FAO warns governments and food industry leaders have six to 12 months to prevent escalating inflation and supply chain disruption.

Strait of Hormuz closure could spark global food price crisis, FAO warns

The closure of the Strait of Hormuz could trigger a global food price crisis within six to 12 months unless governments and industry take urgent action to protect supply chains, the Food and Agriculture Organization of the United Nations (FAO) has warned.

The UN agency said disruption to one of the world’s most important shipping routes is already increasing costs for food manufacturers, growers and importers as energy, fertiliser and logistics prices climb.

According to FAO, decisions made now on fertiliser use, imports, financing and crop choices will determine whether a full-scale food price crisis develops over the coming year.

The time has come to ‘start seriously thinking about how to increase the absorption capacity of countries, how to increase their resilience to this choke, so that we start to minimise the potential impacts.”

 

FAO Chief Economist Máximo Torero

FAO warned the disruption could ripple through food production systems in stages, from energy and fertiliser shortages to lower yields and higher consumer food prices.

The FAO Food Price Index has already risen for three consecutive months, driven by higher energy costs and supply chain disruption linked to conflict in the Middle East.

Alternative routes offer limited relief

FAO warned countries must strengthen supply chain resilience, secure alternative trade routes and avoid export restrictions to limit further disruption across agrifood supply chains.

David Laborde said countries will need to redirect trade through alternative land and sea corridors, including routes across the eastern Arabian Peninsula, western Saudi Arabia and the Red Sea.

However, Laborde warned these routes offer limited capacity, making it critical for major producing countries to avoid export restrictions that could tighten supply further. FAO also stressed the need to protect humanitarian food flows as import-dependent countries face mounting costs.

Speaking in a new FAO podcast published on Wednesday, FAO Chief Economist Máximo Torero said governments and international organisations must act now.

“The time has come to ‘start seriously thinking about how to increase the absorption capacity of countries, how to increase their resilience to this choke, so that we start to minimise the potential impacts,’” Torero said.

He added that this would require “intervention by governments, by international financial organisations, by the private sector, and by UN agencies and other research centres to try to help countries to be able to cope better with the current situation”.

FAO also warned that El Niño weather conditions could intensify the crisis by bringing drought and disrupting rainfall patterns across key agricultural regions.

Policy recommendations

FAO has issued a series of short-, medium- and long-term policy recommendations aimed at strengthening food system resilience and reducing future chokepoint risks.

Short-term recommendations:

  • Rapidly secure alternative land and sea corridors to bypass Hormuz - this won’t resolve the magnitude of the supply shock of inputs but will help to marginally reduce it.
  • Avoid export restrictions, especially on energy, fertilizers and inputs.
  • Exempt food aid from trade curbs.
  • Promote in emergency interventions intercropping (cereals + legumes) to cut nitrogenous fertilizer use and provide major nutritional, environmental, economic, and agronomic benefits.
  • Activate social protection programmes, drawing on lessons from Latin America.
  • Avoid blanket subsidies, which create significant fiscal pressures and tend to be regressive; instead, prioritize targeted support for the most vulnerable through digital registries that can efficiently direct assistance to vulnerable rural households and smallholders, particularly in Africa.

Medium-term recommendations:

  • Avoid boosting biofuel demand during shortages to limit food–fuel competition.
  • Ensure energy policy responses do not exacerbate food crises.
  • Expand affordable credit for farmers and agribusinesses through second-tier institutions to provide credit lines to reach SMEs, MSMEs, and value-chain actors. These lines should be of low interest emergency credit, with repayment schedules aligned to harvest periods and with at least six to nine months of grace periods.
  • Combine agricultural loans with guaranteed offtake agreements from aggregators, processors, or public buyers.
  • Use digital farmer registries and mobile money systems, as implemented in Mozambique and Peru, for rapid disbursement.
  • Integrate informal farmers into different forms of horizontal coordination (farmer associations, farmer groups, cooperatives, etc.) to improve access to finance and support and take the crises as an opportunity to formalize farmers through digital registries.
  • Provide facilities for balance-of-payments, support of rapid disbursement and expand financing for food and fertilizer imports. The Food Import Financing Facility is design for this and the implementation in 2022 of the food shock driven window should be reactivated.
  • Use fast-track financing and increase grants for debt-distressed countries through existing mechanisms of MDBs and IFIs.

Long-term recommendations:

  • Diversify ports, corridors, storage, and logistics systems globally to reduce chokepoint risks in the future.
  • Build regional reserves and warehousing capacity to strengthen future shock absorption.
  • Improve the resilience of domestic and cross-border transport systems.
  • Use concessional financing to accelerate diversification of the energy mix and expand irrigation by replacing diesel with electric and solar-powered systems, particularly for irrigation.
  • Expand the use of electrified machinery, drones, and precision agriculture technologies.
  • Improve efficiency through soil mapping and precision application to reduce fertilizer waste and increase nutrient-use efficiency.
  • Develop innovation funds to support green ammonia, biostimulants, crop genetics, and nutrient-efficiency technologies. While this will take three to five years, it will significantly strengthen long-term resilience.
  • Coordinate with fertilizer companies to develop shared soil and fertilizer mapping systems based on agreed common standards.
  • Support crop switching, intercropping, and fertilizer efficiency improvements rather than pursuing full system overhauls.
  • Strengthen macroeconomic resilience to food inflation and import shocks.
  • Expand the use of early warning systems, insurance, and monitoring mechanisms to act before crises escalate. This is even more urgent given the high probability of a strong El Niño event.

Without coordinated intervention, the agency warned, the disruption could evolve from an energy and shipping crisis into a prolonged global food inflation shock.

Deputy Editor of New FoodView full profile

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