Summary of Key Points
The global agriculture and economy are currently facing a "dual blow": firstly, the disruption in transportation through the Strait of Hormuz has led to increased fertilizer prices, raising the risk of reduced rice production in the Asia-Pacific region; secondly, a super El Niño is likely to persist throughout 2026-2027, potentially becoming the strongest on record since 1950, causing extreme weather conditions around the world (alternating droughts and floods), which directly impacts the supply of agricultural products and drives up prices. The combination of these two risks has not only caused prices of agricultural products such as cocoa, palm oil, and wheat to soar but also affected the supply of industrial metals (like copper), inflation in emerging markets, and sovereign credit, ultimately impacting the cost of living for ordinary consumers.
Detailed Explanation
1. How severe is this El Niño? It could be the strongest ever
El Niño is essentially a phenomenon where warm water masses in the Pacific Ocean move around abnormally. Under normal circumstances, the equatorial trade winds blow warm water to the western Pacific, keeping the waters off the coast of South America cold. However, during an El Niño, the trade winds weaken, allowing the warm water to flow eastward, raising the temperatures in the eastern Pacific and disrupting global weather patterns (with some areas suffering from severe droughts and others from floods).
This El Niño is particularly intense: NOAA (National Oceanic and Atmospheric Administration) predicts a 100% chance of it continuing through the fall and winter of 2026, with an over 80% chance of lasting into the spring of 2027. There is a 90% probability that it will become "super strong" between September and January of the following year, and there is a 69% chance it could surpass previous major El Niño events such as 1982/83 and 1997/98, making it the strongest on record. The sea temperatures are already 1.8°C higher than average, indicating that extreme weather will be more frequent and severe.
2. Agricultural products are the hardest-hit: Which commodities will see price increases?
The impact of El Niño on agricultural products is delayed but persistent. Data from the Spanish Central Bank shows that for every 1°C increase in El Niño intensity, food prices rise by 9% after 12 months and remain high for 18 months. The crops most affected include:
- Cocoa: Prices have risen by 68% in the past three months due to low global cocoa reserves, and any reduction in production in major producing areas (which is highly correlated with temperature) will lead to sharp price increases.
- Palm oil: Prices are closely linked to the El Niño index; the hotter the water and the more severe the drought, the higher the price increases, with effects becoming apparent 6-24 months later. The drought in 2026 will have its full impact in 2027.
- Wheat: Australia is a major affected region, with historical significant reductions in wheat production during El Niño years (a 58% decline in 2002/03 and a 36% decline in 2023/24).
- Sugar: Droughts in major producing areas such as India and Thailand have caused sugar prices to rise by 26% in the past month.
- Fishmeal: The price of fishmeal, a key ingredient for fish and shrimp feed, has increased by 75% due to restricted fishing in Peru, which may also lead to higher prices for fish and shrimp in the future.
3. The dual blow: Blocked Strait of Hormuz + El Niño, is rice at risk?
The Strait of Hormuz is a vital route for fertilizer imports to Asia. The disruption in transportation has caused fertilizer prices to rise by 44% since the end of 2025. If farmers cannot afford the higher costs of fertilizer, rice production will decline:
- There is already a 3.3 million tons of rice production at risk in the Asia-Pacific region (a 42% increase from March).
- If the El Niño continues and the Strait remains partially closed, the risk could rise to 7-8 million tons.
Thailand is particularly vulnerable: 52% of its nitrogen fertilizer comes from the Gulf region, and the main rice growing season (September to November) coincides with the peak of the El Niño. Diesel prices have risen by 32.9%, putting 320,000 tons of rice production at risk. Indonesia and the Philippines are also affected by droughts and higher fertilizer costs, which will inevitably impact rice production.
4. Not just agricultural products: Industrial metals and emerging markets are also affected
The impact of El Niño extends beyond agriculture:
- Industrial metals: In Chile (the world's largest copper producer), heavy rainfall and floods could paralyze mining and transportation. In Zambia (which accounts for 4% of global copper ore), droughts and water shortages could stop copper smelting, potentially driving up copper prices.
- Emerging markets: Rising food prices in countries like Brazil and Colombia could lead to inflation, prompting central banks to delay or even raise interest rates, making economic conditions more difficult. There will be a divergence in sovereign credit: countries with financial buffers will be better off, while those like Ecuador and Zambia will face greater pressure. Chile and Argentina, on the other hand, might benefit from increased rainfall, which is good for agriculture.
5. What will ordinary consumers feel?
These risks will ultimately affect everyone:
- Food prices: Prices of coffee (Arabica has risen by 28%), chocolate (cocoa prices have risen by 68%), sugar, rice, and fish and shrimp are all likely to increase, raising the cost of living.
- Decreased purchasing power: People who spend a large portion of their income on food (especially low-income families) will face greater pressure and may have to spend more on basic necessities.
- Global implications: Even if you are not in the Asia-Pacific region, you will be affected as energy, fertilizer, freight, and food prices are interconnected globally, leading to higher import costs and tighter supply.
In short, over the next year, you can expect to see higher prices for coffee, chocolate, and sugar. If rice prices rise, the impact will be even more significant.
Conclusion
The dual risks of El Niño and the blocked Strait of Hormuz are not short-term issues but will be a prolonged challenge lasting for more than a year. Rising prices of agricultural products, fluctuations in industrial metal prices, and pressures on emerging markets will all have a negative impact on the wallets of ordinary consumers. It is advisable to monitor the prices of these commodities in advance and prepare for possible changes.