FAO warns El Niño, drought and energy costs could revive global food inflation

Commodity pressure could return by year-end

Global food inflation could accelerate again as El Niño, drought in Europe, geopolitical conflict and higher energy costs converge across agricultural supply chains. Digi24 reported that the UN Food and Agriculture Organization expects agricultural commodity prices to begin rising by the end of 2026, with the impact becoming increasingly visible in consumer prices during 2027.

FAO chief economist Maximo Torero identified the conflicts in Ukraine and the Middle East, rising oil and natural gas prices, reduced fertilizer availability from the Gulf region and diesel shortages in some markets as major production-cost risks. The transmission to supermarket prices is not immediate: FAO estimates a typical lag of about six months between increases in agricultural raw-material prices and higher retail food prices. Wheat, corn and rice quotations have already risen in recent months, although Digi24 said current prices still reflect previously strong harvests rather than the difficulties expected in the next growing season.

El Niño exposes tropical crops and European oilseeds

Adevărul reported that El Niño intensified to the “strong” category in July and could develop into a “super” event. The World Meteorological Organization expects it to strengthen during August–October and persist at least until the following spring. Climatologist Roxana Bojariu said Europe and Romania would experience much of the impact indirectly through international trade in coffee, particularly Robusta, cocoa, sugar and palm oil sourced from drought-prone tropical producers including Indonesia, Vietnam, India, Thailand and Malaysia.

Goldman Sachs analysts estimate that El Niño could lift global agricultural commodity prices by 15.8% and euro-area food prices by about 1.3%, according to Adevărul. JPMorgan estimates that a super El Niño could add roughly 0.7 percentage points to global food-price inflation at its peak. Such shocks usually reach their maximum impact four to eight months after the climate event begins, pointing to pressure from the autumn and through the winter.

Lower yields and transport disruption reshape supply

European soil and hydrological drought is already affecting sunflower and rapeseed crops, creating risks for vegetable oil and biofuel feedstock supplies. Low water levels on the Danube and Rhine are also restricting river transport and adding logistics costs. At Kaub, a key Rhine navigation gauge, the water level fell to 24 centimetres, below the previous record low of 25 centimetres registered in October 2018. About 285 million tonnes of goods move along the Rhine annually, representing roughly 80% of Germany’s inland waterway traffic. ING economist Carsten Brzeski estimated that the disruption could reduce German GDP growth by at least 0.3 percentage points this year.

Farmers are also changing planting decisions. FAO sees signs in Europe, the United States, Brazil and Asia that lower expected yields and higher costs are prompting reviews of sowing plans. Some US producers have reduced wheat and corn acreage in favour of soybeans, which require less fertilizer. Australia, a major grain exporter, expects production to fall by about 21% amid higher fertilizer and fuel costs.

For wheat, Bojariu said global stocks and production in the Black Sea region, the European Union and North America remain more influential than a possible El Niño-related decline in Australia. However, simultaneous pressure on tropical crops, European oilseeds, energy inputs and transport means processors and importers face a broader cost risk. The size and timing of retail increases will depend on harvest outcomes, commodity inventories and how quickly producers pass higher raw-material and logistics expenses through the food chain.