmers from some price increases, but a prolonged global price shock could increase the government’s subsidy burden. S&P Global estimates India's fertilizer subsidy bill at $20 billion–$22 billion for the 2026–27 crop year.

Will Indian consumers face higher food prices in 2027?

The risk extends beyond staples. S&P Global warns that El Niño could disrupt sugar, coffee, cocoa and other crops important to farmers’ livelihoods. In India, weaker sugarcane yields could affect sugar supplies, while disruptions to grain and oilseed production could put pressure on food and feed costs.

However, higher prices are not inevitable. The eventual impact will depend on rainfall, crop output, fertilizer availability, energy costs, government support and global supply adjustments. S&P Global expects fertilizer production to recover gradually, while higher crop prices could encourage farmers to plant more land and use more inputs.

The central warning is about timing: farmers must spend on seeds, fuel and fertilizer months before they sell their harvest. If costs rise now and yields suffer later, the pressure can travel through supply chains into food prices well into 2027.

As S&P Global puts it, “A global food crisis is not foreordained. But neither is it any longer a distant risk.” For India, the coming crop cycles will help determine whether these converging risks remain manageable or translate into a fresh squeeze on farmers, government finances and household food budgets.

(With inputs from ANI)