A “super El Niño” Threatens Waves of Commodity-Driven Inflation Into 2027

Schroders

David Rees, Sandeep Jaggi

Article

1 Pages

Schroders examines how a potentially strong El Niño, combined with fertilizer disruptions and energy market stress, could fuel another wave of global food inflation. The authors argue food prices could become a renewed inflation driver, with sugar, rice, wheat, and cocoa facing particularly acute supply risks.

Key Takeaways

Food Inflation Risk: A 50% rise in the UN FAO food price index could push G7 food inflation into double digits during 2027 and add more than 1 percentage point to headline inflation.
Fertilizer Shock Impact: About one third of global urea supply moves through the Strait of Hormuz, and urea prices have already doubled since the conflict began.
Crop Supply Pressures: Previous El Niño episodes reduced sugar production in India and Thailand by 20% to 30%, while Australian wheat output could fall by roughly 9 million tonnes in 2026/27.
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