El Niño puts food supply chains on alert as commodity risks build

KUALA LUMPUR, 22 SEPTEMBER 2026 —

El Niño is set to tighten food‑ingredient supply chains, with analysts warning that a “very strong” event could lift global commodity prices by up to 16% and keep manufacturers on alert through 2028.

Consultancy Beroe said the combination of a prolonged El Niño, fertilizer shortages, geopolitical tensions and high energy costs could push global food‑commodity prices 14‑16 percent higher. Because commodity markets typically react most strongly about a year after a climate event peaks, the full price impact may not be felt until 2028, extending the commercial risk well beyond the immediate weather disruption.

For food manufacturers and procurement teams, the lag matters. “The commercial impact of weather disruption could continue long after the immediate effects of El Niño have passed,” Beroe noted, underscoring the need for sourcing flexibility now rather than precise forecasts of the event’s trajectory.

The ripple effects are already being felt in logistics. Drought conditions have forced Panama Canal vessel transits down from 36 to 32 per day, adding a further choke point for the movement of food ingredients and commodities worldwide.

Among the most exposed commodities, cocoa is flagged as the top short‑term procurement risk.

Beroe’s senior agro analyst Karthick SS said cocoa “presents the highest procurement risk in the short term” and that prices are expected to rise “by nearly 9 % in the short term as the market continues to price in uncertainty surrounding the upcoming West African main crop.” He added that “heavy rainfall, disease pressure and weaker early crop development have increased production concerns, while a potential El Niño event could further stress crop conditions during a critical growth phase.” Although “stronger port arrivals and improving exchange inventories are preventing a sharper rally,” buyers should still expect “elevated volatility and intermittent supply tightness.”

The cocoa outlook illustrates the mixed signals that buyers must navigate. While better port flows and stock levels temper price spikes, weather‑related disease and crop‑development risks keep the market vulnerable to further shocks.

Sugar faces a more regional set of risks. Karthick SS identified sugar as the second key risk category but noted divergent dynamics across markets.

In India, “prices projected to increase by around 4 % over the next few months as tightening pipeline stocks, uncertain monsoon progress and ethanol diversion support the market.” In Europe, “relatively comfortable inventories” currently cushion the market, yet “persistent dry weather and reduced beet acreage could tighten availability as the season advances.” Brazil, meanwhile, “continues to provide a stable supply base during its peak crushing season,” though shifts between sugar and ethanol production will influence global export availability.

These regional variations suggest that El Niño is unlikely to generate a uniform shock across all food commodities. Local weather patterns, inventory levels, crop prospects and competing uses such as biofuel production will shape the ultimate impact.

Vegetable oils are also under pressure, with biofuel demand adding a layer of complexity. Karthick SS warned that European rapeseed oil could see prices rise “by around 2 %,” driven by structural supply deficits, weather‑related production risks and resilient biodiesel demand. In the United States, soybean oil is forecast to climb “by approximately 5 %,” primarily because renewable diesel demand is outpacing the comfortable supply of soybeans.

He stressed that “these markets increasingly reflect the combined influence of agricultural fundamentals, biofuel policies and energy market developments rather than weather alone.”

By contrast, corn presents a comparatively balanced outlook. European corn prices may rise “by around 4.2 %” due to lower production expectations and weather‑related yield concerns, but “favorable crop prospects in the US and seasonal harvest pressure in Brazil are expected to keep global availability comfortable,” leading to projected price declines of about 2.5 % in the United States and 0.8 % in Brazil.

Karthick SS concluded that “regional disruptions are unlikely to translate into widespread global supply shortages during the near term.”

Palm oil, however, is expected to feel mounting strain into 2027. Karthick SS said “palm oil prices are expected to firm through Q4 2026 and into 2027 as El Niño risks, delayed drought effects, weaker Malaysian and Thai output, aging plantations and rising biodiesel mandates constrain food‑sector availability.” Indonesia’s near‑term production may offer some relief, but a late‑year El Niño could depress yields in 2027 because palm output reacts to drought with a lag.

Senior agro analyst Balambika Muthusamy advised buyers to “gradually secure H1 2027 coverage, split forward contracts across several months, and monitor biodiesel policy alongside weather.” She added that “where formulations permit, partial substitution into sunflower or rapeseed oil, pooled purchasing and pre‑qualified alternate specifications can reduce exposure.”

The broader picture for food manufacturers is a set of variables that extend beyond weather forecasts. Inventories, port arrivals, energy costs, fertilizer availability, biofuel policy and logistics capacity will all influence procurement decisions. With Beroe expecting the strongest commodity‑market response to emerge roughly 12 months after a climate event peaks, companies could still be grappling with price pressures and supply tightness well into 2028.

For procurement teams, the immediate priority is therefore to embed flexibility into sourcing strategies now, rather than wait for the full effects of El Niño to materialise. The combination of heightened weather risk, logistical bottlenecks and intersecting policy pressures makes a proactive, diversified approach the most prudent path forward.