Global agriculture markets Report Interpretation

Overview

Goldman Sachs examines why agricultural prices may become more vulnerable to upside shocks even though markets entered 2026 with relatively ample supplies. It identifies disruptions around the Strait of Hormuz, Black Sea grain trade and a potential record-strength El Niño as concurrent risks whose price effects could be amplified by more inward-looking agricultural trade policies.

Core views

Agriculture markets began 2026 with relatively ample supplies, but Goldman Sachs argues that the upside tail for prices is thickening as geopolitical and weather shocks accumulate. The BCOM Agriculture Spot Index had already risen 24% year-on-year, led by a 41% increase in wheat prices. The central thesis is not simply that physical disruptions reduce supply: an increasingly fragmented trade system can make even small disruptions produce larger and more persistent global price moves. First, continued disruption around the Strait of Hormuz could tighten agricultural markets through higher input costs and reduced exportable crop supply. Hormuz is a chokepoint for about one-third of global fertilizer trade, and fertilizer flows through it have fallen since the July re-escalation. Nitrogen fertilizer matters immediately for yields because grains such as corn, wheat and rice require seasonal application; the disruption coincides with the third-quarter procurement period for Brazil's corn, India's rice and sugarcane, and EU winter wheat. In 2024, approximately 34% of global urea trade and 23% of ammonia trade passed through Hormuz. Phosphate disruption has a slower but potentially enduring effect. Farmers can initially draw down soil reserves, but sustained under-application weakens soil quality, resilience and productivity. Goldman Sachs highlights Brazilian soybeans, which account for 62% of global soybean exports and have roughly 80% import dependence on phosphate fertilizers. Brazilian growers had secured about 68% of expected fertilizer demand by mid-June, compared with roughly 75% historically. Elevated phosphate prices during the key procurement period could therefore prolong under-application and raise longer-term risk to Brazilian soybean production. Record-high diesel prices on September 4 add pressure because diesel powers farm machinery, harvesting and transportation; Hormuz handles about 10% of global diesel exports. Energy-security concerns may also divert crops from export markets to domestic biofuel use, as Brazil and India raised ethanol mandates and Indonesia raised its biodiesel mandate. Second, renewed Russia-Ukraine tension puts the Black Sea, described as the world's most important grain corridor, under pressure. Goldman Sachs estimates that up to 15-20% of global grain trade is at risk. The timing is significant because the disruption arrives in peak Black Sea wheat-export season, with Russian and Ukrainian seaborne wheat exports already sharply below normal levels. Wheat prices had risen about 20% since the escalation began in early July. Corn exports have also fallen sharply, though August is seasonally a low-export month; if disruption persists when Black Sea corn exports normally increase from October, the effects could extend from wheat into global corn markets. Third, the report sees a greater than 90% probability that current El Niño conditions develop into a very strong, or “super,” El Niño during the 2026-27 winter, with the event forecast to be the strongest on record. Such episodes are unusual, occurring only three times over the past 75 years, and stronger events tend to produce more pronounced global effects, usually peaking in Northern Hemisphere winter. Goldman Sachs expects simultaneous drought and flood disruption across multiple crop regions. Sugar is particularly exposed because global exports are concentrated in El Niño-sensitive regions including Center-South Brazil, India and Thailand. El Niño could also disrupt trade logistics. The Panama Canal handles 10% of global cereal trade and 17% of global soybean trade. Although it entered the current El Niño with comfortable water levels, reservoir levels have declined rather than rebuilt during the rainy season. If they are not sufficiently replenished before the January-May dry season, canal authorities may need to impose further vessel-transit restrictions, similar to 2023/24. The Panama Canal Authority had already reduced transit capacity on August 20, 2026 as weaker rainfall lowered reservoir levels. The report's broader mechanism is trade fragmentation. Since the pandemic and the 2022 food and energy crisis, governments have placed more emphasis on domestic food and energy resilience through tariffs, export controls, higher biofuel mandates and government inventory building; the annual pace of new agricultural trade restrictions has roughly doubled since 2020. In concentrated global agricultural markets, a small physical shock—or merely the risk of one—can trigger precautionary export restrictions that remove far more exportable supply than the original disruption. Goldman Sachs cites India's rice export ban before the 2023/24 strong El Niño, which removed about 40% of global rice trade from export markets even though Indian production ultimately proved resilient. Fragmentation also reduces the size and liquidity of the market absorbing shocks. Goldman Sachs estimates that if a regional bloc is half the size of the global market, the same external disruption produces twice the price impact. Its wheat illustration assumes a three-standard-deviation US harvest shock equal to about 60% of US wheat production, or 4% of global output, using supply elasticity of 0.2 and demand elasticity of -0.85. Lower elasticities would increase the price impact further, while fragmentation would still double it in this example. The report therefore concludes that policies intended to strengthen domestic resilience may collectively raise global agricultural price volatility.

Analysis framework

Goldman Sachs begins with current market conditions and recent price performance, then traces three disruption channels—Hormuz inputs and energy, Black Sea grain exports, and El Niño weather and shipping effects. It then explains how export controls, stockbuilding and biofuel mandates can magnify physical shortages by reducing exportable supply and shrinking the market available to absorb shocks.

Methodology notes

• Industry AnalysisSupply-demand framework

  Supply-demand analysis of crop inputs, exportable crop supply, shipping capacity and agricultural trade flows.

  The report links fertilizer and diesel availability, crop-use diversion, grain-export disruptions and weather impacts to potential changes in agricultural supply and prices.

• Other

  Price-elasticity shock illustration

  Goldman Sachs uses supply elasticity of 0.2 and demand elasticity of -0.85 to show that the same harvest shock has a larger price effect when a smaller, fragmented regional market absorbs it.

Key data

• BCOM Agriculture Spot Index24% year-on-year increaseRecent agriculture-price performance entering the report's risk analysis.
• Wheat prices41% year-on-year increaseContribution to the BCOM Agriculture Spot Index rise.
• Black Sea grain trade at risk15-20% of global grain tradeExposure associated with renewed Russia-Ukraine tensions.
• Wheat-price move since early-July escalation~20% increaseLinked to sharply below-normal Russian and Ukrainian seaborne wheat exports.
• Probability of super El Niño>90%NOAA assessment for development into a very strong event during the 2026-27 winter.
• Panama Canal trade exposure10% of global cereal trade; 17% of global soybean tradeTrade potentially affected by lower water levels and transit restrictions.
• India rice export-ban impactabout 40% of global rice trade removed from export marketsHistorical example of policy amplifying a perceived supply risk.
• Fragmentation shock effectTwice the price impact when a regional bloc is half the size of the global marketGoldman Sachs' illustrative market-size mechanism.

Impact & implications

The report argues that agricultural markets may respond more sharply to supply risks than in the past because domestic-resilience policies can remove exportable supply, reduce traded liquidity and fragment the market. The combined effect of input disruptions, constrained grain corridors, weather damage and shipping bottlenecks could therefore intensify price volatility even from a relatively comfortable inventory starting point.

Risks

• Continued Hormuz disruption could constrain fertilizer and diesel flows, raise production costs and pressure crop yields.
• Persistent Black Sea disruption could broaden stress from wheat into global corn markets as the seasonal corn-export period begins.
• A super El Niño could cause simultaneous drought and flood disruption across crop-producing regions, particularly affecting sugar-exporting regions.
• Insufficient Panama Canal reservoir replenishment could lead to tighter vessel-transit restrictions and disrupt cereal and soybean trade.
• Further export restrictions, stockbuilding and biofuel mandates could amplify physical disruptions and increase agricultural price volatility.

What to watch

• Fertilizer and diesel flows through the Strait of Hormuz during major crop procurement windows.
• Russian and Ukrainian wheat exports and whether Black Sea disruptions persist into the October corn-export pickup.
• NOAA forecasts for the strength of El Niño conditions into the 2026-27 winter.
• Panama Canal reservoir levels ahead of the January-May dry season and any additional transit restrictions.
• Changes in export controls, commodity tariffs, government stockbuilding and biofuel mandates among major agricultural exporters.