Southeast Asia Faces Potential Food Supply Shock Amid Oil, Fertilizer, and El Niño Pressures

Goldman Sachs warns that simultaneous volatility in oil prices, fertilizer costs, and a projected strong El Niño event in late 2026 could trigger a food-supply shock across Southeast Asia. The bank estimates an extra 1 pp to food inflation after six months, rising to 2.1 pp after twelve months, then moderating to about 2 pp at eighteen months.

CNBC

Singapore and the Philippines, as net food importers, are directly vulnerable to global price swings. Thailand imports over 90 % of its fertilizers, heightening exposure to fertilizer price spikes. Malaysia and Indonesia, while supported by palm-oil production, would become net importers if that sector is excluded from calculations.

CNBC

The projected inflationary impact adds roughly 1 percentage point after six months, 2.1 percentage points after a year, and stabilises near 2 percentage points after eighteen months. Fuel shortages linked to the Iran-related war could further raise transportation costs for food commodities.

CNBC

Goldman Sachs highlighted that the oil shock from the Middle East conflict has increased fuel-sensitive CPI items and raised farm input costs. A London School of Economics paper confirms rapid transmission of oil price changes through food supply chains. An OECD report warns that rising fertilizer prices could disrupt planting and harvesting seasons in 2026-2027, potentially reducing yields and increasing food prices.

CNBC

Goldman clarifies its figures represent “additional pressure on top of the usual food inflation trend, not as forecasts of total food inflation,” highlighting uncertainty about the overall inflation trajectory and the precise timing of El Niño effects.

CNBC

• “The oil shock from the Middle East conflict has shown up in fuel-sensitive CPI items, and higher fertilizer prices will raise farm input costs,” — Goldman Sachs analyst

CNBC

• “A potential strong El Niño event in late 2026 could create another food-supply shock just as oil and fertilizer pressures are passing through the food chain,” — Goldman Sachs analyst

CNBC

• “This could affect planting and harvesting seasons over 2026 and 2027, reducing yields and potentially leading to higher food prices over time,” — OECD report

CNBC

• “These estimates should be read as additional pressure on top of the usual food inflation trend, not as forecasts of total food inflation,” — Goldman Sachs report

CNBC

Higher food prices may strain household budgets in Indonesia, the Philippines, Vietnam, and other affected economies, forcing governments to weigh fuel subsidies against food affordability and potentially reshaping trade and import policies.

CNBC

Authorities are expected to track oil market developments, fertilizer supply chains, and El Niño forecasts closely. Adjustments to agricultural support and import-export regulations may be considered to mitigate the projected inflationary pressures.

CNBC