S&P Global warns that costlier diesel and fertilizer, biofuel demand and El Niño are pressuring world agriculture. The IMF projects higher fertilizer and food costs, and low-income countries face the most risk.
S&P Global Institute describes a "multidirectional squeeze" on farming, published in a report on Monday. According to S&P Global: "multidirectional squeeze on world agriculture". The report says diesel is an important input cost for farmers, and farmers may direct acreage away from food production to feedstock for biofuels.
Fertilizer supply runs through Hormuz
Before the United States and Israel began their military offensive in Iran in February, one half of all the world's fertilizer feedstock exports passed through the Strait of Hormuz. After the Strait closed to nearly all shipping traffic on February 28, fertilizer prices rapidly doubled their previous levels.
The Strait is no longer at a standstill, but control of the waterway remains contentious. Even if the United States and Iran maintain their fragile agreements, fertilizer companies must wait for Gulf natural gas production to ramp up, which will take months or even years, according to Semafor.
IMF projects higher food costs
The International Monetary Fund's World Economic Outlook projects a 10% increase in fertilizer prices by the end of 2026. That would contribute a 5% hike in food costs in 2026 and another 2.4% in 2027, with variation by region.
The poorest countries face the greatest exposure. The S&P Global report says the risk is increasing, especially for low-income countries, where food costs amount to about half of household spending.
Pressure on consumers, not a certain crisis
A global food crisis is not a certainty, according to the author, but pressure on cash-strapped consumers is. Historically, food price shocks and inflation of prices for food staples have been a key driver of conflict, and many experts believe the Arab Spring followed rising food costs across the region.
Source: Oilprice.com
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