A triple convergence of geopolitical disruption, supply chain fractures, and climate risk is bearing down on global agriculture with force. In a comprehensive new special report1 published October 19, 2026, S&P Global Vice Chairman Daniel Yergin, together with Shankari Srinivasan, Allan Pickett, and Simon Blakey, maps the links between energy disruption and food security in granular, unsettling detail. Their conclusion is sobering: "Conflict is moving through fertilizer, energy and biofuel markets" — and the full force of that disruption on food prices has yet to arrive.
A Crisis Built in Layers
The shock runs through three distinct channels. The first is fertilizer, the second is diesel, and the third — less obvious until now — is biofuels. All three are under simultaneous pressure.
Russia's 2022 full-scale invasion of Ukraine was the opening fracture. Ukraine had supplied approximately 46% of global sunflower oil exports, 17% of barley, 12% of corn, and 9% of wheat. Russia contributed an additional 20% of global wheat. Together, the two countries provided roughly a third of Middle Eastern and North African food imports and close to half of East African imports. Black Sea trade never fully recovered, and renewed 2026 hostilities have tightened the vice further.
The Iran war, which began February 28, 2026, delivered a second and far less anticipated shock. Markets focused instinctively on oil when Iran asserted sovereignty over the Strait of Hormuz. Yergin, Srinivasan, Pickett, and Blakey argue the more consequential revelation concerns the Gulf's deep integration into global fertilizer supply chains. The Strait carries approximately 29% of global urea trade, 47% of global sulfur trade, and 21% of merchant ammonia trade. Infrastructure damage and shipping restrictions have sharply curtailed these flows. Urea prices swung from roughly $420 per metric ton in January to $910 per metric ton during the Northern Hemisphere's critical spring planting season — before retreating to approximately $380 by late September as Chinese export quotas and weaker European demand provided a partial cushion.
The Sulfur Bottleneck
Sulfur has proved the more intractable problem. Unlike urea, where China and other producers can partially fill the gap, no ready alternative exists for the 47% of global sulfur trade that normally transits the strait. Sulfur prices hit a record $1,000 per metric ton in July before easing to roughly $810 by late September. Morocco's OCP, among the world's largest phosphate producers, reportedly cut operating rates by as much as 30% in the second quarter and shifted production away from diammonium phosphate — the most widely used phosphate fertilizer — toward products requiring less sulfur. The knock-on effect in ammonia markets is equally revealing: sulfur shortages forced phosphate producers to curtail output, reducing ammonia demand and driving ammonia prices lower even as the overall fertilizer system remains under severe stress. Disruption in one part of the chain, the authors make clear, reverberates through all the others.
Diesel Scarcity and the Biofuel Wildcard
The Middle East and Russia together account for approximately half of global net diesel exports. Roughly 2 million barrels per day of that supply has effectively disappeared. Middle Eastern diesel exports fell from close to 2 million b/d in July 2025 to under 1 million b/d by July 2026. Ukrainian drone attacks and an export ban have pushed Russian diesel exports from roughly 1 million b/d toward zero. The crude-to-diesel spread, historically $12 to $20 per barrel, surged above $100 per barrel in early September 2026. Higher diesel directly raises farm operating costs — machinery, irrigation, transport — and squeezes already-compressed margins.
Biofuels add a further dimension. As diesel prices rise, biofuels become cost-competitive with petroleum-based fuels, drawing acreage toward fuel feedstocks and away from food crops. For the first time on record, biofuels became cheaper than oil-based shipping fuels in Europe in September 2026. Indonesian industrial palm oil consumption, largely for biodiesel, is projected at 18.4 million metric tons in 2026–27 — nearly five times the volume consumed during the strong El Niño of 2015–16. Biofuel policy is now a food-price variable, not a peripheral one.
El Niño: The Environmental Multiplier
An exceptionally strong El Niño, expected to peak in late 2026, is projected to compound the fertilizer and energy squeeze just as crops are rendered less resilient by under-applied nutrients. S&P Global's agricultural modeling points to rainfed grains and oilseeds in Brazil and Australia as facing the greatest exposure. Brazil's corn output forecast has been cut by 6 million metric tons, with potential for a further 10 million mt loss if conditions intensify. The soybean forecast has been reduced to 177 million mt, with probability-weighted estimates suggesting output could fall to 168 million mt or lower. Australia's wheat output could decline from 28 million mt to 22 million mt. Global grain reserves, already depleted to historic lows by the ongoing Ukraine war, offer little buffer against simultaneous, multi-regional harvest failures.
The macro consequences fall hardest on those least able to absorb them. For the world's low-income countries, food represents roughly 50% of household spending. A food price increase comparable to the most recent strong El Niño episode — 2014–15 — would add 2.5 to 3 percentage points to headline inflation in a typical middle-income country. Governments will reach for subsidies and price controls; India's 2026–27 fertilizer subsidy bill is already estimated at $20 billion to $22 billion. The authors note that many of the countries most exposed have the least fiscal room to respond — and that food prices, as history demonstrates, can become the spark for broad political upheaval.
5 Key Takeaways for Advisors and Investors
- Food inflation is a multi-year, not a transitory, risk. Farm budgets are under compression now, but the full effect on food prices may not materialize until 2027, when planting reductions and fertilizer shortfalls translate into lower harvests at the grocery level.
- Agricultural commodity exposure warrants reassessment. Grains, oilseeds, soft commodities, and fertilizer-linked equities are under simultaneous supply pressure — a combination not seen in the modern era. Institutional allocations in this space deserve a fresh look.
- North American fertilizer producers hold a structural advantage. Abundant domestic gas insulates U.S. producers from the LNG and urea disruptions hammering Asia and Europe. North American agricultural input companies are a relative beneficiary of the current dislocation.
- Biofuel policy is now a food-price amplifier. Mandates driving fuel production from agricultural commodities keep corn, soy, and vegetable oil demand firm even as production costs rise. Policy exposure in this sector compounds, rather than hedges, the shock.
- Sovereign credit risk in import-dependent low-income nations is rising. Countries where food and fuel represent 40% to 60% of household budgets face mounting social and political instability risk. Global South fixed income exposure warrants careful monitoring, particularly in food-importing nations with limited fiscal capacity.
Footnote:
1 Yergin, Daniel, Shankari Srinivasan, Allan Pickett, and Simon Blakey. "Energy Disruption and El Niño: Leading to a Global Food Crisis?" S&P Global, 19 Oct. 2026, https://www.spglobal.com/en/research-insights/special-reports/energy-disruption-and-el-nino-leading-to-a-global-food-crisis.
