El Niño Brings Growing Economic Risks

Rice is one of the many crops affected by El Niño. Location: Bangladesh. Photo by Ian Taylor from Pexels.

Experts warn of growing risks brought by a strengthening El Niño, which can disrupt food production, commodity markets and global trade. El Niño is a natural climate phenomenon in which the tropical Pacific Ocean becomes unusually warm, affecting weather patterns worldwide. Climate change can make its impact more intense.

The 2026–27 El Niño is expected to become one of the strongest events since 1950, with an 81% probability of becoming very disruptive. Commodity markets are already reflecting these effects. Concerns are rising over supplies of coffee, cocoa, wheat, rice, sugar and palm oil.

The economic consequences could extend well beyond agriculture.

Drought, flooding and extreme heat could disrupt mining, transport, energy and supply chains. In addition, water shortages could affect shipping through the Panama Canal, an important route for global trade. Strong El Niño events have also historically increased global food prices. The European Central Bank estimating that major events have raised food prices by around 9%. 

What Is Happening?

• Commodity prices are responding to El Niño: Cocoa prices have risen 37% since June, while Arabica coffee prices are up 26%, reflecting concerns over heat, drought and disrupted harvests. 
• India’s monsoon is under pressure: Rainfall has been more than 10% below average, raising concerns for water-intensive crops such as rice and sugar. 
• Global temperatures could rise further: El Niño typically adds around 0.1–0.2°C to the annual global average temperature, amplifying existing heat risks. 
• Global trade could be disrupted: Drought can reduce water availability for major transport routes, including the Panama Canal. The canal carries an estimated 3–6% of international trade, making water availability an important economic concern. 
• Economic impacts could persist: Research suggests that major El Niño events can cause long-lasting economic losses, with effects continuing for several years in some countries. 

Why This is Getting Worse

El Niño is a natural climate pattern, but it is now developing on an overheating planet. A 2024 study published in Nature found that extreme El Niño events could become much more frequent as the planet warms. Specifically, these events were more than twice as common in simulations of a warmer climate than in simulations of the last Ice Age. 

Furthermore, research suggests that declining Arctic sea ice can influence tropical Pacific conditions and contribute to more frequent strong El Niño events. One study estimates that 37–48% of the projected increase in strong El Niño events by the end of this century could be linked to Arctic sea-ice loss. These connections show how warming and changes at the poles can interact with tropical climate patterns. As a result, risks to food supplies, water, livelihoods and economies could increase.

What This Means for People

• Food prices: Reduced crop production could increase the cost of staple foods and commodities such as rice, coffee, sugar, and wheat. 
• Food security: The World Food Programme estimates that 49 million additional people could face acute food insecurity, with vulnerable regions particularly exposed. 
• Household costs: Higher food and energy prices could add pressure to households already facing cost-of-living challenges. 
• Livelihoods: Farmers, fishers and workers whose incomes depend on climate-sensitive sectors could face losses from drought, flooding, heat and disrupted production. 
• Trade and supply chains: Water shortages, damaged infrastructure, and disrupted transport routes could increase shipping costs and delay the movement of goods. 

The Urgent Response Needed 

What Needs to Change: 

• Strengthen early-warning systems so governments, farmers, businesses and communities can prepare before drought, flooding and extreme heat intensify. 
• Protect food supplies by improving water management, agricultural forecasting, and food-storage systems. 
• Prepare supply chains by identifying vulnerable commodities, transport routes, and production regions before disruptions occur. 
• Strengthen water security in regions where drought could affect agriculture, energy production, and critical trade infrastructure. 
• Build long-term climate resilience: Businesses and governments should plan for repeated and overlapping climate risks rather than treating each El Niño event as an isolated emergency. 

What YOU Can Do:

• Stay informed about local weather, food-security and disaster warnings. 
• Prepare for higher food costs by following local price and supplying information for climate-sensitive commodities. 
• Support climate-resilient agriculture and food systems that improve water efficiency, crop diversity, and preparedness for extreme weather. 
• Support local resilience: Protect water supplies, infrastructure and communities through water conservation, flood protection and heat-ready public spaces.  
• Cut carbon pollution and prepare for climate risks: Support cleaner energy, efficient buildings, resilient transport and stronger emergency planning. 

Read more: Extreme weather events | Health risks | Climate Risks Daily 

Original source: https://www.ft.com/content/4469e5f8-1839-45a5-9e1d-b63ea58b8763?syn-25a6b1a6=1