El Niño threatens global commodity supplies and prices

A strengthening El Niño phenomenon is impacting global commodity markets by altering weather patterns, leading to droughts in some regions and flooding in others. The World Meteorological Organization (WMO) indicates a high probability that this phenomenon will persist through February 2027.

Key commodities facing supply risks include:

• Rice: Major producers in South and Southeast Asia, particularly India, face rainfall shortages. The World Bank estimates severe El Niño cycles could reduce regional rice yields by 20% to 50%.

• Sugar: High temperatures and drought in Asia and South America are driving price increases. India has already implemented export restrictions to manage domestic supply.

• Palm Oil: Indonesia and Malaysia, which produce approximately 85% of the global supply, face risks from insufficient rainfall and increased wildfire activity.

While the Food and Agriculture Organization (FAO) notes that global grain stocks remain relatively strong, the combination of extreme weather and existing geopolitical disruptions continues to pressure food price indices.