Catenaa, Sunday, June 21, 2026- The expected Super El Niño could complicate the outlook for central banks, posing a risk to global equities trading near record highs.
A high probability of a “Super El Niño” heading into 2027 may drive up temperatures in some parts of the world, sending power demand surging, hurting crop yields and reigniting inflationary pressures.
“El Niño arrives at an especially sensitive moment,” said Ole Hansen, Head of Commodity Strategy at Saxo Bank. “The global economy is still adjusting to the inflationary consequences of the Iran conflict, while supply chains remain vulnerable following months of disruption.”
El Niño is a weather pattern that occurs with sustained warming of the Pacific Ocean surface temperatures. This can lead to patterns of high and low pressure that translate into excessive rains in some parts of the world and drought in others.
There’s a 63% chance it could evolve into a very strong event, what’s informally known as a “Super El Niño”, heading into 2027, according to the US Climate Prediction Center.
The impact is already being felt across various regions, from a delayed start to the Indian monsoon to a temporary halt to Peru’s fishing season.
The last time the world faced such a strong El Niño, in 2015 and 2016, the result was more than $7.8 trillion in lost productivity, based on a Dartmouth College study.
Crop producers are likely to bear the brunt of a stronger El Niño, though the impact will vary across regions and commodities.
In Indonesia, the world’s largest palm oil producer, hotter and drier weather typically reduces yields, clouding the outlook for plantation earnings and adding pressure to local stocks already weighed down by concerns over Indonesia’s market-classification status and move to centralize key commodity shipments.
Global production of corn and wheat may also be negatively affected by the weather phenomenon, according to UBS Group AG, as well as sugar output in Asia. India, the world’s second-largest sugar producer, has banned exports until the end of September, dragging shares of millers such as Shree Renuka Sugars and Bajaj Hindusthan Sugar.
Meanwhile, improved rainfall in Argentina and higher sugar prices may benefit some Latin American firms, including São Martinho and Adecoagro, according to Morgan Stanley.
El Niño has also been globally supportive for soybean output, particularly for major producers in the US and the south of Brazil, UBS analysts said.
Investors may also find opportunities in companies tied to irrigation and water management as farmers cope with drier conditions. Indian firms, including VA Tech Wabag, Jain Irrigation Systems, Astral and Shakti Pumps India, may benefit.
Fertilizer firms could be among the biggest beneficiaries of El Niño if the weather pattern tightens global crop supplies, supporting demand for key nutrients including nitrogen, phosphorus and potassium.
“All else equal on idiosyncratic and other issues, to play a Super El Niño event, we would seek to maximize exposure to short-cycle, price-responsive nitrogen names,” Scotia Capital Inc. analyst Ben Isaacson wrote in a note.
Nitrogen fertilizer stocks like CF Industries Holdings and Nutrien are set to benefit.
Still, dryness from El Niño has started to slow demand for potash, according to RBC Capital Markets analyst Andrew Wong. In a worsening environment, potash-heavy stocks like The Mosaic could be disadvantaged.
Suppliers of agricultural inputs could also see demand rise as farmers seek ways to offset weather-related losses. That may support shares of crop protection players such as US-based Corteva.
“Lower yields could force farmers to pay up for technology (seed) and potentially even crop protection chemicals to maintain crop income,” RBC Capital Markets LLC analyst Arun Viswanathan wrote in a note.
