Key takeaways
- The 2026 Super El Niño is arriving on top of freight and supply chains already under significant pressure from the Hormuz crisis. The two disruptions share no common resolution timeline, which is what drives projections of elevated food inflation lasting into 2028.
- Schroders models a scenario in which the FAO food price index rises 50% by year-end, pushing G7 food inflation into double digits in 2027. The IMF baseline for a typical El Niño is a 5% rise in food prices over a year.
- Rice, sugar, palm oil, and wheat face simultaneous production shortfalls across Southeast Asia, South Asia, Australia, and Europe. Risilience projects a 14% fall in global agricultural production over the next two years — equivalent to $342 billion.
- Southeast Asia bears the weight of this shock as both a major producer and a highly price-sensitive consumer market. In Central America, 78.6% of corn-growing households in Guatemala, Honduras, and El Salvador have already lost 75 to 100% of their production.
The Pacific Ocean temperature anomaly driving the 2026 El Niño reached 3.05°C in September, surpassing the previous record set in November 2015. The World Meteorological Organization has classified the event as very strong and among the most intense in over a decade. The direct humanitarian toll is already being counted: the University of Chicago’s Climate Impact Lab estimates 451,000 excess heat deaths in the six months to February 2027, while the World Food Programme puts 49 million additional people on a path toward acute food insecurity by the end of 2027.
Food inflation is the economic consequence that will outlast the weather event itself. Forecasters at Schroders, JPMorgan, and Allianz Trade project its effects could persist well into 2028, driven not by El Niño alone, but by the amplifying pressures it is colliding with.
A crisis built on a crisis
The 2026 El Niño is colliding with supply chains already operating under considerable strain, and that is precisely what separates this episode from previous ones.
The effective closure of the Strait of Hormuz, following the outbreak of the US-Iran conflict in early 2026, hit freight markets hard and fast. Bunker fuel costs jumped almost 70% within weeks, according to Lloyd’s List, as carriers passed the bill directly to shippers. By late May, spot rates on the Shanghai to Los Angeles route had risen 59% in three months; New York was up 66%. By July, the cost of shipping a standard container had returned to levels last seen during the height of the Red Sea crisis.
The pressure has spread beyond shipping lanes into the fabric of food manufacturing itself. The Middle East accounts for an estimated 40% of global polypropylene exports. With Hormuz traffic constrained, grocery packaging manufacturers began reporting sharp cost increases in resin and transportation; pressures that, according to Food Trade News, are expected to carry into 2027. For food producers and retailers, the packaging supply chain is now as exposed as the commodity supply chain.
El Niño exacerbates an already stressed system. The event is expected to peak between November 2026 and January 2027, with agricultural effects running through harvest cycles well into 2027. The Hormuz disruption has no confirmed resolution timeline. The overlap of the two is what drives forecasters to look past 2027 when projecting how long food inflation will put pressure on global food supply.
The commodities most at risk
El Niño does not hit all crops or all regions equally. In 2026-27, the geography is working against several of the world’s most traded food commodities at the same time, and the figures are alarming.
Sugar faces simultaneous pressure across both beet and cane production. Beet output is already down 22% in Germany and 15% in France; cane sugar crops are down 7% in India and 7.5% in Thailand, according to agricultural intelligence platform CropGPT. India — until recently the world’s second largest sugarcane exporter — halted nearly all overseas shipments in May as drought worsened across its key growing regions. The FAO’s sugar price index reached its highest point since June 2025 in August.
Rice is the commodity most exposed globally. Risilience, a climate risk consultancy, estimates that as much as 26% of global rice production could be impacted if current El Niño projections hold, with output in the worst-affected regions potentially falling by 20 to 50%, according to the World Bank’s Food and Nutrition Security Update. India’s monsoon is running 13% below normal; in Andhra Pradesh and Telangana — two of the world’s largest rice-producing areas, supplying more rice than North and South America combined — August rainfall was down 46% and 63% respectively. Rice prices at major Southeast Asian export hubs have already climbed around 15% this year. The USDA has cut its Philippine output forecast for 2026-27, and global rice production is on course to fall for the first time in a decade.
Palm oil output in Indonesia and Malaysia, the world’s two largest producers, is forecast to fall approximately 3%, equivalent to a reduction of around 6.5 million tonnes in global supply by 2027, according to a Bloomberg survey. The effects on palm oil prices carry a 12 to 16-month lag, meaning the full consumer-facing impact is still ahead.
Wheat faces pressure across a different geography, but the direction is the same. The USDA projects production down 23% in Brazil and 8% across Europe, with US output heading for its lowest level since 1970. Schroders separately estimates Australian wheat production could fall by up to 9 million tonnes in 2026-27 — a decline with consequences well beyond the Asia-Pacific region.
Risilience puts the total projected fall in global agricultural production at 14% over the next two years, equivalent to $342 billion. Latin America offers a partial counterweight: Brazil and Argentina are likely to see improved soybean and corn yields from stronger rainfall. But soybeans and corn don’t substitute for rice, palm oil, and sugar. The pressure on global food supply in those categories has no meaningful offset.
The most exposed regions
The IMF baseline for a typical El Niño is a 5% rise in food prices over a year. Schroders models the current scenario at roughly ten times that — a 50% increase in the FAO food price index by year-end, pushing G7 food inflation into double digits in 2027.
The regional picture shows where food inflation will land hardest.
Southeast Asia bears the weight from both ends, as the primary producer of the commodities most at risk, and as a region where consumers have little room to absorb rising costs. Indonesia, the Philippines, Vietnam, and Thailand are under pressure as growers and as markets simultaneously. Allianz Trade projects Indonesia’s food costs rising 2.3 percentage points above baseline. Central banks across the region may be forced to delay planned monetary easing into 2027 as rising food prices sustain broader pressure on household budgets.
Australia anchors the wheat story. With production projected to fall by up to 9 million tonnes in 2026-27, the shortfall will move through global grain markets well beyond the Asia-Pacific.
Central America illustrates the furthest end of the spectrum. In Guatemala, Honduras, and El Salvador, 78.6% of corn-growing households have lost between 75 and 100% of their production, according to a joint assessment by Oxfam and Action Against Hunger.
The Gulf faces its own distinct pressure. GCC states import most of their food and have no domestic agricultural production to fall back on — every commodity shock that El Niño generates arrives as a price shock, with no local supply to offset it. Elevated shipping costs from the Hormuz disruption add a second layer through a separate channel. The region is absorbing both at the same time.
Forecasters keep returning to 2028 because that is when the cumulative effects of this event are expected to finally ease. Weather eventually passes. Supply chains take longer. Commodity prices take longer still. Some of them cannot afford to wait that long.
