India’s weak monsoon may add to global food inflation as wars disrupt farm supplies

A delayed and weaker-than-normal monsoon in India, coupled with conflicts in West Asia and Ukraine, could push the world into another spell of food inflation after a period of relative stability.

The warning comes as higher crude oil prices, disruptions to fertiliser supplies and mounting climate risks threaten to increase the cost of producing and transporting food globally, with consumers likely to feel the impact by the end of this year and into 2027.

However, a report by Bajaj Asset Management said India’s delayed monsoon is unlikely to derail the broader economy, as improving rainfall, healthy food grain stocks and resilient rural demand could help cushion the impact, even if food inflation remains elevated in the near term.

UN sees food prices climbing again

Food prices played a major role in driving global inflation in 2022 but have remained relatively subdued this year despite elevated energy costs. That respite, however, may prove temporary.

“I expect that commodity prices will start to increase more now, and food prices will start increasing by the end of the year. Next year, for sure, they will increase more,” chief economist of the United Nations Food and Agriculture Organization Maximo Torero told Reuters in an interview.

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According to Torero, there is typically a lag of three to six months before higher commodity prices are reflected in retail food prices.

“The transmission from the commodity to the final food price is around three to six months,” he said.

While prices of key agricultural commodities such as wheat, maize and rice have risen in recent months, they still largely reflect relatively favourable harvests rather than the production challenges expected in the next planting season.

Wars raise costs across the food supply chain

The ongoing conflict involving Iran has heightened concerns over the security of the Strait of Hormuz, one of the world’s most important energy shipping routes. Any disruption there could raise costs across the agricultural sector.

“The Strait of Hormuz is a problem that affects all the inputs of agricultural commodities and agricultural systems,” Torero said.

He noted that higher Brent crude prices increase costs for irrigation, packaging, processing and transportation, while natural gas — an essential feedstock for fertiliser production — could also become more expensive.

At the same time, attacks on Russia’s oil and gas infrastructure during the Ukraine conflict have constrained exports of diesel and natural gas, tightening supplies of two critical agricultural inputs.

The result is rising production costs for farmers worldwide, even in countries not directly involved in the conflicts.

“You’re hearing this in Europe, in the US, Brazil and in Asia. Tight margins are putting stress in planting decisions,” Torero said.

India’s monsoon remains a key watchpoint

India, the world’s second-largest producer of rice and the largest exporter of the staple, is also emerging as a potential source of concern for global food markets.

The country’s monsoon got off to a delayed start, with below-average rainfall raising concerns over rice production and global food supplies. Any prolonged disruption to India’s output could tighten international markets and push up commodity prices.

However, a recent report by Bajaj Asset Management said the broader economic impact of the delayed monsoon is likely to remain limited.

The report noted that rainfall improved significantly during the last week of June and remained strong through July. Reservoir levels are comfortable, with most river basins at or above their long-term averages, while India’s food grain stocks are around five times the prescribed buffer level, providing a cushion against cereal inflation.

The report added that inflation is expected to rise from recent lows, with consumer price inflation likely averaging 5-5.5 per cent in FY27, driven mainly by temporary food supply pressures. However, it said underlying inflation remains contained.

It also highlighted that India’s rural economy continues to show resilience. Tractor sales rose 19 per cent year-on-year in May, agricultural credit growth accelerated to nearly 15 per cent, and strong non-farm incomes have supported household consumption despite delays in sowing.

Historically, a weak start to the monsoon has not necessarily determined the outcome of the full season, the report said. While June 2026 was among the driest in more than a century, rainfall during July to September will be crucial. Consecutive years of deficient rainfall tend to have a much greater impact on farm incomes, rural consumption and economic growth than a single delayed monsoon.

If rainfall continues to improve through August and September, concerns over a deficient monsoon could ease, with 2026 eventually being seen as a delayed but recovering monsoon year, the report added.

Farmers cut planting as costs rise

The squeeze on farm economics is already becoming visible globally.

Global wheat and corn planting declined during the first three months of the Iran conflict, while some US farmers have shifted to soybeans because the crop requires lower fertiliser inputs.

In Australia, one of the world’s largest agricultural exporters, authorities recently projected winter crop production would decline by 21 per cent, citing sharply higher fuel and fertiliser costs as well as uncertainty over the availability of critical inputs.

Even in the United States, where agriculture is relatively self-sufficient, the American Farm Bureau Federation estimates that farmers growing nine major crops could collectively lose $32 billion in 2027 without additional federal support. The group said every major crop analysed is projected to remain below break-even on a per-acre basis.

El Nino could worsen food security

Adding to geopolitical risks is the expected strengthening of the El Nino weather pattern, which is likely to alter rainfall across key agricultural regions.

Extreme weather linked to El Nino could reduce crop yields, tighten food supplies and push tens of millions more people into acute food insecurity, the FAO warned.

The combination of climate shocks, higher energy prices and disruptions to fertiliser and fuel supplies is creating what economists describe as a “perfect storm” for global agriculture.

While commodity markets have so far remained relatively resilient, the full impact of today’s higher production costs is expected to emerge in supermarket prices over the coming months, potentially reigniting inflationary pressures for households around the world. At the same time, India’s improving rainfall, ample food grain reserves and resilient rural economy may help limit the domestic economic fallout, even as food prices remain under pressure in the near term.

With inputs from agencies.