Fitch, Schroders warn El Niño could double food prices

El Niño Risks Threaten Global Food Prices and Inflation Through 2027

A potentially record-breaking El Niño is forming in the Pacific, and two major financial institutions are warning it could deliver a punishing blow to global food prices just as the world economy contends with lingering geopolitical disruptions.

Fitch Ratings warned on Sunday that the U.S. Climate Prediction Center’s June 8 projections indicate a 96% chance El Niño will persist through at least December 2026 to February 2027, with NOAA forecasters placing a 63% probability that sea surface temperatures will exceed 2 degrees Celsius above normal — the threshold for a “very strong” event. Separately, Schroders published an analysis on Sunday in which David Rees, the firm’s head of global economics, warned that if historical correlations hold, “a very strong El Niño would imply a doubling of global food prices from current levels over the next year or so”.schroders

Compounding Pressures on Food Supply

The El Niño threat arrives against an already fragile backdrop. Rees noted that over 50% of the United States was in drought as of late May, affecting roughly 250 million acres of crops, while record heatwaves struck Europe and India. The recent closure of the Strait of Hormuz — through which about a third of global urea supplies are shipped — has already doubled fertilizer prices, adding further strain to agricultural production costs. Although the U.S. and Iran agreed on a framework to reopen the Strait on Monday, June 15, analysts say relief on fertilizer markets will not be immediate.familywealthreport

Rice, wheat, sugar, and cocoa face the sharpest risks. Rees highlighted that Australian wheat production could fall by around nine million tonnes in the 2026/27 season, while sugar output in India and Thailand has historically dropped 20–30% during strong El Niño events. Reuters reported that price shocks of 10% to 50% are projected across core commodities, with rice, palm oil, sugarcane, and coffee potentially seeing surges of 50% to 100% or more.reuters

Inflation Implications

The inflationary consequences could be far-reaching. Food accounts for 10–15% of consumer price baskets in developed markets and over 25% in emerging economies. Rees cautioned that rolling waves of food-driven inflation, arriving as energy price pressures begin to subside, raise the risk of second-round wage effects that could entrench higher prices. The Columbia University International Research Institute’s May forecast assigned a 97–98% probability to El Niño conditions persisting through early 2027, with the probability of La Niña development at effectively zero.columbia

“Rolling waves of inflation, rather than a more immediate, one-off shock, increase the risk of adverse outcomes,” Rees said. “The longer inflation remains elevated, the greater the chance of second-round effects on wages that could see price pressures become ingrained”.familywealthreport