The Regional and Crop-Specific Impact of El Niño in 2026 on Global Agriculture

The US CPC has determined that a tropical El Niño has formed, which will continue to strengthen through summer and fall 2026, with a high probability of moderate to strong El Niño conditions. The core logic is a complete restructuring of global precipitation: droughts in Southeast Asia, Australia, South Asia, and southern Africa; heavy rains in central-southern South America and southern United States; typical southern flooding and northern droughts in China, with completely different gains and losses for various crops and regions. Soft commodities will experience the most intense shocks, while staple grain regions will see clear hedging.

I. Oils and Oilseeds (Most Sensitive Sector to Impact)

1. Palm Oil (80% of global production from Indonesia and Malaysia) [Significant reduction in output, bullish on prices]

- Climate: Southeast Asia experiences sustained high temperatures and drought, hindering flowering and pollination of oil palms, leading to a significant drop in fruiting; production reduction has a lag effect of 9–12 months, with pressure concentrated in the first half of 2027.
- Yield estimate: Moderate El Niño causes a 7%–8% reduction, while strong El Niño causes a 10%–24% decline in per-unit yield; combined with Indonesia’s biofuel blending policies, supply and demand tightening is highly certain.

2. Soybeans (80% concentrated in the US, Brazil, Argentina) [Overall increase in production, suppressing prices]

- Increased rainfall and alleviated droughts in major American production areas: the US Midwest, southern Brazil, and Argentina have favorable climates, with global soybean yields increasing by approximately 2.9%–3.5% during historic El Niño years.
- Slightly negative impact from northeastern Brazil and parts of northern China due to minor droughts, resulting in a global supply hedge overall.

3. Rapeseed and Sunflower Oil

- Drought in Australia’s main rapeseed-producing regions could cause a decline of up to 22%; meanwhile, rainy and abundant harvests in Europe and South America partially offset Australian shortfalls.

II. Major Grain Staples (Regional Divergence, No Significant Global Decline)

1. Wheat

- Bearish factors (reduced output): Drought in Australia (15%–22%), northern India, North China Plain (summer drought), and South Africa;
- Bullish factors (good yields): Southern US, Argentina, and Europe, where improved rainfall boosts yields;
- Global average decline of about 1.4%, with price fluctuations depending on the extent of reductions in Australia and India.

2. Corn

- Americas (US, Brazil, Argentina): Sufficient rainfall, favorable growth, increased yields;
- Risk zones: China’s North China Plain and northeastern summer high temperatures causing “bottleneck droughts,” with high temperatures during pollination leading to failures and up to 20% reductions; drought in South Africa could cause declines of up to 40%;
- Global supply remains balanced, with regional shortages pushing up regional grain prices.

3. Rice (Concentrated in Asia, with tight supply and demand)

- Southeast Asia (Thailand, Vietnam, Indonesia), India: Weaker summer monsoon and persistent droughts lead to insufficient irrigation, reducing yields of early and late rice; historic strong El Niño has caused a total reduction of about 15 million tons of Asian rice.
- China: Flooding and waterlogging south of the Yangtze, with rice paddies submerged, lodging, and pest outbreaks; northern droughts restrict water allocation; overall rice output fluctuates slightly, with notable regional declines.
- Global rice stocks are high, with price elasticity weaker than palm oil and white sugar, but export policies in India and Southeast Asia could amplify volatility.

III. Soft Commodity Economic Crops (High Certainty of Decline, Large Price Upside)

1. White Sugar

- Bearish in producing regions (India, Thailand): Drought inhibits sugarcane growth, resulting in thinner stalks and lower sugar content; strong production decline expectations in these two major producers; India is prone to export bans, exacerbating global shortages.
- Neutral to weak in other regions (Brazil’s central-south): Excessive rainfall delays harvest and dilutes sugar content, reducing sugar yield.
- Historical pattern: Strong El Niño cycles typically lead to international raw sugar prices increasing by over 50%.

2. Natural Rubber (90% produced in Southeast Asia)

- High temperatures and drought shorten tapping days, reduce physiological activity of rubber trees, causing a 10%–15% decline in output; lagging 8–12 months behind El Niño, with prices resonating with palm oil increases.

3. Coffee and Cacao

- Vietnam Robusta and Central American coffee regions experience high temperatures and drought, leading to severe fruit drop; West Africa’s cacao regions face irregular rainfall, increased pests and diseases, resulting in declines in both quality and yield.

4. Cotton

- Bearish: Droughts in India and northern China cause boll shedding and lower yields;
- Bullish: Brazil’s abundant rainfall favors cotton growth, providing supply hedging, with price fluctuations smaller than sugar and palm oil.

IV. Overall Agricultural Patterns by Continent

1. Southeast Asia (Most Affected Area)

Indonesia, Malaysia, Thailand, Vietnam, Philippines: sustained high temperatures and droughts pressure palm oil, rubber, rice, and sugarcane; river and lake water levels decline, irrigation becomes insufficient, and forest fire risks increase.

2. Australia

Entire country experiences dryness, with significant reductions in wheat, rapeseed, and cotton production; livestock pastures dry up, leading to feed shortages.

3. South America (Divergent)

- Southern Brazil and Argentina: abundant rainfall, high soybean and corn yields;
- Northeastern Brazil and northern regions: drought, reduced corn and cotton output;
- Chile and Peru’s west coast: heavy rains and flooding destroy farmland, with fisheries also impacted due to ocean warming and reduced fishery yields.

4. North America

- Southern and central US: increased rainfall, higher corn, soybean, and cotton production;
- Northern US and Canada: drought conditions affecting wheat and rapeseed.

5. Africa

- East Africa (Ethiopia, Somalia): heavy rains and floods submerge crops;
- Southern Africa and Sahel: extreme drought, major reductions in corn production, sharply increasing food security risks.

6. China (Typical Southern Flooding and Northern Drought)

- South (Yangtze, South China, Southwest): frequent summer and autumn storms cause waterlogging and rot in rice paddies; high temperatures and humidity trigger pests and diseases, hindering late rice planting;
- North (North China Plain, Huang-Huai-Hai, southern Northeast): persistent droughts cause water shortages for maize, soybeans, and peanuts, raising irrigation costs;
- Overall grain output remains stable, but regional declines are evident, with larger fluctuations in vegetables and economic crops.

V. Chain Reactions and Indirect Effects

1. Price Divergence of Agricultural Products

Bullish trends: palm oil, rubber, white sugar, Australian wheat, coffee;
Under pressure/weak: soybeans, US maize, South American grains.

2. Rising Cultivation Costs

Increased costs for irrigation water, electricity, drought-resistant inputs in drought-affected areas; drainage, pesticides, reseeding costs rise in flood-prone regions; combined with high global fertilizer prices, squeezing farmer profits.

3. Divergence in Global Food Security Risks

Vulnerable countries with low self-sufficiency in Southeast Asia, southern Africa, and South Asia face rising food prices and shortages; abundant-exporting nations in the Americas and South America can buffer through exports, avoiding a global food crisis but with increased regional famine risks (FAO warning).

4. Disruption of Industrial Chains

Shortages of oils and sugar raw materials push up costs for food processing and biodiesel; rubber shortages impact tire and chemical industries.

VI. Core Summary

In 2026, summer and autumn El Niño will not cause a large-scale global reduction in grain production, but will fundamentally reshape supply patterns: pressure on soft commodities in Southeast Asia, grains in Australia, and rice in South Asia; the US and South America will form buffers through soybean and corn hedging. Oils, sugar, and rubber are the most volatile commodities in this climate cycle; countries should focus on preventing pest and disease outbreaks, irrigation issues, and harvest/planting risks under drought and flood conditions.