NOAA sees over 90% chance of strongest El Niño since 1950

A rapidly intensifying El Niño is reshaping global commodity markets, with forecasters now warning of the strongest event since at least 1950 and economists flagging mounting risks to food prices, energy supplies, and inflation heading into 2027.

NOAA's Climate Prediction Center said last week that the probability of a very strong or "super" El Niño this autumn and winter had grown to over 90 percent, with a 75 percent chance it will be the strongest on record. The agency's September forecast shows a 97 percent probability that the key Pacific temperature index will exceed 2.0°C during the October-through-December window, a threshold matched historically only a handful of times.cpc.ncep.noaa+2

Food Prices and Agricultural Supply Under Pressure

JPMorgan ↗ 0.10% warned in a July report that the combination of a super El Niño and elevated oil prices tied to the conflict in Iran could add 0.3 percentage points to global headline inflation next year, with food costs bearing the brunt. The bank estimated that a super El Niño alone would raise global food inflation by about 0.7 percentage points at its peak, but that energy price disruptions could nearly double the effect to between 1.3 and 1.5 percentage points. According to Yahoo Finance, JPMorgan has warned that global food costs could climb 5 percent in the first half of 2027.agrolatam+2

The UN Food and Agriculture Organization has revised down its global rice production forecast for 2026/27 to 553.1 million tonnes, a decline of 1.9 percent from the previous season's record, citing severe El Niño-related weather. The World Bank projected a 2.5 percent rise in its global food commodity price index this year but said risks were "firmly tilted to the upside".blogs.worldbank+1

Morgan Stanley ↘ 0.46% identified sugar as the agricultural commodity most likely to see price increases from El Niño, noting that weaker monsoon rainfall could cut sugarcane production across India, Thailand, and Southeast Asia, while heavier rainfall in Brazil could also reduce yields. Since July, CBOT soybeans have risen more than 14 percent, corn more than 23 percent, and wheat more than 21 percent, according to market data compiled by TMGM.tmgm+1

European Gas Markets and the Limits of Weather as Strategy

European winter gas prices have fallen to their lowest levels of the year on forecasts that El Niño warmth could temper heating demand. But analysts caution the relief may be illusory. Rystad Energy found that European winter temperatures would need to be at least 2°C above the historical average before LNG demand falls to or below last winter's level. European gas storage stood at roughly 69 percent full as of recent weeks, compared with more than 80 percent at the same point last year, according to data cited by the Financial Times.streamlinefeed+1

The war in Iran has trapped Qatari liquefied natural gas accounting for about a fifth of global supply, lifting summer prices and discouraging extra storage injections. Reuters reported that a record-strong El Niño this winter could boost wind power generation across Europe and help limit gas demand, but stressed that cold snaps can correlate across the Northern Hemisphere, pitting European and Asian LNG buyers against one another for the same cargoes.reuters+1

A Market Caught Between Expectations and Reality

Liu Chuanxi, chief meteorology researcher at Chinese investment firm Kaifeng Investment, argued in an interview published this week that this El Niño cycle is distinct from past episodes because of the compounding effects of global warming, the Middle East conflict, and disrupted logistics through both the Panama Canal and the Black Sea. The convergence, he said, means the impact could persist well into mid-2027 or longer rather than following the short-lived "pulse-style rallies" of previous cycles.panewslab

Bloomberg reported that hedge fund managers in London are positioning for what one called an "unusually alpha-rich environment" created by markets mispricing El Niño consequences. But several emerging market central banks have already begun tightening policy in response to rising food costs, with India, Indonesia, the Philippines, and South Korea among those raising rates at least once this year.bloomberg+1

> "El Niño will only make inflation more stubborn," TMGM's analysis concluded.tmgm