Recommendations on the lagged food-price channel of the 2026 energy shock for Türkiye’s ministries, the CBRT and international forecasters ahead of 2027
ABSTRACT
The 2026 energy shock is reaching food prices in sequence rather than at once. World Bank data show urea averaging $693.5/t in the second quarter and $390 in August, while the FAO Food Price Index kept rising to 133.3 points in August. This brief reads that divergence as the lag structure in Indermit Gill’s “cumulative waves” thesis: energy and fertiliser first, food commodities next, consumer prices last. On that premise, food is likely to be a more persistent inflation component than energy in 2027, a claim about relative duration, not size. The brief addresses four recommendations to Türkiye’s Ministry of Agriculture and Forestry, the CBRT, the Ministry of Treasury and Finance, and the World Bank and IMF, each with sequencing, trade-offs and indicators.
1. The problem: policy is watching the wave that has passed
In April 2026 the World Bank projected that energy prices would rise 24% in 2026, fertiliser prices 31% and urea 60%. Indermit Gill said the war was hitting the global economy “in cumulative waves: first through higher energy prices, then higher food prices, and finally, higher inflation” (World Bank, 2026a). By September the first two links were observable. The war that began on 28 February 2026 and the restriction of Hormuz transit pass energy into food through three channels. Fertiliser is the first: natural gas is the main input for nitrogen fertiliser, so a cut in gas and LNG supply raises urea costs directly. Transport and farm fuel are the second. Supply anxiety is the third: the expectation that inputs will be scarce reaches grain futures before any harvest is affected. The channels run on different clocks: fertiliser prices react at once; reduced application shows up only in yields at harvest; consumer prices follow commodity prices with a lag because of processing, contracts and retail margins.
The policy risk is that fertiliser prices falling from their peak are read as the end of the food problem, when on the evidence below they may mark its transfer into yields and retail prices.
2. Evidence along the chain
| World Bank indicator | Q2 2026 average | July 2026 | August 2026 |
|---|---|---|---|
| Urea, Eastern Europe ($/t) | 693.5 | not in source | 390.0 |
| Fertiliser index (2010=100) | 188.2 | not in source | 146.4 |
| European natural gas ($/mmbtu) | not in source | 18.06 | 21.11 |
| US HRW wheat ($/t) | not in source | 310.0 | 330.0 |
| Maize ($/t) | not in source | 213.4 | 224.0 |
| Food index (2010=100) | not in source | 117.5 | 119.1 |
Source: World Bank (2026b).
The fertiliser index remains above its 2025 average of 138.7 (World Bank, 2026b), yet urea in August stood about 44% below its second-quarter average while European gas rose from July to August. Fertiliser prices did not track input costs in this period, and the sources do not explain why. Two explanations are possible: a seasonal fall in demand after planting, or reduced application in response to second-quarter prices. If the second holds, the August price signals that cost pressure has passed into yields through lower use. India shows gas cuts reaching fertiliser output directly: Gujarat Gas cut daily supply by 50% between 6 and 31 March, and in 2025 LNG met 80% of the fertiliser sector’s gas demand (Argus Media, 2026); these data refer to March–April, with no verified update for August–September.
Food commodities rose while fertiliser fell. The FAO Food Price Index reached 133.3 points in August, up 1.9% on the month and 2.5% on the year; cereals at 116.3 were the highest since May 2024 and vegetable oils at 196.9 the highest since June 2022, and sugar rose 11.9%. FAO attributed support for maize to supply concerns over inputs following the “closure” of Hormuz (FAO, 2026), although the strait was restricted, not closed. That attribution shows the supply-anxiety channel at work. The sources do not separate the energy link in vegetable oil and sugar, so the whole rise in the FAO index cannot be assigned to the energy shock.
Consumer food inflation diverges across economies. Euro-area food, alcohol and tobacco inflation was 1.1% in August (Eurostat, 2026); US food prices rose 0.1% on the month (U.S. Bureau of Labor Statistics, 2026); India’s food inflation was 5.95% against headline CPI of 4.82% (ThePrint, 2026); and Türkiye’s food and non-alcoholic beverages rose 33.79% on the year and 0.22% on the month (Dünya, 2026). Low advanced-economy rates fit the lag thesis, though a rival explanation holds that commodity costs are a small share of final food prices there, so pass-through is limited rather than delayed; only later monthly data can separate the two. Choi et al. (2018), using a 72-country panel, find that average oil-price pass-through is similar in advanced and developing economies and that cross-country differences reflect the transport share of the CPI basket and energy subsidies. Their finding does not test food directly; applying the basket-structure result to food is this brief’s inference. ECB staff, on assumptions cut off on 19 August, expect euro-area energy inflation to turn negative during 2027 (European Central Bank Staff, 2026), which is the comparison on which the persistence claim rests.
3. Recommendation 1: Measure fertiliser application before the 2027 harvest
Addressee: Ministry of Agriculture and Forestry. The ministry should collect and publish nitrogen fertiliser application volumes for the autumn 2026 planting season against prior years. Rationale: the two explanations for August’s urea price carry opposite policy meanings, and no direct data on reduced use exist in the sources reviewed. Sequencing: autumn planting data before the 2027 budget is finalised. Trade-off: survey cost and reporting burden on farmers and distributors. Success indicator: a published series that shows whether application fell.
4. Recommendation 2: Treat food as the persistent component in 2027 projections
Addressee: CBRT. Inflation communication should separate the expected path of food from that of energy and state the lag assumed between commodity and consumer food prices. Rationale: Kilian and Zhou (2022) estimate that oil and gasoline price rises lifted US households’ one-year inflation expectations; food is also a frequently observed price, though whether it moves expectations similarly cannot be tested with this brief’s sources. Sequencing: the September CPI release on 5 October (Dünya, 2026) provides the first check on whether August’s 0.22% monthly food rate was a pause. Trade-off: an explicit food path invites criticism if the lag proves shorter. Success indicator: projections that report food and energy contributions separately.
5. Recommendation 3: Price the diesel schedule’s farm and haulage channel
Addressee: Ministry of Treasury and Finance. Diesel ÖTV was placed on a schedule of 3 TL in September, 6 TL in October, 9 TL in November and 12 TL in December (GZT, 2026), adding cost to food through transport and farm fuel in the final quarter. The ministry should publish an estimate of the schedule’s food-price effect and, if the effect is material, consider relief targeted at agricultural diesel rather than a general pause. Sequencing: before the November step. Trade-off: targeted relief is harder to administer; a general pause costs more revenue. Success indicator: monthly food CPI not accelerating in October–December alongside the excise steps.
6. Recommendation 4: Condition food forecasts on the Hormuz regime
Addressees: World Bank and IMF, at the Annual Meetings of 12–18 October in Bangkok (International Monetary Fund, 2026). The April forecast assumed Hormuz traffic would return to pre-war levels towards the end of 2026 (World Bank, 2026a). Fertiliser and food forecasts should be published as branches conditional on the Hormuz regime, with the lag from fertiliser to food made explicit. Rationale: Baumeister and Kilian (2016) argue that oil prices may continue to surprise forecasters; fertiliser and food forecasts built on oil and gas assumptions inherit that uncertainty. Trade-off: branch forecasts are harder to communicate than one path. Success indicator: October forecasts that state their Hormuz assumption and its food sensitivity.
7. Implementation risks
The persistence claim has two limits: the FAO index’s annual rise is only 2.5%, and there are no direct data on reduced fertiliser use. If the August urea fall is seasonal, Recommendations 1 and 3 lose part of their rationale.
8. Outlook: Türkiye, Saudi Arabia and the World
Globally, the first data point is the September FAO Food Price Index on 2 October (FAO, 2026); a further rise in cereals would confirm that the second wave continues. If the World Bank’s April Hormuz assumption fails, upward revisions to fertiliser and food forecasts are likely at the October Annual Meetings.
In Türkiye, the gap between 33.79% annual and 0.22% monthly food inflation in August shows food prices slowing that month (Dünya, 2026). The diesel ÖTV steps add fourth-quarter cost through transport and farm fuel (GZT, 2026). If global grain prices keep rising on top of that, food inflation is likely to enter 2027 from a high base.
In Saudi Arabia, the 30 September pre-budget statement puts 2026 inflation at 2.1% (Arab News, 2026a), while subsidy spending rose 73% year on year in the second quarter (Arab News, 2026b). The source gives no breakdown, so the extent to which the budget absorbed price increases cannot be determined; the two figures together permit the reading that low inflation rests partly on fiscal policy. If food prices stay high in 2027, that buffer becomes dependent on recovering oil revenue.
9. Conclusion
The 2026 energy shock is arriving in food prices in successive waves. Fertiliser peaked in the second quarter, with urea falling from $693.5/t to $390 in August, while food commodities kept rising in the third quarter and the FAO cereals index reached its highest level since May 2024. Consumer food inflation is low in the euro area and the United States and high in India and Türkiye, consistent with pass-through that varies with basket structure and input dependence. With energy inflation expected to turn negative in 2027 and food costs passing to consumers with a lag, food is likely the more persistent component for 2027. The four recommendations follow from that lag.
SOURCES
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Furkan Mahmut Tameroglu