Food inflation: Why wheat and rice may rise in H2 2026

Food inflation is already moving up

India’s food inflation rose to 3.87% in March 2026, and ratings agency ICRA expects it to cross 4% in April. That matters because food has a large weight in household budgets and is a key driver of headline inflation. The current reading suggests prices are not yet in a shock phase, but the direction is up. The key concern highlighted by the FAO is that the biggest pressure may not show up immediately. Instead, it may build through farm input costs and crop cycles. That timing is why the second half of 2026 is being flagged as a risk window.

The trigger: Gulf disruptions tightening fertilizer supply

The disruption chain described in the reports starts with tensions in the Gulf that have hit trade routes and energy flows. FAO Chief Economist Maximo Torero said the disruption of the Strait of Hormuz has been severe, with tanker traffic collapsing by over 90% to 95%. He also said the closure has stalled an estimated 3 to 4 million tonnes of fertilizer trade per month. Because fertilizers and the energy used to make them move through the same corridor, the shock transmits quickly into input prices. For import-dependent countries, Torero said this can mean both higher costs and physical shortages.

Why India is exposed: import dependence and high nitrogen use

India sources roughly 35% of its fertilizers from the Gulf, according to Torero. India also applies more than 120 kg of nitrogen per hectare, described as one of the most intensive rates in the world, which makes it sensitive to supply disruptions. Torero added that domestic fertilizer plants are operating at only 60% capacity after the government capped gas allocation at 70% of historical averages. These are structural constraints because they reduce the ability to quickly replace imports with local supply. The risk rises when disruption coincides with peak agricultural demand for inputs.

Prices are already reflecting the squeeze

Global fertilizer prices have already risen 50% to 80% since the conflict began, according to the article text and Torero’s comments. In India’s case, urea import bids surged from $110 per tonne in February to around $150 per tonne in April, based on industry data cited. Torero also pointed to a sharp rise in shipping costs, noting that shipping insurance premiums surged from 0.25% to as high as 10% of hull value. Those costs can make transport economically prohibitive even when product is available. The combination raises the landed cost of fertilizers and increases the risk of delayed deliveries.

The Kharif timing problem: inputs needed within weeks

The Kharif planting season begins in May and produces rice, pulses, oilseeds, and vegetables. Fertilizers need to reach farms within weeks for timely application. The article notes that the government responded by front-loading urea imports, fast-tracking 13.5 lakh tonnes through global tenders, and building buffer stocks to record levels by mid-March. The Ministry of External Affairs has stated that India has “adequate stocks” for Kharif 2026. These steps can reduce the near-term probability of shortages but do not eliminate cost pressures if global prices remain elevated.

A second risk alongside fertilizers: monsoon uncertainty

Torero also noted a 60% likelihood of below-normal monsoon rainfall in 2026. Weak rains can reduce yields independently of fertilizer availability. The reports argue that the convergence of both risks in the same Kharif season is what makes H2 2026 the critical window. Lower rainfall can also raise irrigation needs and costs. And higher fuel costs, Torero said, raise expenses for irrigation, transport, storage, and processing, compressing farmer margins.

How higher fertilizer prices can turn into higher food prices

Torero described the transmission mechanism as fertilizer costs affecting application rates, then yields, then food prices. He said fertilizer price increases lead directly to reduced application rates. Lower application on nitrogen-intensive staples like rice, wheat, and pulses can mean lower yields. Lower yields tighten domestic supply, and tighter supply pushes prices higher for farmers and consumers. The effect is described as particularly severe if disruptions continue beyond 60 days. Torero said that if the Strait reopens within a 60-day window, markets can absorb the shock within three to four months.

Macro risks: inflation, interest rates, and stagflation warning

The FAO’s warning extends beyond food prices into macroeconomic conditions. Torero said food commodity prices will rise in the second half of 2026 and into 2027, feeding into headline inflation and pushing central banks toward higher interest rates. He said the FAO predicts an overall reduction of economic growth of 1.7% and warned of stagflation, defined as high inflation and low growth. For India, the reports link this to an inflation trajectory already under watch: ICRA expects CPI to cross 4% in April 2026, and the RBI has projected FY27 retail inflation at 4.6%. A fertilizer-driven food price surge would add pressure to those inflation projections.

Key data points at a glance

What to watch next

The reports frame the next few weeks as important because input availability decisions are being made ahead of Kharif sowing. The FAO’s 60-day duration threshold is a key marker cited for when impacts become severe. Policy actions will also matter because India is running a fertilizer subsidy of $18.6 billion for FY2026-27, which Torero said will help but comes with mounting fiscal pressure. The article’s bottom line is that prices are currently contained and official statements indicate adequate stocks, but the structural conditions for a sharper rise in H2 2026 remain in place.