Core Summary
A super El Niño event is set to peak by the end of 2026 and could become the strongest on record. It, along with factors such as wars and inventory issues, is driving up global food prices (with grain prices rising by 3.4%, wheat by 5.8%, and coffee futures increasing by nearly 40% in just one and a half months), which is being felt in China's food service supply chain. Fish meal prices have already skyrocketed, impacting aquaculture, while sugar and staple grains remain stable due to sufficient domestic supply. However, the delayed effects of palm oil and coffee will become apparent in 2027. The capital market has already begun to position itself in food-related stocks, and food service businesses need to plan ahead.
1. Fish Meal Prices Double, Aquaculture Costs Soar
Fish meal is a crucial nutrient source for aquaculture, providing high protein and stable quality, essential for the growth of fish, shrimp, and crabs. 80% of China's fish meal is imported from Peru. This year, however, due to El Niño, Peru's fishing quotas for the main ingredient of fish meal have decreased by 36% (from 3 million tons to 1.914 million tons), the lowest level in a decade. As a result, fish meal prices have doubled compared to the same period last year, and China's imports have dropped by 36% in the first four months. The cost of feed for aquaculture companies has surged, leading to higher prices for products like salmon, shrimp, and oysters, with final consumer prices likely to follow.
What can businesses do? They need to find domestic alternatives to fish meal or collaborate with reliable domestic feed manufacturers to reduce their reliance on imports.
2. International Sugar and Grain Prices Soar, but Why Are Domestic Prices Stable?
Sugar: Rising Internationally, Falling Domestically
International sugar prices have skyrocketed due to droughts in India and Thailand (caused by El Niño), but domestic prices have decreased. The reason is simple: there is an excess of inventory in China—3.72 million tons as of the end of July, a 131% increase from last year (an additional 2.11 million tons), leading to a surplus of supply that prevents international price increases from affecting the domestic market. Moreover, domestic sugar production is expected to remain stable next year, with increased sugarcane production in the south compensating for reduced beet production in the north, so there is no need for panic in the short term.
Staple Grains: Over 100% Self-Sufficiency
Although global wheat and corn prices are rising, China's staple grain production (rice and wheat) exceeds 100%. In 2025, China accounted for 38.68% of global rice production and can even export rice to help other countries with their cultivation efforts. Therefore, the cost of rice and flour for food service businesses will not be significantly affected for now.
3. Palm Oil and Coffee: Wait Until 2027 for the Real Challenge
The effects of El Niño are not immediate; they will become apparent in 6 to 12 months:
Palm Oil: Prices May Soar Next Year
Palm oil is commonly used in Chinese cooking, especially in hot pot. China relies entirely on imports (with Indonesia and Malaysia accounting for 80% of its supply). El Niño has caused droughts in Southeast Asia, reducing palm oil production. The impact will be felt in 2027, when palm oil prices are likely to increase, and food service businesses should start stocking up or looking for alternative oils.
Coffee: A Critical Harvest Year in 2027-2028
El Niño is affecting major coffee-producing regions (Vietnam, Indonesia, Brazil), where droughts have depleted irrigation water, preventing coffee trees from blooming and bearing fruit. Harvests in 2027-2028 are at risk. Traders are currently focusing on the flowering period from September to November, which will determine the next season's yield. However, this could be an opportunity for Yunnan coffee, as international buyers are beginning to pay attention to its quality and may start including it in high-end supply chains.
4. The Capital Market is Already Moving: What Should Food Service Owners Do?
The capital market has already responded, with food-related stocks rising by 3.6%, with companies like Jinjian Rice Industry and Wanxiang Denong hitting price limits. Food service businesses should:
1. Find Alternative Ingredients: Replace fish meal with domestic alternatives and lock in palm oil prices in advance.
2. Stabilize the Supply Chain: Collaborate with reliable domestic suppliers to avoid supply disruptions.
3. Monitor Delayed Effects: Prepare for potential price increases in palm oil and coffee by planning menu and pricing strategies in advance.
El Niño is a long-term issue, with effects lasting at least until 2027. Food service owners need to prepare early to avoid last-minute panic over price increases.
Conclusion: El Niño is like a "time-delayed bomb"—some food ingredients are already seeing price increases, while others are still in the countdown. By taking proactive measures, businesses can minimize the impact on their costs. After all, the stability of the food supply chain is essential for the stability of the dining experience.