Warnings of a powerful El Niño developing this year have reignited concerns over food inflation, crop losses and supply shortages. However, analysts at ING’s THINK Economic & Financial Analysis unit argue that the threat to global agricultural production is likely being overstated.
Data from the US National Oceanic and Atmospheric Administration (NOAA) shows Pacific Ocean temperatures continue to climb, with forecasters assigning an 81% probability of a very strong El Niño between October and December 2026. If realised, it would rank among the strongest events seen since the 1950s.
Despite the alarming forecasts, ING’s analysis of previous moderate-to-strong El Niño episodes suggests global agricultural output has historically remained relatively resilient.
“Fearmongering generates clicks,” the analysts noted, arguing that while El Niño can significantly affect certain regions and commodities, its impact is often offset by gains elsewhere.
Advances in irrigation, drought-tolerant seed varieties and satellite-based crop monitoring have reduced agriculture’s vulnerability compared with previous decades. The growing importance of Brazil as an agricultural powerhouse has further strengthened global resilience, with some South American crops, particularly soybeans, potentially benefiting from El Niño conditions because the weather pattern often brings increased rainfall to areas that are normally limited by moisture.
The report also found little evidence that El Niño alone drives sustained spikes in food prices. Previous surges in the UN FAO Food Price Index were more closely linked to broader economic factors, including demand shocks, low inventories and geopolitical disruptions.
Asia-Pacific faces the greatest exposure
While global impacts may be limited, ING warns that Asia-Pacific remains highly vulnerable.
Historically, El Niño has brought drier weather to South and Southeast Asia and reduced rainfall across parts of Australia, threatening production of wheat, rice, sugar and palm oil.
Australian wheat production offers a stark example. During the 2002-03 El Niño event, output fell 58% year-on-year, while production declined 36% during the 2023-24 episode.
Sugar production is also particularly exposed. Strong El Niño events have consistently reduced output in India and Thailand, with impacts sometimes extending beyond a single season because sugar cane is a perennial crop.
The report highlights aquaculture as one of the first sectors already experiencing disruption. Restrictions on Peruvian anchovy catches have pushed fishmeal prices up more than 75% year-on-year, raising costs for Asian fish and shrimp producers, where feed accounts for up to 65% of production expenses.
Meanwhile, India’s monsoon season has started slowly, with cumulative rainfall still running 24% below normal. ING warns that concerns over domestic food supplies could trigger further export restrictions from New Delhi, following its decision to extend sugar export bans until at least September 2026.
A wake-up call for agribusiness?
Rather than focusing on worst-case global supply scenarios, ING suggests the 2026-27 El Niño could serve as a catalyst for agribusinesses to strengthen their preparedness for future climate-related disruptions.
The analysts recommend companies operating in or sourcing from Asia-Pacific increase investment in supply chain monitoring, risk mitigation and operational flexibility.
Suggested measures include improved irrigation infrastructure, greater water and feed storage, enhanced hedging strategies and contingency plans for potential export restrictions.
The report also encourages businesses to develop risk-monitoring dashboards incorporating commodity prices, weather forecasts, reservoir levels, Indonesian forest fire activity and water levels in the Mekong River.
For many major agribusinesses such systems are already in place. However, ING argues that smaller and more downstream food companies may need to devote greater resources to resilience planning.
“Even if the impact ultimately proves less severe than feared, improved preparedness will help companies navigate future weather-related disruptions,” the analysts concluded.
