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

Food manufacturers and procurement teams could face a prolonged period of commodity price volatility as a strengthening El Niño increases pressure on some of the world’s most weather-sensitive agricultural supply chains. 

According to the National Oceanic and Atmospheric Administration (NOAA), there is a greater than 93% probability of a “very strong” El Niño event developing. Furthermore, NOAA reports a 75% chance that the October–December 2026 season will be an “historic” El Niño event, and exceed strengths dating back to 1950. 

Beroe estimates that a prolonged El Niño, combined with fertilizer shortages, geopolitical tensions, and elevated energy costs, could contribute to a 14–16% increase in global food commodity prices. The consultancy says the full impact may not be realized until 2028, with commodity markets often experiencing their strongest price response around 12 months after a climate event peaks.

Commodity shock could take time to materialize

For food manufacturers, that lag is significant. It means the commercial impact of weather disruption could continue long after the immediate effects of El Niño have passed.

The risks also extend beyond agricultural production. Drought conditions are already affecting global logistics, with Panama Canal vessel transits reduced from 36 to 32 per day, adding another potential source of disruption for companies moving food ingredients and commodities around the world.

Among the commodities most exposed are cocoa, sugar, vegetable oils, coffee, and palm oil, although the outlook varies considerably between markets.

Cocoa faces the highest short-term procurement risk among weather-sensitive commodities. 

Cocoa emerges as an immediate concern

Cocoa is currently identified by Beroe as the most significant short-term procurement risk.

“Among all food ingredients, cocoa presents the highest procurement risk in the short term. Prices are forecast to increase by nearly 9% in the short term as the market continues to price in uncertainty surrounding the upcoming West African main crop,” says Karthick SS, senior domain analyst Agro, Beroe.

“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 continue to expect elevated volatility and intermittent supply tightness.”

The cocoa outlook illustrates the complexity facing buyers. Improving port arrivals and inventories may be providing some protection against a sharper price rally, but weather, disease, and crop-development concerns leave the market vulnerable to further disruption.

Earlier this year, Rabobank warned that a strengthening El Niño could disrupt supplies and raise prices for key food commodities such as cocoa, palm oil, Robusta coffee, sugar, grains, and seafood through 2026–2027, with seafood already experiencing supply shocks.

The sugar outlook

Sugar is another key risk, although its exposure is more regional, according to the report.

“[Sugar] remains the second key risk category, although market dynamics differ by region. Indian sugar is expected to record the strongest upside, with 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,” says Karthick SS.

“In contrast, Europe currently benefits from relatively comfortable inventories, but persistent dry weather and reduced beet acreage could tighten availability as the season advances. Brazil continues to provide a stable supply base during its peak crushing season, although shifts between sugar and ethanol production will remain an important determinant of global export availability.”

The differing regional outlooks point to the view that El Niño is unlikely to produce a uniform shock across food commodities. Local weather conditions, inventories, crop prospects, and competing uses for agricultural products will all influence the eventual impact.

Biofuel demand adds pressure to vegetable oils

Regarding vegetable oils, Karthick SS points out that European rapeseed oil and US soybean oil warrant close monitoring, as rapeseed oil prices are expected to rise by around 2%, supported by structural supply deficits, weather-related production risks, and resilient biodiesel demand. 

“US soybean oil is forecast to increase by approximately 5%, driven primarily by renewable diesel demand despite comfortable soybean supplies. These markets increasingly reflect the combined influence of agricultural fundamentals, biofuel policies, and energy market developments rather than weather alone.”

Commodity prices cannot necessarily be assessed through weather exposure alone, with biofuel policy and energy markets increasingly influencing the availability and cost of ingredients.

Not every market, meanwhile, is expected to tighten, as corn presents “a comparatively balanced outlook,” according to Karthick SS.

“While European corn prices are expected to increase by around 4.2% due to lower production expectations and weather-related yield concerns, favorable crop prospects in the US and seasonal harvest pressure in Brazil are expected to keep global availability comfortable, resulting in projected price declines of approximately 2.5% and 0.8%, respectively.”

“Consequently, regional disruptions are unlikely to translate into widespread global supply shortages during the near term.”

Palm oil prices are expected to rise into 2027 as weather risks, lower output, aging plantations and stronger biodiesel demand tighten supply.

Corn offers a more balanced picture

Corn analysis suggests that favorable production conditions in major exporting regions can offset disruption elsewhere.

Palm oil, however, is expected to face increasing pressure as the market moves into 2027.

“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,” says Karthick SS.

Indonesia’s stronger near-term production may provide some relief, but a late-year El Niño could reduce yields in 2027 because palm output responds to drought with a lag, Balambika Muthusamy, senior domain analyst, Agro, Beroe, notes.

“Buyers should gradually secure H1 2027 coverage, split forward contracts across several months, and monitor biodiesel policy alongside weather. Where formulations permit, partial substitution into sunflower or rapeseed oil, pooled purchasing, and pre-qualified alternate specifications can reduce exposure.”

For food manufacturers, the key variables to monitor will extend from weather forecasts and crop conditions to inventories, port arrivals, energy costs, fertilizer availability, biofuel policy, and logistics capacity.

The potential impact may also be delayed. With Beroe expecting the strongest commodity-market response to emerge around 12 months after a climate event peaks, companies could still be dealing with the consequences well into 2028.

For procurement teams, the immediate priority may therefore be less about predicting exactly how El Niño will develop and more about building flexibility into sourcing strategies before its effects become fully visible.