How a potential super El Niño could disrupt food supply chains through 2027
Procurement leaders may be facing a new source of commodity and supply chain volatility. Forecasts point to a high likelihood of a very strong El Niño developing in 2026, coinciding with record ocean temperatures across the Pacific. Historically, major El Niño events have reshaped agricultural production around the world, creating drought in some regions and excessive rainfall in others. While supply impacts are expected to emerge with the 2026 harvest cycle, commodity markets are likely to react much sooner.
Where the pressure is building
The greatest concerns are concentrated in Asia, Australia, and West Africa, where drought conditions could reduce production of several globally important commodities.
Key areas to watch include:
- Cocoa: Côte d’Ivoire and Ghana supply roughly 60% of global cocoa production. Weather-related disruptions could tighten already constrained markets.
- Coffee: Drought risks in Vietnam, Indonesia, Central America, and Colombia threaten both Robusta and Arabica supply.
- Rice: Production concerns in India, Thailand, and Vietnam could lead to reduced exports and higher global prices.
- Palm oil: Indonesia and Malaysia account for approximately 85% of global supply, making the market particularly vulnerable to drought.
- Sugar: Lower yields in major producing regions could add further price pressure across food and beverage categories.
Because the United States relies heavily on imports for many of these commodities, procurement teams should anticipate continued cost volatility into 2027.
Not all regions will be affected equally
Some agricultural regions may benefit from changing weather patterns. Brazil, for example, is expected to see stronger soybean and corn production, helping offset losses elsewhere and supporting global feed grain supplies.
Australia presents a more complicated picture. Drought conditions often trigger increased cattle slaughter in the short term, which can temporarily increase export volumes and ease beef prices. Longer term, however, reduced herd sizes typically lead to tighter supply and higher prices until producers rebuild capacity.
Hedge early, not after the fact
Organizations that wait for shortages to materialize often face the highest costs. Procurement teams should evaluate mitigation strategies before markets tighten, including forward contracts, commodity hedges, longer-term supply agreements, supplier diversification, and strategic inventory positions for high-risk categories.
No single strategy eliminates risk, but combining financial hedging, supplier diversification, and inventory planning can significantly improve resilience.
Watch concentration risk as closely as commodity risk
Many organizations focus on commodity prices while overlooking a larger vulnerability: geographic concentration. Cocoa, palm oil, rice, and coffee are all sourced from highly concentrated production regions. When weather disruptions occur, buyers often find themselves competing for the same alternative supply.
A useful exercise is to identify categories where more than 50% of supply originates from a single country or region. In many cases, the greatest risk is not rising prices but the inability to quickly replace disrupted supply. The resulting costs, including expedited freight, production interruptions, and lost sales, can far exceed commodity inflation.
Actions procurement teams should take now
Organizations can strengthen their position by focusing on three priorities:
- Assess exposure: Identify critical commodities, sourcing regions, and suppliers most vulnerable to El Niño-related disruptions.
- Plan for volatility: Incorporate potential inflation, shortages, and freight disruptions into 2027 forecasts and operating plans.
- Strengthen resilience: Reassess sourcing, contracting, hedging, inventory, and market-monitoring practices to improve supply continuity.
A potential Super El Niño could become one of the most significant drivers of food commodity volatility over the next 18 to 24 months. Organizations that move early to manage sourcing risk, hedge exposure, and reduce supplier concentration will be better positioned to navigate market disruptions and protect margins through 2027.
Author:
Managing Director of ProcureAbility
