El Niño phenomenon threatens global agricultural yields and logistics

An intense El Niño phenomenon is expected to impact global agriculture and logistics, creating a mix of risks and opportunities across different regions. In South America, specifically Argentina, Paraguay, Uruguay, and southern Brazil, increased rainfall may benefit soy, corn, and wheat production by improving soil moisture, though excessive rain poses risks of fungal diseases and logistical difficulties.

Conversely, northern Brazil, Colombia, and Venezuela face extreme heat, drought, and wildfires, which threaten livestock, pastures, and water availability. Drought in northern Brazil also threatens Amazonian waterways used for soy transport, while Panama Canal restrictions may force vessels to carry lighter loads, increasing costs.

In Asia, El Niño is expected to be particularly damaging to Robusta coffee production. Analysts from Citi suggest that droughts in Vietnam and Indonesia could significantly reduce yields. While higher temperatures might initially prevent frost in Brazil's Arabica coffee regions, long-term drought expected in the fourth quarter could impact 2027 harvests. Additionally, historical data from WisdomTree indicates that strong El Niño episodes have consistently led to reductions in cocoa production.