Record grain stocks may buffer El Nino food supply shock

Global forecasters and investment analysts are raising alarms that a strengthening El Niño weather pattern poses mounting risks to agricultural commodity markets, with some warning that current prices fail to account for the potential severity of disruptions ahead.

Official Declarations and Forecasts

The U.S. National Oceanic and Atmospheric Administration confirmed on June 11 that El Niño conditions are present in the tropical Pacific, while Australia's Bureau of Meteorology declared on June 16 that the event may become one of the most intense in 70 years, with roughly half of forecast models suggesting it could reach peak levels comparable to the highest recorded since 1950. NOAA has estimated a 63% likelihood the pattern will evolve into a very strong "super" El Niño by 2027. The World Meteorological Organization puts the probability of El Niño persisting until at least November at 90%.thetruestory+3

In a June 18 research note titled "A Sea Change for Commodity Prices," Neuberger Berman analyst David Waugh argued that markets are "underpricing" these risks, writing that the El Niño cycle represents "a meaningful tailwind for agricultural commodity prices" and that "current market pricing" does not "adequately reflect this risk".nb+1

Crops in the Crosshairs

The climate phenomenon is expected to bring excessive rainfall and flooding to parts of South America while triggering drought across Southeast Asia, India, Africa, and Australia. Reuters Thomson Reuters Corporation ↘ 0.33% reported on June 4 that dry weather is already disrupting crop planting across Asia, with rice and palm oil yields under pressure. India expects its 2026 monsoon to deliver the lowest rainfall in 11 years during the critical June-to-September growing season.reuters+2

Neuberger Berman identified cocoa, sugar, and robusta coffee as the most exposed commodities, noting that every strong El Niño event in the past 55 years has led to a decline in cocoa production. Wheat prices have already risen roughly 20% since the start of 2026 on drought concerns in key U.S. growing regions.reuters+2

Buffers and Uncertainties

A separate Reuters analysis published on June 19 noted that ample global grain inventories could soften the blow. Global wheat stocks are projected at their highest in five years, milled rice reserves have reached a record, and soybean stocks sit near last year's all-time high. Regions including China, Europe, and the Black Sea are expected to experience milder weather effects.reuters

Still, analysts at Neuberger Berman warned that if a strong El Niño coincides with ongoing fertilizer supply disruptions linked to the conflict in Iran, the result could be "food price inflation layered onto energy inflation, creating a double headwind for traditional asset classes".nb