London: A powerful El Nino is strengthening in the Pacific Ocean, with the United Nations reporting visible effects around the globe. El Nino, a natural climate cycle, occurs when surface waters in the tropical Pacific warm significantly, altering atmospheric jet streams and causing droughts in some farming regions while flooding others. The World Meteorological Organization (WMO) confirmed on September 3 that the phenomenon is firmly established, with a nearly 100% chance of persisting until February 2027.
According to Anadolu Agency, Guatemala, Honduras, and El Salvador are already experiencing erratic weather and drought linked to El Nino, leading to severe crop losses across Central America's "Dry Corridor." Indonesia is battling wildfires that have resulted in haze drifting into Malaysia and the Philippines. Given that many food crops are concentrated in climate-sensitive regions, these disruptions could lead to increased supermarket prices worldwide in the coming months. However, El Nino does not necessarily mean every commodity will become more expensive. The World Bank notes that the effects vary by crop and region, while the UN Food and Agriculture Organization (FAO) indicates global cereal supplies and stocks remain relatively robust despite weather risks.
The FAO reported that its global Food Price Index rose to 133.3 in August, the highest since November 2022, amid a confluence of a strengthening El Nino, extreme weather, and existing geopolitical and trade disruptions. Here are five commodities that analysts and industry groups identify as most vulnerable to these changes:
Rice: Rice production, concentrated in South and Southeast Asia, is particularly vulnerable to El Nino due to potential reductions in rainfall. India, which handles about 40% of global rice exports, banned most non-basmati rice exports as domestic prices surged, affecting world markets significantly. The US Department of Agriculture has flagged a below-average Indian monsoon as a risk to rice and other crops, with Indian export prices reaching their highest in a year in September. The World Bank estimates that severe El Nino cycles can cut regional rice output by 20% to 50%, impacting import costs in Asia and Africa.
Sugar: Major sugar-producing regions in Asia and South America face risks due to sugarcane's dependence on adequate rainfall. The FAO noted an 11.9% jump in its sugar price index in August, with weather-related production concerns in Brazil, Europe, and Asia. India, the second-largest sugar producer, has restricted exports and allowed duty-free imports to stabilize domestic supplies, which could raise costs for sugar-dependent products globally.
Palm Oil: Indonesia and Malaysia produce about 85% of the world's palm oil. Extended rainfall deficits and high temperatures from El Nino reduce yields on oil palm plantations. Indonesia's wildfires and warnings of a drier period in key provinces further threaten supply, impacting not just palm oil but the broader edible-oils market due to palm oil's role as a cheaper substitute.
Cocoa: West Africa, especially Cote d'Ivoire and Ghana, dominates cocoa production, making it sensitive to rainfall and temperature changes. Concerns about potential El Nino-induced drought have already slowed forward sales of Cote d'Ivoire's 2026/27 crop. The International Cocoa Organization highlighted weather and production risks, with the aging cocoa acreage in West Africa exacerbating vulnerabilities.
Coffee: Major coffee growing areas in Southeast Asia and Latin America could face heat, drought, or excessive rainfall during El Nino. Vietnam, a leading supplier of robusta beans, is especially critical. The USDA warns that warmer and drier conditions from El Nino could reduce Vietnam's coffee productivity and production, impacting global supplies.