El Niño conditions have returned and are expected to strengthen into the Northern Hemisphere winter, with food, energy and transport supply chains among the most exposed.
El Niño is a naturally occurring warming of the central and eastern tropical Pacific Ocean that can alter weather patterns around the world, affecting rainfall, drought risk and temperatures in different regions.
NOAA’s Climate Prediction Center, the US government agency that monitors global climate patterns, has confirmed that El Niño is now present and is forecast to intensify through winter 2026–27, when the pattern typically has its strongest global impacts. Australia’s Bureau of Meteorology has separately declared the event underway in the tropical Pacific, and around half of current climate models indicate it could reach levels comparable with the strongest events recorded since 1950.
The immediate question is how quickly changes in agricultural output, energy demand or infrastructure availability feed into cargo flows, transport costs and customer behaviour.Saxo Bank investment strategist Ruben Dalfovo argues that El Niño should be seen as a global supply-chain stress test rather than only a regional weather event, with food, insurance and energy among the main market channels to watch.
The current picture is not straightforwardly one of shortage. High global inventories of wheat, rice, corn and soybeans could soften the impact of a production shock, and several major producing countries have improved irrigation, early planting and preparedness since previous El Niño cycles.
India illustrates the point. Formerly the world’s second-largest sugar exporter, India is expected to remain largely absent from global sugar markets for at least the next three seasons, with El Niño-related pressure on monsoon rains combining with rising domestic ethanol demand to reduce the country’s exportable surplus.
The first effects may appear as changes in demand patterns.Lower crop yields in one region can increase import demand elsewhere, while strong inventories may delay buying decisions or change the timing of seasonal flows. Retailers, food processors and commodity traders may also adjust sourcing earlier than usual if weather risks begin to affect price expectations.
This can create uneven pressure across freight markets. Some routes may see reduced export volumes, while others see higher inbound flows, more storage demand or short-notice changes in booking patterns. For operators working with food, feed, fertiliser, refrigerated goods or agricultural inputs, the impact is likely to depend as much on customer behaviour as on the weather itself.
The risk is also contractual. Where transport contracts leave little room for sudden changes in fuel, storage, insurance or rerouting costs, weather-driven volatility can test margins before physical disruption becomes severe.
A comparable disruption would again affect transit times, vessel capacity allocation and freight rates on key east–west trades. Even if restrictions are avoided, the previous drought showed how climate-related water stress can quickly become a capacity issue for global transport networks.
Inland river transport, ports exposed to storms or flooding, and agricultural export corridors are among the other infrastructure types that can become pressure points.
The impact is likely to be uneven — some corridors may see little direct disruption, while others face sudden changes in volumes or operational risk.
Insurance costs are also likely to come under scrutiny. More frequent or severe weather events can raise the cost of risk for cargo, assets and infrastructure, prompting closer attention to route planning, warehouse exposure and contingency capacity.
For warehouses and distribution centres, heatwaves, flooding and power constraints can affect labour productivity, cold-storage reliability, delivery windows and the availability of contingency space. These are operational issues rather than abstract climate risks.
Strong inventories reduce the risk of a global food shock but do not eliminate localised disruption, changed trade flows or sudden price movements. For operators and shippers, El Niño is a practical prompt to check whether contracts allow for volatility, whether sourcing is too concentrated in weather-exposed regions, and whether contingency capacity can be secured before disruption becomes visible in the market.
