‘Super’ El Niño could cause global food price shocks until 2028, analysts say | The global economy

Economists warn that a “major” El Niño weather cycle this year could cause a major shock to food prices around the world until 2028.

As the war in Iran pushes global food prices to their highest level in three years, economists say supply chains face “double shocks” from extreme weather linked to global warming.

Scientists said the 2026-27 El Niño – which forms when changes in wind patterns allow warm water to spread over the central and eastern equatorial Pacific – has a historically unprecedented chance of developing into a “very strong” event fueling heat waves, floods and stormy weather.

Randomly described as “super” or “Godzilla” El Niño, the US National Oceanic and Atmospheric Administration (NOAA) confirmed that last month warming conditions were taking place in the Pacific and that there was a 63% chance of sea temperatures exceeding 2C above normal later this year.

At a time when families around the world are already feeling the pinch due to rising living costs, experts say an extreme El Niño could add to the pressure. The prospect of another shock to inflation is also weighing on central banks, adding to concerns that interest rates may be kept at high levels.

“El Niño puts ‘climate recession’ back on the agenda,” analysts at Italian bank UniCredit wrote in a research note. “The recent heat waves in Europe are a reminder that the climate is changing. El Niño may add new pressure later this year, as it amplifies the effects of global warming.”

The naturally occurring phenomenon has a history of impacting harvests and the food supply network. More than a century ago, what was possibly the most severe El Niño on record caused catastrophic droughts across China, southern Africa, Brazil, Egypt and India. Caused by famine conditions at its worst due to colonial rule, millions were killed, including over 6 million people in India in 1876-78.

El Niño events in 1981-82, 1996-97, 2015-16 and 2023-24 were some of the strongest on record. However, NOAA projections show that the 2026-27 cycle could be even worse – increasing the risk of drought and crop flooding, as well as food shortages around the world.

According to Goldman Sachs analysts, the strength of this El Niño could cause a 15.8% increase in food prices around the world. That could have implications around the world, including for consumers in Europe, where it has predicted that food prices could rise by 1.3% across the eurozone.

However, the full effect will take time because of how the costs of climate impacts increase with the global food supply. As a result, Goldman Sachs said the results could take until the second half of 2028 to be “fully realized”.

Most of the delays come down to bad weather that affects food production, given the different planting, growing and harvesting cycles of crops. Planning challenges – including water levels in canals and rivers used for important shipments – will also have an impact.

“El Niño does not disrupt agriculture in the same way. It reshapes global rainfall and temperature patterns, creating regional winners and losers,” UBS analysts said. Some regions may benefit from warmer weather.

El Niño will compound the disruption caused by the Iran war by adding food supply problems to already high prices, as well as shortages of fertilizer and energy, analysts say. “Even small supply disruptions could cause larger price movements than historical patterns would suggest,” UBS analysts said.

El Niños usually lead to high risks of drought in southern Africa and northern parts of South America, but floods in southern Brazil, Argentina, Paraguay and Uruguay. Analysts say low-income countries – already hit hard by the Iran conflict – are likely to suffer the most.

“El Niño has already started to affect crops, driving a dry rainy season in India, some regions receive only 25% of their normal rainfall, while parts of central India receive only 50%, which may affect the availability of wheat, rice, sugarcane,” wrote Goldman Sachs analysts.

The impact is likely to be felt around the world.

Analysts say the drought in southeast Asia could affect the supply of palm oil – a key ingredient in processed foods – while coffee and cocoa harvests could be affected. Hotter and wetter conditions may fuel the spread of disease, hitting yields in future years.

In North America, the impact of El Niño is stronger in winter, and although conditions in Europe are not influenced by the weather event, analysts say that other factors – such as the effect of food prices around the world – will be where they are felt.

Three years ago, the European Central Bank estimated that a strong El Niño could increase global food prices by 9%, with soybeans, corn and rice seeing the biggest increases.

How prices reflect on the shelves depends on mitigation strategies and domestic policies. Factors such as consumer demand and retail prices also play a role.

According to UniCredit, the magnitude of an extreme El Niño situation remains high. This could lead to a 14.3% hit to global agricultural production – equivalent to $342bn (£254bn) in lost output, it said.

“Price shocks could reach 10% to 50% for all major commodities, while the most exposed crops – including rice, palm oil, sugar and coffee – could increase by 50% to 100% or more,” the bank said. “The food system goes into the second half of 2026 with buffers, but it has small flaws.”