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A potentially very strong El Niño is emerging as a major risk for global agricultural markets, threatening to disrupt rainfall, raise temperatures and expose some of the world’s most important tropical crops to severe weather stress.

The U.S. Climate Prediction Center now sees a greater than 90% chance of a very strong El Niño during the northern hemisphere autumn and winter of 2026 to 2027. For commodity markets, the concern is not simply that El Niño causes drought. Its effects vary sharply by region, meaning excessive rainfall in one major producing country can occur alongside extreme dryness in another.

That makes the phenomenon particularly important for soft commodities such as cocoa, coffee and sugar, whose production is concentrated in climate sensitive tropical regions.

Why El Niño matters for commodity markets

El Niño occurs when sea surface temperatures in the eastern Pacific become unusually warm as trade winds weaken. The pattern generally lasts between nine and 12 months and can alter global temperature and rainfall patterns.

For farmers, the problem is timing. Crops can be damaged not only by drought but also by excessive rainfall, heat, fungal disease and disrupted flowering or harvesting cycles.

This year’s potential El Niño also arrives at an unusually difficult moment for agricultural producers. Farmers are already dealing with higher fertiliser and diesel costs linked to the U.S. Israeli war on Iran. Another major weather shock could therefore amplify existing production pressures.

Historically, strong El Niño episodes have been associated with substantial increases in soft commodity prices. But the effects differ considerably between crops.

Cocoa faces one of the clearest risks

Cocoa appears particularly vulnerable because production is heavily concentrated in a relatively small number of countries.

Ivory Coast and Ghana together account for roughly half of global cocoa production, while Ecuador is the third largest producer. All three can experience significant El Niño related weather disruptions.

Every strong El Niño over the past 55 years has reduced cocoa output, according to WisdomTree.

The previous El Niño illustrates why the relationship is more complicated than simply associating the phenomenon with drought. During the initial phase of the 2023 to 2024 event, West Africa experienced unusually heavy rainfall. Excess moisture contributed to fungal disease affecting cocoa trees.

Conditions subsequently shifted toward intense heat and unusually dry Harmattan winds. Trees weakened by disease struggled to flower, further damaging production.

That sequence demonstrates the real danger for cocoa: El Niño can produce multiple weather shocks during the same crop cycle.

The consequences can quickly reach global consumers. Cocoa prices nearly tripled in 2024 after the West African harvest failed, eventually exceeding $12,000 per metric ton.

A very strong El Niño could therefore revive fears of another supply deficit if weather conditions deteriorate across major growing regions.

Coffee faces a divided outlook

Coffee presents a more complicated picture because the world’s two major varieties are concentrated in different regions.

Robusta coffee is particularly exposed to El Niño because Vietnam and Indonesia, which together account for about half of global robusta production, typically experience higher temperatures and reduced rainfall under the weather pattern.

The timing is especially important. Dry conditions can hit these countries during crop development, with the consequences becoming visible during harvesting later in the year.

Citi analysts warned that dryness in Vietnam and Indonesia could significantly reduce robusta yields.

Arabica coffee presents a different picture.

Brazil, responsible for nearly half of global arabica production, can initially benefit from warmer conditions because they reduce the risk of damaging winter frosts.

But that advantage could prove temporary. El Niño typically brings hotter and drier conditions to Brazilian coffee growing regions later in the year, when the next crop is developing.

That creates the possibility of a delayed supply shock in 2027.

Sugar could be the exception

Sugar demonstrates why El Niño does not automatically translate into a bullish commodity market.

Brazil, the world’s largest sugar exporter, can experience heavier rainfall during the second half of the year. Excessive rain can disrupt harvesting and affect sugar quality.

India and Thailand face the opposite problem. El Niño generally reduces rainfall during the summer monsoon, creating additional pressure on production.

India is already expecting its lowest monsoon rainfall in 11 years, at around 90% of the long-term average. Hedgepoint estimates that even a moderate El Niño could reduce Indian sugar production by around 1 million metric tons.

Yet there is an important counterweight.

El Niño’s wetter conditions in Brazil could ultimately support the country’s following sugar crop. Since Brazil accounts for roughly half of global sugar exports, stronger Brazilian production could offset losses elsewhere.

That means sugar may not experience the same sustained price pressure as cocoa or robusta coffee.

The bigger problem is climate uncertainty

The most important market implication is not simply whether El Niño becomes “very strong.” It is where its effects materialise and when.

Agricultural markets operate on highly specific growing cycles. Rain arriving at the wrong stage can be just as damaging as drought. Excessive rainfall can create disease, while heat can interfere with flowering and crop development.

Climate change further complicates the picture.

The relationship between El Niño and agricultural weather is becoming harder to interpret because rising global temperatures can intensify the consequences of existing climate patterns. A weather event that might previously have produced manageable stress can now occur against a much hotter baseline.

This means commodity traders increasingly have to price not just the probability of El Niño, but the interaction between El Niño, climate change and already strained agricultural supply chains.

What could happen to prices?

The clearest risk is concentrated in cocoa and robusta coffee, where production is particularly exposed to adverse conditions in major growing countries.

Cocoa has perhaps the greatest vulnerability because West Africa dominates global supply and has already experienced serious weather related production problems. Another major disruption could quickly tighten inventories and push prices higher.

Robusta coffee faces a similar risk if drought develops across Vietnam and Indonesia.

Sugar is more balanced. Production losses in India and Thailand could be partly or potentially substantially offset by improved Brazilian conditions for the following crop.

The broader lesson is that El Niño is not a uniform commodity shock. It redistributes weather risks across producing regions, creating winners and losers within the same market.

Why consumers should care

The effects will ultimately extend beyond commodity exchanges.

Higher cocoa prices can increase chocolate production costs. Coffee shortages can raise prices for roasters and consumers, while sugar disruptions can affect everything from beverages to processed foods.

And because agricultural markets are interconnected, a weather shock in one producing region can encourage buyers to compete more aggressively for supplies elsewhere.

The potential super El Niño therefore arrives at a particularly sensitive moment for global food markets.

If forecasts prove correct, the next several months could test whether commodity markets have adequately priced the risks of increasingly volatile weather.

The real threat is not El Niño alone. It is El Niño hitting an agricultural system already under pressure from rising costs, concentrated production and a changing climate.

With information from Reuters.

Stronger Food System Offers Cushion Against El Niño

Near-record food inventories, advances in agricultural technology and the emergence of major exporters such as Brazil and Russia have made the global food system more resilient to this year’s potentially powerful El Niño than during previous severe episodes.

Global agricultural production has generally outpaced consumption and population growth since the 1980s, according to the UN Food and Agriculture Organization (FAO) and analysts.

Higher-yielding crop varieties, increased fertiliser use, improved irrigation and better crop protection have significantly raised production of major staples including rice, wheat, corn and soybeans.

“Even during drought conditions, better irrigation management and crop science mean we can still produce marketable yields,” said Andrew Whitelaw of Australian agricultural consultancy Episode 3.

While El Niño can still disrupt global supplies and push prices higher, improved agricultural preparedness means the consequences could be less severe than during previous major events.

El Niño Gathers Strength

The effects are already being felt across major agricultural regions.

Drier conditions linked to El Niño have disrupted planting across parts of Asia, including India, Southeast Asia and Australia. At the same time, shortages of fertiliser and diesel caused by the Iran war have created additional risks for global agricultural production.

India is experiencing a deficient monsoon season, while Australia’s major wheat-producing regions face the prospect of drier conditions. Crops in Indonesia, Thailand and other parts of Southeast Asia are also suffering from insufficient moisture.

The situation could deteriorate further as El Niño is expected to intensify during the fourth quarter and early next year.

U.S.-based meteorologist Chris Hyde said the event could become one of the strongest on record, meaning the biggest impact from drought may still be ahead.

El Niño is associated with warmer ocean surface temperatures across the eastern and central Pacific. The weather pattern typically produces drier conditions across large parts of Asia while increasing rainfall across the Americas.

Previous major El Niño events in 1997-98 and 2015-16 caused substantial damage to crop production, contributing to food shortages, inflation and weaker economic growth.

Drought pushed up sugar and palm oil prices after damaging production in countries including Brazil, India, Indonesia, Malaysia and Thailand. Tight rice supplies also prompted some Southeast Asian producers to restrict exports.

Australia suffered lower wheat production and exports, while countries in southern Africa were forced to increase corn imports.

Record Inventories Provide a Buffer

One of the biggest differences between previous El Niño events and the current environment is the level of global food reserves.

Near-record grain inventories, drought-tolerant seeds, improved weather forecasting, precision agriculture and better irrigation could help absorb some of the production losses.

India’s crop sowing has broadly recovered from an initial delay, although rainfall during August and September will remain important for crop maturity and grain formation.

India also holds a particularly important position in the global rice market. The country accounts for around 40% of global rice exports and has accumulated such large reserves that storage capacity is being stretched.

China, meanwhile, holds nearly half of global wheat stocks. As the world’s largest wheat producer and consumer, its large reserves could reduce the need for imports if drought damages production in major suppliers such as Australia.

Global palm oil inventories are also near historic highs, although Indonesia’s expanding biodiesel programme is expected to reduce stocks in coming months.

Brazil and Russia Strengthen Global Supply

The emergence of major agricultural exporters that were far less important several decades ago has also increased the resilience of global food markets.

Brazil has become the world’s largest soybean exporter, with shipments increasing more than 13-fold since the 1997-98 El Niño period.

Russia has also emerged as a major wheat supplier, with exports reaching 48 million tons last year compared with roughly 1 million tons in 1997-98.

These additional sources of supply give global markets more alternatives if weather damages production in individual countries.

Agricultural science has also improved. Drought-tolerant corn hybrids have become widely used across Africa and the Americas, while heat- and drought-resistant wheat varieties have gained ground in India and Australia.

Short-duration rice varieties are increasingly being used across South and Southeast Asia, allowing farmers to reduce exposure to increasingly unpredictable monsoon conditions.

Technology Changes the Equation

Farmers today also have access to technologies that were largely unavailable during the 1997-98 El Niño.

Satellite crop monitoring, seasonal climate forecasts, detailed soil-moisture maps and GPS-guided fertiliser application allow farmers to make more precise decisions about planting, irrigation and inputs.

AI-powered agricultural platforms are also increasingly combining weather forecasts, soil information and crop data to advise farmers on planting schedules, irrigation, fertiliser use and pest management.

The result is a food system that can identify and respond to weather risks earlier.

FAO Chief Economist Maximo Torero said governments now have significantly better information and can prepare earlier because forecasting and market transparency have improved.

Wars Could Undermine the Resilience

Despite these improvements, the global food system remains exposed to risks beyond weather.

The wars in the Middle East and Black Sea region could undermine some of the protection provided by stronger inventories and agricultural technology.

The Iran war has disrupted fuel and fertiliser supplies, while higher fertiliser costs could reduce farmers’ ability to maintain production.

Torero warned that much will depend on how conditions develop during the second half of 2026, particularly because agricultural input use has been affected by the Strait of Hormuz crisis.

Before its blockade during the Iran war, the Strait carried around one-fifth of global crude oil and liquefied natural gas supplies. Disruptions to the waterway have therefore created additional pressure on fuel and fertiliser markets.

Analysis: Is the Global Food System Ready?

The biggest takeaway is that El Niño is no longer operating against the same fragile agricultural system that existed during previous major events.

Higher productivity, larger inventories, diversified exporters and better technology provide several layers of protection. If one major producing region suffers a drought, supplies from countries such as Brazil and Russia, combined with existing reserves, can help prevent a sudden global shortage.

However, resilience does not mean immunity.

The greatest risk comes from the interaction between climate shocks and geopolitical disruptions. A powerful El Niño could reduce production at the same time that wars restrict fuel, fertiliser and transport. That combination could rapidly turn a manageable agricultural disruption into a broader food-price problem.

For now, large inventories provide an important buffer. But if the El Niño intensifies as expected while geopolitical disruptions continue to constrain agricultural inputs, the real test will be whether those reserves and technological gains are sufficient to prevent another surge in global food inflation.

With information from Reuters.

World Meteorological Organization forecasts more likelihood of heatwaves, droughts and heavy rainfall due to El Nino.

The United Nations’ weather watchdog is warning governments and humanitarian organisations to brace for “extreme weather events” including heatwaves, droughts and heavy rainfall due to the El Nino weather phenomenon.

The World Meteorological Organization (WMO) said in a statement on Friday that El Nino conditions had already set in and are “forecast to strengthen rapidly” between July and September.

El Nino typically peaks between November and February.

The UN agency has activated climate information services and early warning systems to help governments and humanitarian agencies prepare support plans for farmers and vulnerable communities.

“El Nino conditions are already under way and are forecast to strengthen rapidly into a strong event – as accurately anticipated by WMO forecasts,” said WMO Secretary-General Celeste Saulo.

“This will intensify the chances of drought and heavy rainfall and the risk of heatwaves on land and marine heatwaves in many regions of the world.”

Saulo added that “advanced seasonal forecasts and early warnings are vital to save lives and cushion the impact on our economies and our communities.”

El Nino is a natural climate phenomenon that warms surface temperatures in the central and eastern equatorial Pacific Ocean, bringing worldwide changes in winds, pressure and rainfall patterns.

El Nino events typically occur every two to seven years and usually last between nine and 12 months. Not all regions of the world are affected.

Conditions oscillate between El Nino and its opposite La Nina – both phases of the El Nino-Southern Oscillation (ENSO) – with neutral conditions in between.

Even when ENSO is neutral, extreme weather can still occur.

On Thursday, the WMO reported that global ocean temperatures hit a new high in June, partly driven by El Nino.

The last El Nino contributed to making 2023 the second-hottest year on record and 2024 the all-time high, at about 1.55 degrees Celsius (2.79 degrees Fahrenheit) above the 1850-1900 pre-industrial average.

If you’re dreaming of sitting on a Spanish terrace with a beer in your hand, then you might want to check the weather, as new laws could see outdoor terraces closed to holidaymakers

For many British holidaymakers jetting off to sunnier destinations like Spain, few pleasures compare to dining outdoors for lunch or dinner, basking in the sunshine while enjoying a chilled beer and tapas.

But for Brits heading off to Spain in the next couple of months, new restrictions could put a dampener on plans for al fresco dining, and mean you have to enjoy your paella indoors.

A weather phenomenon known as El Niño, which delivers prolonged warm temperatures across the Pacific Ocean every two to seven years, is predicted to drive up temperatures and could lead to red weather warnings throughout Spain. Currently, forecasts are still being reviewed, but the World Meteorological Organization (WMO) has indicated it could be a ‘strong event’ this year, meaning particularly scorching temperatures in the next couple of months.

This weather news comes shortly after an amendment was made to the National Labour Agreement for the Hospitality Sector (ALEH), which safeguards workers including waiting staff, meaning that during periods of extreme weather bars and restaurants will be required to shut their terrace areas on health and safety grounds.

According to Majorca Daily News, when Spain issues orange or red weather warnings due to soaring temperatures, establishments with outdoor terraces will be compelled to either scale back or stop outdoor service altogether. They can, however, continue serving customers indoors. Businesses must also ensure adequate cooling systems are installed inside, or adjust staff shifts to lessen the impact of the heat.

Businesses that fail to comply with the new regulations – for instance by compelling waiting staff to work outdoors during a red alert – could face fines exceeding €50,000 (around £43,000) imposed by the country’s Labour and Social Security Inspectorate.

Parts of Northern Spain are currently under an orange weather alert after a 40C heatwave was followed by rain and thunderstorms. Earlier this week, a yellow warning was issued in parts of Andalucía as afternoon temperatures hit the 40s, and the weather is likely to become more intense as the busy summer season reaches its peak, which could force diners indoors.

A reduction in al fresco dining isn’t the only change Brits will encounter this summer. Holidaymakers touching down at Spanish and other EU airports will now be required to use the EU Entry/Exit System (EES), which has reportedly triggered lengthy queues at some of the busiest airports.

More Spanish cities, including the port of Vigo, are also introducing tourist taxes in an effort to manage the effects of overtourism, while Barcelona is redirecting cruise ships to a port further from the city centre to tackle overcrowding.

Spain also has a number of existing rules that Brits must abide by, including a crackdown on vaping and smoking in public spaces, restrictions on the type of footwear permitted while driving, and even a ban on going shirtless in certain well-known beach resorts.

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