El Niño impacts: overview
- El Niño is expected to drive higher ingredient, packaging and freight costs over the next 18 months
- Procurement decisions made in the coming months could have a lasting impact on manufacturers’ margins
- The effects will reach consumers gradually, with some food prices likely to remain under pressure into 2027
Manufacturers have barely caught their breath after successive shocks from the pandemic, war, soaring energy costs and Red Sea disruption. Now another threat is emerging that could keep procurement teams on high alert well into 2027.
Meteorological agencies have officially declared El Niño conditions, with forecasts pointing to a strong event peaking between November 2026 and January 2027. While the weather pattern itself is expected to weaken during the second half of next year, its commercial impact is likely to last much longer as crop losses, transport disruption and rising raw material costs gradually feed through supply chains.
The effects won’t be felt all at once. Fresh produce is expected to react first, followed by grains such as wheat and rice within three to six months. Processed foods, edible oils and packaged products are more likely to experience cost inflation six to 12 months later as existing contracts expire and manufacturers begin replacing inventories at higher prices.
That delay creates a rare opportunity.
According to procurement intelligence specialist Beroe, the decisions manufacturers make over the next three months could determine how exposed they become as markets respond to worsening weather conditions.
Why this El Niño matters
Successive years of geopolitical conflict, shipping disruption, volatile energy markets and tighter sustainability requirements have left global supply chains with far less capacity to absorb another major shock.
“Compared with previous El Niño cycles, the weather impact itself is not necessarily more severe, but the market’s ability to absorb disruptions has weakened,” says Malligeswari Panneerselvam, senior manager of cost and price analytics at Beroe.
“Supply chains are already operating with lower tolerance for shocks after successive years of geopolitical conflicts, Red Sea disruptions, volatile energy markets and tighter sustainability requirements. As a result, weather-related production losses are now transmitted more quickly into procurement costs, while supply recovery takes longer due to constrained logistics and reduced sourcing flexibility.”
The implications stretch across many of the world’s most important agricultural regions. Wheat, rice, maize and soybeans account for more than 60% of global calorie intake, and all are produced in areas vulnerable to El Niño-related weather extremes.
Why food inflation lags behind the weather
El Niño is a naturally occurring climate pattern that develops when sea surface temperatures in the central and eastern tropical Pacific Ocean become warmer than normal. Occurring every two to seven years, it alters weather patterns around the world, bringing drought to some regions, flooding to others and disruption to agricultural production and transport.
The weather event may last less than a year, but its impact on food costs typically unfolds over a much longer period.
Immediately: Fresh fruit and vegetables are often the first to react as drought, flooding or heat reduce yields and disrupt harvests.
3-6 months: Grains such as wheat and rice begin reflecting tighter supplies and changing global trade patterns as buyers compete for alternative sources.
6-12 months: Processed foods, edible oils and other manufactured products become more expensive as ingredient contracts are renewed and higher raw material, packaging and freight costs feed into production.
Beyond 12 months: Even after weather conditions improve, manufacturers may still be working through higher-cost contracts, while retailers gradually pass those increases on to consumers.
That delayed timeline is why procurement teams monitor El Niño long before its effects reach supermarket shelves. By the time consumers notice higher prices, many of the commercial decisions that shaped those costs have already been made.
Rice illustrates how quickly disruption in one market can spread to another. India remains the world’s largest rice exporter, and Beroe estimates that any move to restrict exports to protect domestic supplies could push global rice prices up by as much as 30%.
“If India restricts rice exports, the first impact will likely be a shift in global procurement behaviour rather than an immediate supply shock,” says Panneerselvam.
“Major rice-importing countries across Asia and Africa are expected to increase wheat purchases, strengthening export demand from key suppliers such as the EU, Russia, Australia and North America. This could tighten spot availability, compress exporters’ selling flexibility and support wheat prices even in a fundamentally well-supplied market.”
In other words, wheat prices could strengthen even without widespread crop failures simply because buyers begin competing for alternative supplies.
Cocoa remains another concern after two years of poor West African harvests. Beroe forecasts cocoa prices across the Middle East and Africa will rise by a further 6.2% during the July to September period.
Vegetable oils are also expected to remain under pressure. Palm kernel oil is forecast to increase by around 3% across Europe and Asia, while soybean oil could climb almost 6% in North America, adding to already elevated fats and oils costs.
Sugar has so far proved more resilient, but that could change if Brazilian sugarcane production disappoints or India tightens export policy. Although Beroe’s current outlook points to regional increases of around 2.5% in Europe and 3.4% across Latin America, global prices could climb by between 5% and 8% if both risks materialise.
Where the next cost pressures will emerge
The knock-on effects extend well beyond agricultural commodities.
“Packaging and logistics are becoming indirect cost amplifiers rather than standalone risks,” says Panneerselvam.
Packaging is already showing signs of strain. Drought conditions threaten hydropower generation used by aluminium smelters in parts of Asia, reducing output and extending lead times. Beroe says the Midwest Premium for aluminium has already risen by 20%-30% during the first half of 2026.
Freight markets face a similar challenge. Although container shipping has largely stabilised since the pandemic, El Niño is expected to tighten draft restrictions at the Panama Canal later this year as lower water levels reduce vessel capacity. Longer transit times and the return of drought-related surcharges would increase landed costs for both ingredients and finished products moving between Latin America, North America and Asia.
“Consumers won’t feel the full brunt immediately because of existing supply contracts and inventory buffers,” says Panneerselvam. “Fresh produce will spike quickly, but staples such as rice and wheat will see price pass-throughs in three to six months, while packaged goods and edible oils are more likely to experience inflation six to twelve months later.”
The lag means manufacturers may spend months absorbing higher costs before retailers begin accepting price increases. Even if weather conditions improve during 2027, businesses could still be working through more expensive ingredient, packaging and freight contracts, keeping supermarket prices under pressure.
The next 90 days could define the next two years
Rather than buying more inventory across the board, Panneerselvam argues manufacturers should focus on identifying where disruption is most likely to occur and adjusting procurement strategies accordingly.
“Rather than increasing inventory indiscriminately, procurement teams should reclassify commodities by disruption risk, extend contract coverage only for high-exposure categories such as cocoa and vegetable oils, renegotiate freight and delivery terms before logistics tighten, and establish trigger-based sourcing strategies linked to weather, crop and export policy developments.
“Early decisions made now will determine procurement resilience over the next two quarters.”
The same approach applies to sugar. Instead of rushing into reformulation or panic buying, manufacturers should use today’s relatively stable market to stagger purchases, rebalance contract portfolios and strengthen supplier negotiations before weather uncertainty is fully reflected in prices.
Smaller manufacturers may have less buying power than multinational competitors, but Panneerselvam believes procurement discipline can still provide an advantage.
“Small and mid-sized manufacturers typically have limited ability to influence supplier pricing or secure long-term volume commitments during volatile markets. Their focus should therefore shift from price negotiation to procurement execution,” she says.
That means identifying the commodities most likely to affect profitability, maintaining approved alternative suppliers and aligning purchasing decisions with market conditions rather than reacting to supplier price announcements.
“During periods of constrained availability, suppliers often prioritise customers with consistent ordering patterns and reliable commercial performance over opportunistic buyers,” says Panneerselvam. “In practice, stronger market visibility and disciplined procurement timing usually deliver greater margin protection than attempting to compete with larger buyers on purchasing scale.”
El Niño may begin easing during 2027, but its commercial impact is likely to outlast the weather itself. The contracts negotiated, crops harvested and procurement decisions made over the coming months will shape manufacturing costs long after forecasts return to normal.
By the time it reaches its peak, the window to reduce its financial impact may already have closed.
