Global Agriculture Crisis Deepens as 3 Converging Risks Threaten 2026 Harvests

Global Agriculture Crisis: A Dual Shock Without Precedent

The global agriculture crisis now unfolding is defined by two forces operating in parallel. The first is the ongoing war between the United States, Israel, and Iran, which has effectively severed the Strait of Hormuz as a corridor for fertilizer trade since early March 2026. The second is the increasing probability of a strong or super El Nino event developing through the second half of the year, threatening to compound supply-side losses with weather-driven yield reductions across multiple continents.

Each of these risks alone would constitute a significant challenge for global food systems. Together, they represent a structural threat to crop production, input economics, and food price stability that international institutions have been warning about for months.

The International Monetary Fund has cut its 2026 global growth forecast to 3.1%, with a worst-case scenario of approximately 2% growth if supply disruptions persist, a level the fund warns would bring the global economy dangerously close to recession.

Australia Grain Production Faces Severe Downside

Australia grain production provides a case study in how fertilizer supply disruption translates directly into harvest losses. The country relies heavily on urea imports from the Persian Gulf, and the closure of the Strait of Hormuz has left Australian growers facing acute nitrogen shortages as winter crop planting gets underway.

Commonwealth Bank agricultural analyst Dennis Voznesenski has modelled three scenarios for Australian crop output based on varying levels of urea availability. Under the most severe scenario, involving a 45% reduction in urea supply, wheat production could fall by as much as 25%, barley by 32%, and canola by 31%. Even the most optimistic scenario, a 15% drop in urea availability, would result in a 9% decline in wheat, 17% in barley, and 10% in canola.

In Western Australia, the country's largest grain-producing and exporting region, industry estimates suggest that without adequate urea, the grain harvest could fall from a record 27 million tonnes in the previous season to around 15 million tonnes. That would represent a decline of nearly 45%.

A survey of Australian growers found that only 10% had urea supplies on-farm, with prices having nearly doubled since January. Australian farmers are now pivoting toward less nitrogen-intensive crops such as barley, oats, and legumes, a shift that will reshape the country's export profile for the 2026-27 marketing year.

Victorian Farmers Federation grains group president Ryan Milgate warned that wheat yields through the Wimmera and Western District would almost certainly decline year-on-year, noting that last season's strong yields had already stripped significant nitrogen from the soil.

Fertilizer Supply Disruption Hits Brazil at the Worst Possible Moment

Fertilizer supply disruption poses an acute challenge for Brazil, the world's largest fertilizer importer. The country consumes approximately 47 million tonnes of fertilizer annually but produces only about 7 million domestically, translating to an 88% import dependency. Nearly half of those imports normally transit the Strait of Hormuz.

The timing of the crisis is particularly damaging. Brazilian soybean farmers are entering their purchasing window for the 2026-27 crop season right now. Unlike US farmers, who had largely secured their spring fertilizer needs before the conflict began, Brazilian producers face the full force of elevated prices and constrained supply.

Brazil's urea imports have already fallen by 33% compared to the same period last year. Analysis from North Dakota State University suggests that if the Strait of Hormuz remains closed through July, Brazil's cumulative urea imports from April 2026 to March 2027 could decline by 18.7%. A longer closure through year-end would result in a 27.3% drop.

Critically, unlike the 2022 disruption triggered by Russia's invasion of Ukraine, Brazilian producers cannot offset higher input costs through elevated grain prices. Soybean and corn prices remain depressed by the global supply glut, making the margin squeeze far more punishing. Research from Purdue University's Center for Commercial Agriculture concludes that the current situation is characterised by fertilizer price increases without corresponding gains in commodity values, a combination that threatens Brazilian soybean competitiveness globally.

Petrobras approved a $1 billion revival of the UFN-III fertilizer plant in Tres Lagoas on 13 April, part of a broader effort to reduce nitrogen import dependency to approximately 65% by 2029. However, new production capacity requires years to come online and offers no relief for the current planting cycle.

El Nino Crop Threat Adds a Second Layer of Risk

El Nino crop threat is building alongside the fertilizer crisis. NOAA's April 2026 outlook places a 50% chance of a strong El Nino developing by the second half of 2026 and a 25% chance of a very strong or super El Nino by late 2026 or early 2027. The European Centre for Medium-Range Weather Forecasts (ECMWF) model has been even more aggressive in its projections, with some runs indicating conditions consistent with the most powerful El Nino events on record, comparable to 1982, 1997, and 2015.

The agricultural implications are regionally distinct but universally concerning. In Australia, El Nino is correlated with drier-than-average conditions during the winter and early spring growing season, meaning the urea shortage and adverse weather could compound simultaneously. Analysts have noted that these yield projections could carry further downside risk if El Nino conditions materialise during the critical September flowering window for wheat and canola.

In India, El Nino typically reduces the southwest monsoon, which is active from June through September. A weakened monsoon would affect the kharif crop cycle and could diminish rabi season planting conditions, with downstream implications for wheat, rice, and pulse production. India is already under strain from the fertilizer disruption, having shut output at three domestic urea plants after Qatari LNG supplies were curtailed.

In central Brazil, strong El Nino events tend to produce drier conditions, adding weather risk on top of the existing input supply constraints. Argentina, by contrast, typically receives wetter conditions during El Nino years, though the timing and intensity of the event remain uncertain.

For the US Corn Belt, the pattern is more nuanced. El Nino generally brings wetter conditions to the southern Plains and Midwest during spring, which could support soil moisture but also risks planting delays from waterlogged soils. The Pacific Northwest faces elevated drought risk through summer and autumn.

Farm Profitability Pressure Across Major Producing Nations

Farm profitability pressure is the underlying condition that makes both the fertilizer and climate shocks so dangerous. Farmers in the United States, Brazil, Canada, and Australia are not absorbing these input cost increases from a position of strength. They are absorbing them during what the American Farm Bureau Federation has described as a generational downturn in the farm economy.

In the United States, USDA data shows net farm income was already forecast to decline in 2026, sitting roughly $48 billion or 24% below the 2022 record. Corn prices have dropped nearly 50% since 2022 and soybeans 40%, while fertilizer and pesticide costs have barely eased. The National Corn Growers Association reports that corn farmers are losing 85 cents per bushel at current input and output price levels. Farm bankruptcies reached 315 Chapter 12 filings in 2025, according to the Farm Bureau.

Direct government payments to US farm producers are forecast at $44.3 billion for 2026, a 45% increase from 2025, reflecting both escalating subsidy programmes under the One Big Beautiful Bill Act and the continued need for emergency disaster assistance. The Farmer Bridge Assistance Programme alone disbursed $11 billion to offset 2025 losses. However, these transfers are sustaining operations rather than restoring profitability, and the fertilizer price shock threatens to widen the gap further.

In Canada, the structural exposure is different but equally consequential. Western Canada produces nitrogen and potash but has zero domestic phosphate production capacity. All phosphate fertilizer is imported, primarily from the United States. Logistical constraints mean that Eastern Canada finds it more efficient to import fertilizer from abroad than to transport it from Western provinces, deepening the country's vulnerability to global supply chain volatility.

Fertilizer Canada spokesperson Kayla Fitzpatrick confirmed that Canada produces nitrogen and potash but does not produce any phosphate and relies entirely on imports. The phosphate sourced from the US, while relatively insulated from the Strait of Hormuz disruption, remains exposed to broader trade policy risks, including the ongoing tariff standoff between Ottawa and Washington.

Import Dependency: Lessons Unlearned From 2022

Despite the sharp fertilizer price shock that followed Russia's 2022 invasion of Ukraine, domestic production in major agricultural hubs has remained largely stagnant. The promises made in the wake of that crisis to diversify supply chains and expand self-sufficiency have, in most cases, not been realised.

Brazil released a national fertilizer plan in 2022, yet imports have since risen to a record 43.3 million tonnes in 2025, up from 39.3 million in 2021. The United States supplies approximately 60% of its own nitrogen, phosphate, and potash needs domestically but remains a significant importer, particularly for nitrogen products. Australia relies on the Middle East for 64% of its urea and 33% of its DAP and MAP supplies. Bangladesh has been forced to shut four of its five fertilizer factories after Qatari gas supplies were disrupted.

The structural vulnerability is not merely a function of supply concentration. It reflects the absence of strategic fertilizer reserves in major consuming nations. G7 countries maintain strategic petroleum reserves but have no equivalent stockpiles for nitrogen, phosphate, or potash. This asymmetry means that when the Strait of Hormuz closes, the agriculture sector has no buffer.

The World Food Programme has estimated that an additional 45 million people worldwide could face acute food insecurity if the war does not end by mid-2026 and oil prices remain above $100 per barrel.

Outlook: Converging Risks With No Quick Resolution

The convergence of conflict-driven fertilizer disruption and a building El Nino presents a risk profile for global agriculture that is fundamentally different from any single shock in recent history. The 2022 Ukraine crisis spiked input costs but also lifted grain prices, providing producers with at least a partial offset. The current situation offers no such compensation.

Farm margins are already compressed. Input costs are climbing. Grain prices remain depressed by 2025's record harvests. And the weather outlook is deteriorating across multiple major producing regions simultaneously.

If the Strait of Hormuz remains disrupted through the Northern Hemisphere growing season and El Nino materialises at strong or super intensity, the downstream impact on global food supplies would become visible in late 2026 and intensify through 2027. The World Bank has projected energy prices to surge 24% this year and overall commodity prices to rise 16%, with developing economies facing inflation of 5.1% or higher.

For producers and policymakers alike, the message is the same: the buffer is gone. The overlapping risks of conflict, climate, and collapsing margins have created conditions where the next disruption, however small, could tip the balance from stress to crisis.