by Neil Greet, first published at The Canberra Times
The cost of living is at the centre of Australians’ concern and a major political battleground, but one of the biggest inflation threats is flying under the radar: a food-cost crisis brewing at the intersection of two current global events.
The first is the war on Iran that has cut global fertiliser supply by a third and doubled prices in some cases, the consequence being less planting of grain staples this year, and lower yields over the next year. Australia’s wheat harvest in 2025-26 is expected to be down by a quarter. Across Asia, it will also affect rice and other crop yields.
The second is that 2026 may be the hottest year in the modern record, and 2027 even hotter, as a result of a record-breaking “super” El Niño driving up temperatures, on top of a world that has already heated by 1.5°C due to the burning of oil, coal and gas.
This will result in a hotter, drier 2026-27 summer in Australia and enhanced fire and drought risks, with the likelihood of lethal heat, record-breaking heatwaves, severe bushfires and adverse impacts on food production. In much of Asia, the El Niño will also produce hotter, drier conditions, unlivable heat and potentially weaker or delayed monsoons.
The deadly combination of a strong El Niño and the fertilizer crisis will have a significant impact on food production, and lead to shortages, higher prices, panic buying and perhaps social unrest and conflict in some parts of the world. We have seen this before: the main trigger of the Arab Spring was simultaneous wheat harvest failures in major producing countries, which led to a tripling of wheat prices and widespread rioting.
Four crops – wheat, rice, maize and soybeans – provide more than 60% of the world’s calorie intake. Wheat and maize are highly dependent on nitrogen fertiliser for protein content and yield; and high-yield rice is also significantly nitrogen fertiliser dependent. The threat to food security from the war on Iran is significant and ongoing, and so are extreme heatwaves which can severely affect yields.
The global interconnection of food systems and markets means that no country is insulated from the consequences. Climate change can be abrupt, and so can the consequences. But the Australian Government is one of many that appears not to routinely consider extreme climate scenarios in their security plans, instead assuming that climate risks will gradually evolve over the long term.
This is a dangerous mistake that would leave Australia poorly prepared. The double-whammy of fertiliser shortages and extreme heat could produce unexpected events in neighbouring countries with whom Australia has security arrangements, and Australia will not be immune. Defence and emergency services may be spread too thin over multiple competing response demands.
There is an urgent need to enhance the capacity of neighbours to withstand climate-changed-driven food shocks. Australia’s system for assessing and preparing for such climate risk is inadequate, and now is the time to establish an Abrupt Climate Change Early Warning System and fund and integrate climate research in Australia in a manner that will deliver a sound platform for realistic risk assessment and government planning and policy-making.
Domestically, climate disasters have had a dramatic impact on insurance premiums and availability. Premiums in disaster-prone regions have increased by up to 400%, posing a systemic financial risk.
The Australian Prudential Regulation Authority warns that an estimated one in seven households are uninsured today, which may be one in four households by 2050, and that a growing home insurance protection gap can lead to greater uninsured financial losses for households and banks, which can in turn erode financial system resilience.
Three food crops — maize, rice and wheat — account for 42 per cent of calories that people eat around the world. Scientists warn that even under an optimistic, low-emissions climate scenario, those crops will experience dramatic increases in heat stress by 2050, with 27 per cent of maize, 36 per cent of wheat and 87 per cent of rice at risk.
Climate-driven food shocks, reduced yields and higher production costs will drive ongoing food-flation. Research from the European Central Bank published in 2024 found that rising temperatures and extreme weather events will push food prices and inflation higher over the next decade, and that in a worst-case scenario food inflation would be more than four per cent per year across large parts of the world.
UN climate chief Simon Stiell says that the climate crisis is a cost-of-living crisis because “climate disasters are driving up costs for households and businesses… worsening climate impacts will put inflation on steroids unless every country can take bolder climate action.”
How events will unfold over the next 6 to 12 months is uncertain, but it is prudent to look ahead and consider plausible scenarios. Are we prepared for this, and for the consequences for human security both at home and across the Indo-Pacific?
Neil Greet is a former Australia Defence Force Colonel.
