El Niño 2026 threatens global rice, wheat and palm‑oil markets, raising inflation risks

A strong El Niño event has been confirmed for the second half of 2026, with NOAA assigning a 63 % chance of it becoming “very strong” and satellite data suggesting it could be one of the strongest episodes since the 1950s.

The climate anomaly is expected to weaken monsoon rains over east‑ and southeast‑Asia, regions that supply about 60 % of the world’s rice, while increasing temperatures. This could cut rice yields in China, Indonesia, Vietnam and Thailand and push global rice prices higher. In Australia, wheat production is deemed most vulnerable, whereas the United States and Argentina may see yield gains. Indonesia and Malaysia face heightened risk to palm‑oil output, with reduced rains potentially lowering supply into 2027.

In Brazil, the Rio Grande do Sul’s rice belt may suffer from excess rainfall that hampers planting, and the southern state of Paraná is already experiencing severe storms, hail and flood threats. Analysts project that the El Niño could add up to 0.35‑1.68 percentage points to Brazil’s consumer‑price index and could delay cuts to the Selic interest rate, pressuring the real currency.

Commodity markets have already reacted: futures for cacao and raw sugar have reached multi‑month highs, and wheat and oil‑seed prices show increased volatility. The FAO’s 2026 cereal outlook forecasts a modest decline in global wheat and rice production but near‑record overall cereal output, reflecting mixed regional effects.

National agencies in Brazil have issued a joint bulletin with the INPE, INMET, ANA, CEMADEN, SGB and SEDEC, outlining monitoring, preparedness and mitigation measures for the expected heatwaves, floods and fire risks through early 2027.