Scientists and financial institutions are monitoring conditions across the Pacific as warmer sea surface temperatures continue to develop. According to the US National Oceanic and Atmospheric Administration (NOAA), there is a 63% chance that sea surface temperatures will exceed 2C above normal later this year, increasing the likelihood of a very strong El Niño.
The warnings come as households in many countries continue to face elevated living costs, while central banks remain alert to the risk that renewed inflation could delay reductions in interest rates.
The weather pattern has historically disrupted agricultural production across multiple regions, with effects emerging gradually as planting, growing and harvesting cycles respond to changing rainfall and temperature conditions.
El Niño Raises Concerns over Global Harvests and Food Inflation
El Niño develops when changes in wind patterns allow warmer water to spread across the central and eastern equatorial Pacific, altering weather conditions around the world. According to NOAA, warming conditions were confirmed last month, with an unusually high probability that the current event could develop into a very strong episode.
Economists say this could affect harvests through drought, flooding and more severe weather. According to Goldman Sachs, the strength of the current El Niño could result in a 15.8% increase in global food commodity prices, with food prices across the eurozone rising by 1.3%.
The bank said the full impact would not be immediate because weather-related disruptions affect different crops at different stages of production. Transport systems could also be affected by changing water levels in canals and rivers used for agricultural shipments. Goldman Sachs said the consequences may not be fully realised until the second half of 2028.
The phenomenon has already begun to influence weather in some regions. According to Goldman Sachs, parts of India have experienced significantly weaker monsoon rainfall, with some areas receiving only a quarter of their usual precipitation and parts of central India receiving about half of normal levels, creating risks for wheat, rice and sugar cane production.
Regional Impacts Are Expected to Vary across Agricultural Markets
Analysts emphasise that El Niño does not affect every region in the same way. According to UBS, the weather pattern reshapes global rainfall and temperature, creating both regions that experience losses and others that may benefit from changing conditions.
The bank said drought in south-east Asia could reduce palm oil production, while coffee and cocoa harvests could also be affected. It also warned that warmer and wetter conditions may encourage the spread of crop diseases, with implications for agricultural yields in future seasons.
UBS added that disruptions linked to El Niño would coincide with higher food prices, fertiliser shortages and energy supply pressures associated with the Iran war. The analysts said that even relatively modest disruptions to supply could produce larger price movements than historical patterns might suggest.
In Europe, analysts expect the main effects to be transmitted through international food markets rather than through direct weather impacts. UniCredit estimated that an extreme El Niño scenario could reduce global agricultural production by 14.3%, equivalent to approximately £254 billion in lost output. The bank also warned that price increases across major commodities could range from 10% to 50%, while rice, palm oil, sugar and coffee could experience even larger rises if the most severe scenario were to develop.
