“Super El Niño” could cause food price shock by 2028

Goldman Sachs analysts indicate that a “Super El Niño” could cause a 15.8% increase in global food commodity prices. The impact would not be immediate, given the way the costs of climate disruption ripple through the global food chain. Thus, the consequences may take until the 2nd half of 2028 to be “fully realized”, or rather, felt in your pocket.

The situation worsens when side effects of El Niño are considered, which could affect food trade, especially in logistics. Drier conditions may make it difficult to flow production in areas that depend on water transport. Water scarcity in dry regions can also make it difficult to irrigate crops.

“El Niño has already begun to affect harvests, causing a drier monsoon season in India, with some regions recording just 25% of normal rainfall and parts of central India receiving just 50%, which could affect the supply of wheat, rice and sugar cane”, assesses Goldman Sachs.

Another analysis, this one from the Italian bank UniCredit, reinforces the risk of a new global climate-driven rise in inflation. "El Niño puts 'climateflation' back on the agenda. Recent heatwaves in Europe are a reminder that the climate baseline is already shifting. El Niño could add a new layer of pressure later this year as it amplifies the effects of global warming," he highlighted.

According to UniCredit, an extreme El Niño scenario could result in a 14.3% drop in global agricultural production, with losses of US$343 billion (R$1.7 trillion). Price shocks can be 10% to 50% for major commodities. In the most exposed crops – including rice, palm oil, sugar and coffee – the increase can be even more significant, from 50% to 100% or more.

"Rice is the staple food for billions of people in Asia, and its production depends heavily on seasonal monsoon rains. If El Niño interrupts these rains, the biggest concern will not be global food availability, but rather food security and affordability in countries where families depend on locally produced rice," Joseph Balagtas of Purdue University (USA) told Newsweek.

To make matters worse, as Bloomberg highlights, the effects of the war in the Middle East continue to haunt the global food market. This is because the Strait of Hormuz, blocked by Iran and the United States, is strategic for the urea trade.

International fertilizer prices have largely followed the trajectory of crude oil prices in recent months. The accumulated increase is more than 30% since the start of the conflict, on February 28.

“If a strong El Niño event occurs alongside fertilizer supply disruptions, investors could face a particularly challenging combination: food price inflation overlapping with energy inflation, creating double pressure on traditional asset classes,” said David Waugh, manager at Neuberger Berman, cited by AgFeed.