Global food inflation risks are intensifying, with Citi Research flagging a potential 13 per cent rise in agricultural prices amid climate shocks and geopolitical tensions
A renewed wave of global food inflation may be emerging as climate-related disruptions and geopolitical tensions threaten agricultural supply chains across key markets. According to a new report by Citigroup’s Citi Research, risks associated with El Nino weather conditions and a possible disruption in the Strait of Hormuz could push agricultural commodity prices sharply higher over the next six to 12 months.
The report comes amid heightened volatility in commodity markets driven by tensions in West Asia, uncertain energy supplies and fragile trade routes. Citi Research said agricultural markets remain particularly vulnerable because food production depends heavily on stable energy availability, fertilisers and favourable weather conditions.
“Agriculture price risks are heavily skewed to the upside over the next 6-12 months, as they face major supply risks resulting from a potential prolonged closure of the Strait of Hormuz, and from likely poor weather related to El Nino,” Citi Research said in its Commodities Outlook report.
Energy Costs And Farming
The Strait of Hormuz is among the world’s most strategically important shipping routes for oil and energy exports. Any prolonged disruption in the passage could trigger a sharp rise in global energy prices, increasing agricultural production costs worldwide.
According to Citi Research, farming operations depend extensively on fuel, fertilisers and chemical crop protection products derived from fossil fuels. A rise in oil prices could therefore raise cultivation costs and impact food production globally.
“A prolonged SoH closure would drive up the cost of agriculture production (via higher energy prices), reduce crop yields/output (owing to lower fertiliser and lower crop protection from oil based fungicides and pesticide availability),” the report added.
The report further noted that higher fossil fuel prices may also accelerate the diversion of agricultural commodities towards biofuel production. Such a shift could tighten food supplies further and place additional upward pressure on global food prices.
El Nino Threat Grows
Alongside geopolitical concerns, Citi Research identified El Nino-linked weather disruptions as another major threat to global food security and agricultural output. El Nino is typically associated with hotter temperatures and lower rainfall across several parts of Asia and other key agricultural regions. Such conditions can damage crops, reduce yields and tighten food supplies globally.
The report highlighted that commodities such as sugar, cocoa and coffee are among the most exposed to weather-related disruptions linked to El Nino, alongside supply-side pressures arising from higher energy costs.
Citi Research cautioned that reduced rainfall and rising temperatures across major farming regions could weaken agricultural output in the coming months, adding pressure to already strained food markets.
Food Prices Already Climbing
Citi Research said inflationary pressures are already becoming visible across global agricultural markets.“Food prices are rising, with traded agricultural prices up 13 per cent year-to-date through mid-May,” the report said.
The report also stated that broader food indices had risen 5 per cent through April this year, indicating that food inflation pressures are gradually intensifying worldwide.
The warning comes amid continued concerns over supply chain disruptions, volatile commodity markets and geopolitical instability affecting global energy and food trade.
(With input from agency)
