What is an El Nino and why the 26/27 cycle could be unprecedented
An El Nino is a naturally occurring weather phenomenon originating in the Pacific Ocean where ocean surface temperatures see a significant rise typically in the range of 1-20C. A key aspect to note is that these weather systems aren’t consistent in how they affect weather patterns around the globe, while warmer, wetter conditions are expected through late 2026 in much of southern Europe, south America and central Asia; Australia, sub-Saharan Africa and the Indian subcontinent are predicted to see drastic reductions in rainfall during the same period. Up-to-date meteorological predictions for the currently developing El Nino compound on the above sentiment with recent forecasts having surface temperatures reaching potentially upwards of 30C which will almost certainly amplify regional climate impacts. This was explained by the UK Met office’s chief climate science communicator recently on The Times Podcast stating ‘what we typically expect with El Nino’s are rises in the surface ocean temperatures in the pacific however what we’re seeing in forecasts this year is a rise of just over 30C and that is unprecedented in living memory’. Given this potentially record breaking El Nino is developing through the latter half of a year in which we have already observed extreme weather across most of the world, the two could combine for a severe supply and subsequent price shock, the worst of which may yet to be truly visible. We are currently witnessing what might be the lowest harvest volume on record in the UK driven almost exclusively by the exceptionally hot and dry conditions over the summer, following this with another potentially dire harvest in 2027 could have a catastrophic impact on food goods and pricing stretching far into late 2027 and possible early 2028.
Asymmetric Consequences
Due to the asymmetric effects of El Niño on global weather patterns, predicting exactly where the pricing impacts will hit hardest is almost impossible. However, historical evidence shows that El Niño-related climate shifts often drive inflation across a wide range of food and commodity prices. Historical evidence shows that corn, rice and wheat suffer the most consistent yield reductions during strong El Niño cycles. Global yields for corn and rice can drop by up to 4.4%, inevitably driving price inflation. However, the impact is not entirely negative; certain crops, most notably soybeans, actually see average yield increases of up to 5.5%. See the maps below outlining the net historical effects on different crop yields around the globe.
As these key grains form the foundation of the wider food supply chain, this example highlights how yield reductions could trigger downstream price inflation across a vast range of products. This was again reinforced by Graham Madge when speaking to The Times podcast ‘’we’re likely to see less rainfall in places like southeast Asia which will undoubtedly affect agriculture…. and even drought in places like India and parts of sub-Saharan Africa… so when we put these together globally, we’re likely to see significant impacts”. Unfortunately, current evidence shows no sign of impending cost relief in food and beverage procurement.
Size and Time of Impact
Whilst it is impossible to predict exactly when the associated price impacts will hit hardest, one thing is historically observable, pricing shocks can persist long after an El Niño cycle concludes. A 2023 article by the European Central Bank (ECB) noted that the transition to a strong El Niño can ‘raise global food commodity prices for up to two years.’ Consequently, we are not only likely to see food prices rise, but these elevated costs could extend as far as the summer of 2028. Regarding the severity of the impact, while exact forecasts are difficult, the ECB suggests a peak increase of up to 9% could occur approximately 16 months after a strong El Niño episode begins. Based on this timeline, the peak pricing impact would likely hit in early summer 2027. (for reference see the graph below.)
A key detail here is that the graph above is based on the classically observed 1–2°C rise in ocean surface temperatures. However, with current Met Office forecasts predicting a rise exceeding 3°C, these pricing estimates could be a gross underestimation. Price impacts exceeding 10% are by no means out of the question, which would undoubtedly put intense pressure on an already struggling food and beverage industry.
Ultimately, the currently unfolding El Niño season is set to be unprecedented; not only in its strength but also in its subsequent impact on food pricing, which could persist well into 2028. With little cost relief on the horizon, dynamic operators who can innovate with their menus and remain fluid in response to produce pricing will be best positioned to mitigate the inevitable shocks ahead.
