El Niño, global warming and war: A perfect storm for food security?

29 October, 2026

Nick Smithie

John M. Malloy

James Johnstone

The current El Niño event — potentially the most intense on record — could compound the effects of war and climate change on the production of essential commodities and their routes to market. We believe the resulting pressure on food and energy prices is likely to create contrasting risks and opportunities across emerging and frontier markets.

Chart 1: Temperature (LHS) and precipitation (RHS) probability forecasts – November 2026 – January 2027

What is El Niño?

El Niño is characterized by the warming phase of the El Niño-Southern Oscillation (ENSO), a Pacific Ocean climate event that can alter rainfall and temperature patterns around the world. As a result, it can increase the risk of drought in some regions and excessive rainfall or flooding in others. For investors, the significance is not the weather phenomenon itself, but its potential to disrupt crop yields, food prices, power generation and transportation worldwide. The magnitude, timing, and location of these weather patterns vary by episode, making El Niño a risk factor to monitor rather than a standalone market event. Research suggests strong El Niño occurrences are becoming more frequent and more intense, compounding the ongoing effects of climate change [1]. While El Niño tends to reduce agricultural output, climate change and war could also diminish food production and exports by disrupting shipping.

The strength of El Niño is measured by the Oceanic Niño Index (ONI), which tracks how much warmer surface temperatures in the tropical Pacific are relative to normal. El Niño is identified when the three-month average ONI reaches at least +0.5°C for five consecutive overlapping periods. A peak ONI reading of +2.0°C or higher is classified as a very strong El Niño, often referred to informally as a super El Niño [2]. Since NOAA’s historical record began in 1950, four El Niño episodes have reached this threshold, with two of them being very recent: 1982-83, 1997-98, 2014-16, and 2023-24. El Niño in 2026 – 2027 could be the most intense event on record.

Chart 2: El Niño Intensity Profiles – Historical Episodes vs. 2026

El Niño’s effect on agriculture

As can be expected during a prolonged period of severe weather, agricultural production falls and food prices tend to rise. A very strong El Niño increases drought risk across parts of Central America, northern South America, and South and Southeast Asia, with flooding being an additional risk on the northwest coast of South America [3].

Chart 3: S&P GSCI Agriculture & Livestock Index – Performance

The most significant price increases have been seen in food staples: corn, soy and wheat, but almost all agricultural commodities are going up in price.

Chart 4: Bloomberg Commodity Agriculture and Livestock Index Constituents – Price Returns (%, USD)

Trade routes under pressure from drought, climate change and war

Food prices have been increasing since the COVID-19 pandemic and the war between Russia and Ukraine [4], now exacerbated by conflict between the United States and Iran. The interaction between climate change and war has reduced shipping and freight volumes worldwide, with traffic through the Strait of Hormuz almost grinding to a halt; the Bab-el-Mandeb Strait has also become more dangerous to transit because of the Houthi blockade of Saudi Arabian ships. Russia and Ukraine supply approximately one quarter of the world’s wheat [5], but attacks on Black Sea ports and vessels have disrupted shipments, with their combined wheat exports estimated to have fallen by 60% compared with last year [6].

Chart 5: Strait of Hormuz – Daily Commercial Cargo Ship Crossings

While traffic through the Strait of Hormuz has been reduced by war, the number of ships transiting through the Panama Canal has been curtailed by lower water levels and could decline to only about two-thirds of its average daily capacity, if the 2023 – 2024 El Niño is a guide.

Chart 6: Panama Canal – Daily Commercial Cargo Ship Crossings

Furthermore, in September 2026, the Rhine sank to a record low of four centimetres at the key chokepoint of Kaub – the lowest level in records dating from 1880 [7]. When El Niño, climate change and war act in concert, we would expect to see acceleration in food price inflation. The experience of consumers has become especially noticeable since 2021 and shows no signs of abating.

Chart 7: US CPI For All Urban Consumers: Food at Home

Industrial commodities at risk

At the other extreme, a super El Niño can increase the risk of excessive rainfall and flooding in parts of western and southern South America, East Africa, and Central Asia. The economic effects can include not only crop losses, but also lower production of industrial commodities. For example, copper illustrates how regional weather events can affect the sustainability and resilience of business operations. Chile and Peru account for approximately one-third of global copper mine production [8], and both face potential flooding and landslide risks due to today’s El Niño; this has the potential to raise further the price of copper, whose price recently exceeded the record set in the super cycle of the 2000s.

Chart 8: Price of Copper (USD/Metric Ton)

Risks and opportunities across emerging markets

Rising food prices, in tandem with higher energy prices, are causing a stubborn increase in inflation that is unlikely to prove transitory, just as inflation climbed higher for longer than initially anticipated in 2021 – 2022. In our view, food-importing countries in South-East Asia and sub-Saharan Africa are at particular risk of shortages and sharp price increases, which could force governments to subsidize essential food and fuel, causing possible inflationary shocks and currency weakness against the USD. On the other hand, crop-producing countries in South America, especially Argentina and Brazil, are expected to benefit from more abundant crops and higher prices due to more favourable farming conditions.

Finally, the emergence of the theme of food security might prompt investors to look more closely at soft commodities, energy and transportation logistics at the local level. This could help to avoid the dangers posed by El Niño and take advantage of the opportunities it presents in smaller emerging and frontier markets. These opportunities may also offer a route to diversification beyond the AI theme that has dominated equity markets throughout 2026.
In our view, the effects will not be uniform: the same forces that put food importers under pressure may benefit producers elsewhere. Understanding these local differences will be key to navigating the wider disruption.

Sources

[1] Commonwealth Scientific and Industrial Research Organisation (CSIRO), May 2023

[2] National Oceanic and Atmospheric Administration, June 2026

[3] BBC.com, September 2026

[4] Global Agriculture, October 2026; FAO Food Price Index, September 2026

[5] CNBC, August 2026

[6] CBC News, October 2026

[7] Bloomberg News, 24 September 2026

[8] US Geological Survey, Mineral Commodity Summaries 2026: Copper, February 2026.

Key Information

No investment strategy or risk management technique can guarantee returns or eliminate risks in any market environment. Past performance is not a guide to the future. The prices of investments and income from them may fall as well as rise and investors may not get back the full amount invested. Forecasts and estimates are based upon subjective assumptions about circumstances and events that may not yet have taken place and may never do so. The statements and opinions expressed in this article are those of the author as of the date of publication, and do not necessarily represent the view of Redwheel. This article does not constitute investment advice and the information shown is for illustrative purposes only.

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