Big alert from global brokerage firm JP Morgan, new storm of food inflation may come in 2027

At the same time when central banks and common citizens around the world are hoping for relief from the blow of inflation, one of the world’s largest investment banks JPMorgan Chase & Co. Has issued a very worrying warning. According to JP Morgan’s latest global research report, there may be an unexpected surge in global food inflation in the first half of the year 2027. The report estimates that food inflation will increase from 2.8 percent in the first half of 2026 to approximately 2.8 percent in 2027. 5.0 percent Can reach the level of. The main reason behind this huge increase has not been attributed to any single reason, but to the simultaneous collision of the extreme form of weather i.e. ‘Super El Nino’ ​​and the geopolitical crisis of the Middle East (Gulf countries).

What is JPMorgan’s ‘5-W’ crisis formula?

The report, led by JP Morgan’s senior global economist Nora Szentivanyi, defines the threat looming over the global food supply chain as the ‘5-W’. These five key factors include:

• War (war and geopolitical tension): Increasing conflict in West Asia and blockage of sea routes.

• Weather: Super El Nino rapidly strengthening in the Pacific Ocean.

• Warehousing (Challenges of Storage): Increase in logistics and storage costs of major grains.

• Water (Water Crisis): Monsoon uncertainty and declining groundwater levels in key agricultural areas.

• Waste (waste in supply chain): Loss of agricultural produce due to transportation disruptions.

The report clarifies that this crisis is not a sudden end of food in the world, but it is a deadly combination of huge increase in agricultural costs and decline in crop production due to adverse weather.

Threat of Super El Nino: 81% chance of a historic weather disaster

Citing data from climate scientists and global weather agencies, JP Morgan has said that by the end of the year 2026, the current El Nino cycle will become ‘very strong’ or ‘Super El Nino’ Possibility of turning into (Super El Niño) 81 percent Has reached. Additionally, there is a 97 percent chance that these weather conditions could last throughout 2027.

El Nino causes abnormally high surface temperatures in the Pacific Ocean, triggering a cycle of severe drought, irregular monsoons and extreme heat in South Asia, South-East Asia, Australia and Latin America. Historically, whenever a Super El Nino has been active, tropical agricultural regions have seen an average decline of 3.5 percent in total crop production. JPMorgan estimates that Super El Nino alone could directly increase global food inflation by 0.7 percentage points at its peak.

Huge shortage of urea-fertilizer due to Middle East war and Hormuz crisis.

The second most serious aspect of the food crisis is related to the energy and fertilizer markets. Agricultural production is completely dependent on chemical fertilizers, especially nitrogen-based urea and ammonia, in the manufacture of which natural gas is the main raw material.

The Middle East’s share in the global fertilizer supply is extremely important. World’s total urea export is approximately 42 percent and ammonia export 27 percent Part comes from the Bay Area alone. Countries like Qatar and Iran hold a major share in global urea exports at 9.3% and 8.4% respectively.

The movement of ships is being affected due to the ongoing military tension in the Strait of Hormuz and the risk of drone and missile attacks. If gas supplies to fertilizer factories are disrupted or shipping routes are closed, global urea prices will skyrocket. Since it is essential to use urea at the right time during sowing and initial growth of crops, due to non-availability of fertilizer on time, the crop yield can directly fall by 15 to 25 percent.

Why is India and emerging economies the biggest threat?

The JP Morgan report warns that the most serious impact of this double whammy will be in developed countries like India, Indonesia, Brazil and Colombia rather than in developed countries like the US or Europe. Emerging Economies But it will happen.

The main reasons for this are as follows:

• Major share of food and drink in expenditure: While in developed countries an average family spends only 10 to 15 percent of its total income on food, whereas in developing countries like India, the weightage of food items in the Consumer Price Index (CPI) is almost Rs. 45 to 50 percent It happens. Even a slight increase in the prices of food items derails the entire monthly budget of a common family.

• Weather Dependent Agriculture: More than 50 percent of the agricultural area in India is still directly dependent on monsoon rains for irrigation. If the south-west monsoon weakens due to El Nino, there will be a direct negative impact on the sowing and production of paddy, pulses (pulses), oilseeds and sugarcane.

• Imported Inflation: India is a major importer of edible oils (palm oil, soybean oil) and fertilizer raw materials. Due to increase in the prices of crude oil, diesel and edible oil in the international market, domestic prices in India will increase rapidly.

What will be the impact on the common man’s kitchen?

If this forecast of JP Morgan proves correct, then in the year 2027, ordinary consumers may have to see a huge increase in their daily ration and food expenses:

• Pulses and Rice: Due to decrease in production due to El Nino, retail prices of tur (tur), urad, moong and non-basmati rice may increase by 15 to 20 percent.

• Vegetables and Fruits: Due to extreme heat and untimely rains, there will be a sharp rise in the prices of tomatoes, onions, potatoes and green vegetables.

• Cooking Oil: Prices of all branded edible oils will increase due to decline in palm oil production due to drought in Malaysia and Indonesia.

• Milk and Poultry Products: Due to increase in the cost of fodder and animal feed (maize, soybean), an increase in the prices of milk, ghee, cheese and poultry products is also considered certain.

What are the expectations of relief and the preparations of the governments?

Although the warning is serious, JPMorgan also noted a positive aspect in the report. At present the buffer stock of grains at the global level is in a much stronger position than in previous crises. India also has adequate strategic reserves of wheat and rice in Food Corporation of India (FCI) warehouses, which is capable of absorbing any sudden shock in the initial months.

Economists believe that to deal with this potential threat, the Indian government will have to make alternative long-term deals for fertilizer imports for Kharif and Rabi crops, promote PM Krishi Sinchai Yojana and micro-irrigation, and implement a strict supply-chain monitoring system to prevent hoarding of food items so that the general public can be protected from back-breaking inflation in 2027.