El Niño threatens global food supplies as crop output falls

The developing El Niño weather pattern is poised to disrupt global food production in 2026-27, with output of key crops expected to fall across major producing regions and analysts warning the phenomenon could feed a new wave of commodity-driven inflation.

Production Declines Across Key Crops

S&P Global Energy ↗ 0.30% published a factbox on Monday detailing the expected toll on agricultural output. Australian wheat production for the 2026-27 marketing year is forecast at 26.7 million metric tons, down 26% year over year, according to the Australian Bureau of Agricultural and Resource Economics and Sciences. The U.S. Department of Agriculture estimated corn output at 406.3 million metric tons, a 6% decline, while S&P Global's Energy CERA division projected Brazil's soybean crop at 177 million metric tons, down 2.7%.spglobal

"A strong late-2026 to early-2027 event would increase weather-driven volatility, with the largest downside risks concentrated in Brazil, Australia, India, and Southeast Asia," CERA said in a report.spglobal

The World Meteorological Organization confirmed in late July that a strong El Niño is developing and expected to strengthen during August through October 2026, with sea-surface temperature anomalies projected to exceed 2.9°C in key monitoring regions. WMO Secretary-General Celeste Saulo warned that El Niño conditions "will intensify the chances of drought and heavy rainfall."wmo+2

Inflation Risks Mount

The production shortfalls are already visible in prices. Australian premium white wheat was assessed at $289 per metric ton on July 31, up from $261 a year earlier, while U.S. corn CIF New Orleans rose to $215.65 from $187 over the same period.spglobal

Analysts at The Corner warned that if historical correlations hold, a very intense El Niño episode could drive global food prices sharply higher over the next year, compounding pressures from fertilizer supply disruptions linked to the closure of the Strait of Hormuz, which has doubled urea prices. A 50% rise in the FAO food price index by year-end could push food inflation in the G7 to double digits by 2027, the analysis suggested.thecorner

China's Heat Wave Adds Pressure

Compounding the El Niño threat, a heat wave across China's major agricultural regions is putting corn, rice, and cotton at risk. Provinces including Shandong and Liaoning, which together account for roughly 17% of China's corn crop, face daytime highs between 35°C and 38°C during critical growth stages. In Xinjiang, temperatures could approach 50°C, with private analysts estimating cotton production may decline by as much as 5%.agrolatam

Any shortfall in Chinese domestic production could increase import demand, further tightening global supplies and supporting higher commodity prices across interconnected agricultural markets.agrolatam