A strong El Niño is already underway, with leading forecasters indicating it could rank among the most powerful on record. Whether it ultimately reaches “super El Niño” status will become clearer later this year.
While El Niño alone is unlikely to spark a repeat of the fertiliser shock that rattled global agriculture in 2022, analysts warn it could inject fresh volatility into fertiliser markets by altering production expectations, changing farmer behaviour and amplifying existing supply-chain vulnerabilities.
“El Niño is unlikely to create a fertiliser shortage directly,” Anushree Ganeriwala, global analyst at the Economist Intelligence Unit (EIU), told AgNavigator.
“Instead, it creates uncertainty around agricultural production, which can quickly change fertiliser demand. If farmers anticipate lower yields or greater weather risks, they may reduce fertiliser application rates, switch to less fertiliser-intensive crops or delay planting decisions.”
Her comments come as fertiliser markets continue to recover from recent disruptions linked to geopolitical tensions in the Middle East.
Volatility risk is growing
According to Ganeriwala, the most significant impact of El Niño on fertiliser markets this cycle is likely to come through shifts in agricultural production and fertiliser demand rather than direct supply disruptions.
“The biggest transmission channel is likely to be through agricultural production and fertiliser demand, as El Niño can reduce agricultural yields through drought and weaker monsoon rainfall, affecting fertiliser application rates and farmers’ willingness to invest in inputs,” she said.
Energy markets remain an important factor because natural gas accounts for around 70-80% of nitrogen fertiliser production costs. However, following the easing of the recent Iran-related shock, energy prices have moderated, and fertiliser supply conditions have improved.
“As a result, the bigger risk this cycle is how El Niño influences fertiliser demand through agricultural production decisions, rather than causing direct disruptions to fertiliser supply,” Ganeriwala added.
Logistics could also come under pressure. Drought conditions may disrupt inland waterways and port operations, delaying fertiliser deliveries and raising transport costs in affected regions, although such impacts are typically localised.
Markets better prepared than in 2022
Despite the risks, Ganeriwala stressed that fertiliser markets enter the current El Niño cycle in a considerably stronger position than during the 2021-22 crisis.
“Fertiliser markets are considerably better supplied than during the 2021-22 crisis,” she said.
“Prices have eased from recent highs as energy prices moderated and China’s resumption of fertiliser exports signalled improved global supply availability.”
Global crop inventories also provide an additional layer of protection. According to USDA and FAO forecasts cited by the EIU, global wheat stocks are at their highest level in five years, rice inventories are at record highs, corn stocks are at a three-year high and soybean inventories remain close to record levels.
As a result, Ganeriwala believes El Niño on its own is unlikely to recreate the extreme market conditions witnessed in 2022.
However, she cautioned that “resilience should not be mistaken for immunity.”
“The greater risk is renewed price volatility if adverse weather coincides with fresh geopolitical or energy-market disruptions,” she said.
“The recent Iran conflict demonstrated how quickly fertiliser markets can tighten when energy markets and trade flows are disrupted, and the current US-Iran understanding remains fragile.”
Asia and low-income importers most exposed
The regions facing the greatest risk from a combination of climate-related yield losses and fertiliser affordability challenges are concentrated in South and South-East Asia, according to the EIU.
Ganeriwala said many major agricultural producers, including India, Thailand and Indonesia, remain heavily dependent on seasonal monsoon rainfall while fertiliser represents a significant share of production costs.
“Rice-producing countries including India, Thailand, Vietnam and Indonesia are particularly exposed,” she said.
Australia’s wheat sector could also face weather-related challenges, while Indonesia and Malaysia remain vulnerable through palm oil production. India and Thailand could additionally experience pressure on sugar production if dry conditions persist.
Beyond Asia, lower-income fertiliser-importing nations, particularly in parts of Sub-Saharan Africa, remain exposed because affordability is often a greater challenge than physical supply availability.
“Fertiliser affordability is often a greater constraint than physical availability, limiting farmers’ ability to maintain application rates when prices rise,” Ganeriwala explained.
Not all regions are expected to suffer equally. Parts of North and South America, along with the Black Sea region, could experience more favourable growing conditions during El Niño years, potentially offsetting some losses elsewhere and helping stabilise global supplies.
Reduced fertiliser use could hit food production in 2027
Analysts warn that the most significant long-term risk may emerge if farmers respond to uncertainty and higher input costs by reducing fertiliser use.
“The recent fertiliser shock highlighted that fertiliser affordability can matter almost as much as fertiliser availability,” Ganeriwala said.
“Even when supplies remain accessible, higher prices can influence planting decisions, crop choices and fertiliser application rates.”
Recent market behaviour demonstrates how producers adapt to changing economics. During the previous fertiliser price spike, elevated nitrogen costs encouraged some US farmers to shift acreage from maize to soybeans, which require less fertiliser. Meanwhile, some Brazilian growers experimented with lower-cost nutrient blends, while concerns over fertiliser affordability also surfaced among rice farmers in parts of South-East Asia.
Ganeriwala warned that reduced fertiliser application combined with El Niño-related drought conditions could create a damaging feedback loop.
“The combination of lower fertiliser use and El Niño-related drought could amplify yield losses beyond what either shock would cause independently,” she said.
Any impact on consumers would likely emerge with a significant delay.
“Food price impacts are typically lagged by six to twelve months as lower production first tightens agricultural commodity markets before feeding through to wholesale and retail food prices,” she explained.
“Lower production during the 2026/27 crop cycle would therefore be more likely to affect consumer food inflation during 2027.”
Building resilience beyond agriculture
The EIU argues that the biggest lesson from recent fertiliser crises is that threats to food systems often originate outside agriculture itself.
“The recent fertiliser shock showed that risks to food systems often originate outside agriculture itself – in energy markets, geopolitics and trade policy,” Ganeriwala said.
“Building resilience therefore requires looking beyond food production alone and strengthening fertiliser supply chains, market transparency and diversification before disruptions occur.”
She added that strong inventories, diversified sourcing strategies and adaptable markets are often what prevent input shortages from escalating into wider food crises.
Apurva Kothari, senior analyst at Economist Enterprise, said governments must also focus on improving fertiliser-use efficiency rather than relying solely on expanding production capacity.
“While many governments are strengthening and diversifying domestic production, including mineral fertilisers and bio-based alternatives, supply-side measures alone will not address the vulnerability,” Kothari said.
According to the Resilient Food Systems Index, the average nutrient-use efficiency score across 60 countries stands at just 52.22, highlighting substantial room for improvement.
Kothari said greater investment in precision agriculture, soil testing, digital decision-support tools and agricultural extension services would help farmers use nutrients more efficiently, lowering costs and reducing exposure to future fertiliser shocks.
“Policies promoting efficient fertiliser application and investment in precision agriculture, soil testing, digital decision-support tools and stronger extension services would help farmers apply nutrients more effectively, lowering input costs, reducing environmental impacts and making food systems less exposed to future fertiliser supply shocks,” he said.
