Agricultural markets are entering 2026 with relatively comfortable inventory levels, but geopolitical and climate risks are building in tandem, significantly thickening the tail-risk profile for higher agricultural commodity prices.
Goldman Sachs commodity research analysts Lina Thomas and Daan Struyven noted in a September 7 report that the BCOM agricultural spot index has climbed 24% year-over-year, with wheat prices surging 41%. Three simultaneously compounding risks are driving this rally—developments in the Strait of Hormuz, the Black Sea region, and a potential super El Nino.
What deserves even closer attention is that these three shocks are converging against a backdrop where global agricultural markets are becoming increasingly "inward-looking." Following the pandemic shock and the 2022 food and energy crisis, multiple economies have shifted policy focus decisively toward food and energy supply security—manifested through higher commodity import tariffs and expanded export controls.
The bank argues that the higher trade barriers rise, the lower the threshold for shocks to cause disruption. Since 2020, the pace of new agricultural trade restrictions has doubled, and market fragmentation means equivalent supply shocks will trigger larger and more persistent price swings. The tail risk of higher agricultural prices is thus thickening considerably.
Risk One: Hormuz—Dual Disruption to Fertilizer and Diesel Directly Hits Farm Production Costs
The Strait of Hormuz serves as the chokepoint for roughly one-third of global fertilizer trade. Since tensions re-escalated in July, fertilizer traffic through the strait has declined noticeably.
For nitrogen fertilizers, approximately 34% of global urea trade and 23% of ammonia trade transited Hormuz in 2024. Nitrogen fertilizers directly impact yields of corn, wheat, and rice, requiring application every season with critical timing. This supply disruption coincides precisely with the third-quarter procurement window for major nitrogen-importing nations—including Brazil's corn season, India's rice and sugarcane cycle, and the EU's winter wheat preparation period.
For phosphates, about 18% of global MAP and DAP trade moved through Hormuz in 2024. Brazil's soybean sector relies on phosphate imports for roughly 80% of its needs, and Brazilian soybeans account for 62% of global exports. The July escalation struck just as Brazilian soybean farmers entered their critical pre-planting procurement window (June-July) ahead of September sowing. Analysts point out that by mid-June, Brazilian soybean growers had secured only about 68% of their anticipated fertilizer requirements (versus a historical norm of roughly 75%). With phosphate prices remaining persistently elevated, the risk of prolonged under-application is building.
Meanwhile, US diesel prices hit an all-time high on Friday, September 4. Tensions around Hormuz constrain approximately 10% of global diesel exports, and combined with refinery outages in the Middle East and Russia, persistently high diesel prices will further squeeze farmer margins and push up agricultural production costs.
Energy security concerns add another layer of pressure: Brazil and India have raised ethanol blending ratios (sugar/corn), and Indonesia has increased biodiesel blending mandates (palm oil). As major exporters divert more crops toward domestic biofuel production, available exportable supply is shrinking.
Risk Two: The Black Sea—The World's Most Critical Grain Corridor Faces Threats to 15%-20% of Cereal Trade
The Black Sea is the world's most important grain export route. Analysts highlight that renewed Russia-Ukraine tensions put 15%-20% of global food trade at risk.
With the Black Sea wheat export season now underway, seaborne wheat shipments from Russia and Ukraine are running substantially below normal levels. Since tensions escalated in early July, wheat prices have climbed approximately 20%.
For corn, seaborne exports from Russia and Ukraine have also dropped sharply, though August typically marks a seasonal export lull. The bank warns: if disruptions persist into October—when Black Sea corn exports normally enter their peak season—the risk will spread from wheat markets to the global corn complex.
Risk Three: Super El Nino—Only Three Occurrences in 75 Years, with Current Forecasts Pointing to the Strongest on Record
According to the US National Oceanic and Atmospheric Administration (NOAA), the probability that current El Nino conditions develop into a "super" event exceeds 90%, with expectations of peak intensity during the 2026-2027 winter.
Super El Ninos have emerged only three times in the past 75 years, and the current event is projected to become the strongest ever recorded.
Analysts note that a super El Nino can simultaneously impact multiple major production zones through severe drought and flooding. The sugar market faces particularly acute exposure—global sugar exports are heavily concentrated in El Nino-sensitive regions, including Brazil's center-south, India, and Thailand.
The Panama Canal also faces fresh threats. The waterway handles 10% of global grain trade and 17% of soybean trade. Although the canal entered this El Nino cycle with relatively ample water levels, reservoir elevations have been declining rather than rising during the current rainy season. On August 20, 2026, the Panama Canal Authority reduced transit capacity due to weak rainfall and falling reservoir levels. Analysts warn that if reservoirs fail to recharge sufficiently before the January-May dry season, authorities may need to impose further restrictions on vessel transits—potentially repeating the 2023/24 shipping limits.
The Larger Threat: Higher Trade Barriers Lower the Shock Threshold
Goldman Sachs maintains that while the three shocks described above are already severe, the true risk amplifier is that they are striking an increasingly "inward-oriented" global agricultural market.
Since 2020, multiple economies—after weathering the pandemic and the 2022 food and energy crisis—have pivoted policy priorities toward food and energy supply security. This manifests through higher commodity import tariffs, expanded export controls, elevated biofuel blending mandates, and government-led stockpiling. Bank data shows that the annual pace of new agricultural trade restrictions has roughly doubled since 2020.
The bank's core logic rests on two pillars. First, small shocks can trigger massive supply withdrawals. Global agricultural trade is heavily concentrated among a handful of major exporters. When a key exporting country faces even a potential supply disruption, preventive export restrictions may follow, removing far more supply from global markets than the original disruption itself. During the 2008 and 2022 food price crises, cascading export bans amplified global price increases. India's rice export ban ahead of the 2023/24 strong El Nino removed approximately 40% of global rice trade from export markets, driving prices sharply higher—even though India's rice output ultimately proved resilient.
Second, market fragmentation amplifies price volatility. Analysts estimate that the price impact of external shocks—such as weather events in agricultural markets—depends on the shock's size relative to the market absorbing it. If a regional bloc's market is only half the size of the global market, an equivalent shock will produce twice the price impact. Trade barriers and precautionary stockpiling measures designed to enhance domestic resilience may ironically fragment markets, reduce liquidity, and amplify price swings—working directly against their intended purpose.
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