Economists are warning that a “super” El Niño weather cycle, projected to develop through 2026-2027, could trigger a severe, multi-year shock to global food prices.
The Mechanics of a “Super” El Niño
The US National Oceanic and Atmospheric Administration (NOAA) has confirmed that warming conditions in the Pacific are intensifying. There is a 63% probability that sea surface temperatures will exceed 2C above normal later this year. This phenomenon, often referred to as a “super” or “Godzilla” El Niño, occurs when wind pattern shifts allow warmer water to spread across the central and eastern equatorial Pacific.
Scientists caution that the 2026-2027 cycle has a historically unprecedented chance of becoming a “very strong” event. Historically, such cycles—including those in 1981-82 and 2015-16—have been linked to extreme heatwaves, flooding, and stormier weather patterns that disrupt global harvests.
Did you know?
The 1876-1878 El Niño, considered one of the most severe on record, contributed to catastrophic droughts in Brazil, China, southern Africa, Egypt and India, resulting in millions of deaths.
Projected Impact on Global Food Commodity Prices
The economic fallout from this weather pattern is expected to be significant. Goldman Sachs analysts project that the strength of this cycle could cause a 15.8% surge in global food commodity prices. UniCredit analysts have framed this as a return of “climateflation,” noting that the current climate baseline is already shifting.
The financial impact is expected to be uneven. While some regions may see minor benefits from altered rainfall, others face severe production hits. UniCredit estimates that global agricultural production could see a 14.3% decline, translating to approximately $342 billion in lost output. Core commodities—specifically rice, palm oil, sugar, and coffee—could see price increases ranging from 50% to 100% or more.
Regional Vulnerabilities and Supply Chain Strains
The disruption is already appearing in agricultural data. According to Goldman Sachs, parts of India have received only 25% to 50% of normal rainfall during the current monsoon season, directly threatening wheat, rice, and sugar cane supplies. Because these disruptions occur at different stages of the planting and harvesting cycles, the full economic impact is unlikely to be fully realized until the second half of 2028.
Analysts at UBS warn that El Niño does not affect agriculture uniformly, creating regional winners and losers. However, they emphasize that even modest supply disruptions could trigger price movements far beyond what historical patterns would suggest, particularly when layered on top of ongoing energy and fertilizer shortages caused by the Iran war.
Central Bank Concerns and Inflationary Pressure
Central banks are monitoring the situation closely as they attempt to manage elevated living costs. The prospect of a renewed inflation shock has fueled concerns that interest rates may need to remain at elevated levels. For European consumers, the impact is expected to be felt primarily through retail price increases rather than direct weather exposure, with Goldman Sachs predicting a 1.3% rise in eurozone food prices.
Frequently Asked Questions
Why will the economic impact take until 2028 to be fully realized?
According to Goldman Sachs, the delay is due to the complex, staggered nature of global planting and harvesting cycles, as well as logistical challenges involving water levels in rivers and canals used for international shipping.
Which crops are most at risk during an El Niño event?
Analysts highlight rice, palm oil, sugar, and coffee as the most exposed crops, with potential price increases of 50% to 100% or more in an extreme scenario.
Does El Niño affect all countries equally?
No. UBS analysts note that the phenomenon reshapes regional rainfall and temperature patterns, creating different outcomes for different areas. However, lower-income nations—already hit hardest by the Iran conflict—are generally expected to suffer the most significant economic consequences.
How do you think your local food supply chain will adapt to these climate-driven price shocks? Share your thoughts in the comments below or subscribe to our newsletter for ongoing updates on global economic trends.
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