In 2022, the war in Ukraine, the breadbasket of Europe, had a direct impact on the price of cereals. Prices have today reacted little to the war in the Persian Gulf because global stocks have been boosted by exceptional harvests in 2025. However, the current abundance of supply could be called into question in the long term by various structural and cyclical factors.
According to the International Energy Agency, nearly 80% of primary energy consumption comes from fossil fuels. The agricultural sector and more generally our entire food system is also dependent on fossil fuels and thus remains particularly vulnerable to energy and geopolitical crises. This dependence of the agricultural sector on hydrocarbons comes mainly from mechanization, the intensive use of chemical fertilizers, maritime transport of goods and all the infrastructures necessary for industrial agriculture: refrigeration, greenhouses, packaging. Thus, according to certain studies[1]it takes approximately 7.3 calories of fossil energy to produce a single calorie of food in the United States.
Fertilizers play a central role in this ecosystem. Nitrogen fertilizers, such as urea, require significant amounts of natural gas to manufacture, while phosphate and potash fertilizers rely on oil and mining. For example, the United States depends 90% on imports for its supply of potash, which pushed the Trump administration to add this mineral to its list of critical minerals in November 2025. However, more than a third of the fertilizers exchanged in the world transit through the Strait. of Hormuz, a strategic area today greatly disturbed by geopolitical tensions in the Middle East. At the height of the crisis, prices of American urea increased by more than 90%, which illustrates the extent of current tensions.
Graph 1: Prices of agricultural products compared to fertilizer prices[2]
The consequences are already visible in certain Asian markets. Several fertilizer factories in India and Bangladesh have even reduced or stopped their production due to lack of sufficient supplies of natural gas. In order to secure its supply, China has once again reduced fertilizer export quotas. This drop in production and the increase in the cost of inputs could lead to a reduction in agricultural yields in several regions of the world in the coming months.
In addition, an increase in the price of cereals will affect the livestock sectors, where animal feed costs often represent more than 60% of production costs. In 2007, the sharp rise in the price of corn, caused by drought and the growing demand for ethanol, pushed American breeders to reduce their herds in order to avoid significant financial losses. The following year, meat prices, particularly turkey prices, rose sharply for Thanksgiving.
In addition, by substitution effect following the increase in the price of petroleum products, certain agricultural products used for the production of biofuels such as soybean oil have increased by 50% since the start of the year. The prices of sugar, largely converted into ethanol in Brazil, the world’s largest producer, are benefiting from a respite due to government intervention on fuel prices.
Added to these structural pressures is an amplification factor that investors would be wrong to neglect. Forecasters anticipate the return of El Niño from September 2026, potentially in its most intense form ever recorded. For the record, in 2024, two consecutive years of this climatic phenomenon had propelled cocoa prices from $2,500 to $12,000 per ton. In the short term, heat waves in Europe and drought in the United States could also negatively affect yields.
Despite these risks, financial markets still seem to anticipate a rapid return to normal. However, physical constraints linked to energy, fertilizers and agricultural capacities could last for several years. Even if strategic agricultural reserves still exist in the United States, Europe or Asia, a late reopening of the Strait of Hormuz and climatic phenomena could strongly disrupt global agricultural yields, reduce production and thus exert upward pressure on prices. For the informed investor, exposure to agricultural products today constitutes an element of diversification in a raw materials portfolio allocation.
[1] ScienceDirect, Assessing the sustainability of the US food system: a life cycle perspective, juin 2003.
[2] Bloomberg, World bank, mai 2026.
