Barclays warns record El Niño could lift commodity prices up to 40%

Barclays ↘ 1.84% analyst Craig Rye warned in a report published on August 30 that a potentially record-breaking El Niño event could drive palm oil and natural rubber prices up by as much as 40% over the next 18 months, as the tropical Pacific weather pattern intensifies beyond anything seen in modern records.

A Super El Niño Takes Shape

Multi-model forecasts cited by Rye indicate that the El Niño index could peak near 3.2°C between late 2026 and early 2027, which would make the event roughly 15% stronger than the Super El Niño of 2015–2016. NOAA now assigns a greater than 90% probability to a very strong El Niño during the Northern Hemisphere autumn and winter, with a 69% chance the event exceeds anything recorded since 1950.thedarksideoftheboom.substack+1

Under Barclays' scenario, palm oil, coconut oil and natural rubber could rise between 30% and 40% over 18 months, while robusta coffee could gain 20% to 30% and rice may advance 10% to 20%. The analysis adds to a growing chorus from Wall Street: UBS ↘ 2.84% has urged clients to position for a commodity upcycle, and Morgan Stanley ↘ 1.07% has separately flagged sugar as one of the agricultural commodities most exposed to El Niño disruption.morganstanley+2

Supply Chains Under Pressure

The concentration of risk reflects the dependence of Southeast Asian agriculture on rainfall patterns across tropical production centers. The USDA has already lowered its 2026–27 palm oil production estimate for Malaysia to 19.7 million metric tons, citing expected dry conditions. A Purdue University analysis published last week identified a "convergence of two independent pressures" on global vegetable oil markets — El Niño's supply suppression and conflict-driven biofuel demand — operating simultaneously.spglobal+2

Palm oil's reach extends well beyond cooking oil into processed food, cosmetics and biodiesel, meaning shortages tend to pass quickly through food prices and household inflation. Rice carries an additional political dimension as a staple across much of Asia, where governments may impose export restrictions that tighten international markets further.thedarksideoftheboom.substack

Beyond the Farm Gate

Rye's analysis extends the threat beyond agriculture. Drought can reduce hydropower generation, raise electricity costs for energy-intensive industries, and disrupt mining operations. Barclays estimates copper and aluminium could rise as much as 20%, while thermal coal could gain 20% to 40% as utilities compensate for weaker hydroelectric output. The bank identified Bunge ↗ 4.16%, Archer Daniels Midland Archer-Daniels-Midland Company ↗ 4.01%, Freeport-McMoRan ↘ 4.32% and Rio Tinto ↘ 0.62% among potential beneficiaries.thedarksideoftheboom.substack

"When several commodity markets begin tightening for different reasons, diversification can become correlation remarkably quickly," the Barclays analysis noted. Whether the Pacific delivers on its threat or moderates in the months ahead, the warning has sharpened the focus on supply chains that were already running thin.thedarksideoftheboom.substack