The growing impact of El Nino

From an investment perspective: agriculture is among the most exposed areas, but changing rainfall and temperature patterns can have wider implications for food production, raw-material costs, energy demand and business operations. Rather than producing a uniform effect, we expect the consequences to differ significantly by geography, sector and company.

As of October, the U.S. National Oceanic and Atmospheric Administration (NOAA) estimated a 100% probability of a “very strong” El Nino during last quarter of 2026. It also estimated a 83% probability that the event reaches a level exceeding previous El Nino events in its record dating to 1950. A powerful El Nino, however, does not necessarily translate into proportionately more severe impacts everywhere.

Some effects are already visible. India’s monsoon rainfall was around 13% below normal by September-end, stressing crops. Exceptionally heavy September rainfall across the U.S. Corn Belt delayed corn and soybean harvesting. In South America, El Nino-related warming disrupted anchovy fisheries, with Peru ending its main season after catching around 25% of its quota.

Food and agriculture sit near the center of the story. During past El Nino years, global corn yields have been 2.3% lower and wheat yields 1.4% lower, although these global averages can mask much larger differences between countries. Yields are also usually lower for palm oil, sugar and cotton, while droughts in India and Thailand have often correlated with sugar price increases.

The effects can then travel through supply chains. Our research points to differing implications across industries. Crude palm oil plantations and Australian bulk miners could benefit from changing conditions, while food and protein producers, agrochemicals and fertilizer demand could face pressure from lower yields, higher feed and raw-material costs, weaker farm incomes and softer input demand. Utilities, insurers and other financial companies face a more mixed picture.

Exposure to El Nino alone does not determine the outcome for an individual business. Our research suggests that preparedness matters. Diversification, contractual protection, pricing power and operating flexibility can all influence how climate exposure translates into business impact.

The consequences can also extend beyond the most obvious industries. We have identified potential second-order effects ranging from industrial water constraints and forest-fire smoke to heat-related productivity losses and increased flooding and landslides when rains return to drought-affected areas.

The result is a complex and evolving picture. El Nino may be one global climate phenomenon, but its economic and business impacts are anything but uniform.