Global food supply chain risks are accelerating. Analysts at JPMorgan have issued a warning that the intensifying El Nino, combined with global diesel and fertilizer shortages, is expected to deliver the most significant blow to agricultural production in the first quarter of 2027.
On September 18th, Tracey Allen, JPMorgan's head of agricultural commodities, stated in a research report that the effects of El Nino on farming are still in their infancy, but are projected to amplify markedly early next year. Citing forecasts from the U.S. National Oceanic and Atmospheric Administration, he noted that El Nino is likely to peak around November, with a 90% probability of evolving into a "super El Nino" that persists through the Northern Hemisphere's autumn and winter.
Currently, the Bloomberg Agriculture Spot Index has climbed to its highest level of 2023, fueling expectations that food supply chains will tighten next year. While ample carryover inventories from the previous quarter have cushioned the immediate impact on physical grain markets, multiple risks are now surfacing simultaneously. From record-high diesel prices, geopolitical trade flow disruptions, and fertilizer shortages, to droughts in Europe and a disappointing U.S. spring planting season, the challenges confronting agricultural markets are comprehensive. In the report's foreword, Tracey Allen remarked bluntly:
"Agriculture markets have 99 problems, and El Nino is just one of them."
Production risks spread across regions, threatening multiple crops
The report meticulously charts the climate pressures facing key agricultural zones worldwide. In Southeast Asia, persistent drought and wildfires in Indonesia's palm-growing areas are jeopardizing yields, while widespread dryness across the region has sparked concerns over robusta coffee, cocoa, and Thailand's sugarcane output. In India, southwest monsoon rainfall is roughly 15% below the long-term average. Although a decline in sugarcane ethanol output has partially mitigated the pressure on sugar supplies from reduced cane harvests, rice, cotton, and oilseed production are now confronting rising risks.
South America presents a similarly bleak picture. Brazil is grappling with a mix of drought and flooding: dry conditions in the north threaten cocoa regions, central areas are under stress for soybean and second-crop corn belts, while excessive rainfall in the south-central part is delaying sugarcane harvesting and potentially trimming final sugar output. In northern Argentina, overly wet weather is hampering soybean planting operations.
Agricultural market technicals under pressure
Jason Hunter, JPMorgan's head of technical strategy, pointed out that the agricultural sub-index of the JPMorgan Commodity Composite Index reached multi-year highs in August of this year. He cautioned that should a significant pullback occur, previous breakout levels would transform into new support, indicating that the bullish market structure remains technically intact.
Since this summer, Wall Street has issued a flurry of reports warning that El Nino, combined with the energy crisis, could spark food supply chain risks next year, with the severity of these warnings escalating month by month. JPMorgan's clear timeline now provides a quantified coordinate for this brewing supply-side shock.